BENGALURU – Goldman Sachs has lowered the odds of the United States slipping into a recession in the next 12 months to 15 per cent from 20 per cent, following the latest employment report that showed better-than-expected data.
US job gains increased by the most in six months in September and the unemployment rate fell to 4.1 per cent, the Labour Department reported on Oct 4.
The September employment report has “reset the labour market narrative” and calmed fears about the labour demand “weakening too quickly to prevent the unemployment rate from trending higher,” Goldman chief US economist Jan Hatzius said in a note on Oct 6.
The Wall Street brokerage maintained its forecast of consecutive 25 basis points (bps) cuts to reach a terminal rate of 3.25 per cent to 3.5 per cent by June 2025.
“We now see much less risk of another 50-bps rate cut,” Mr Hatzius said.
The Federal Reserve cut its policy rate by 50 bps in September to the 4.75 per cent to 5 per cent range, its first rate reduction since 2020.
Financial markets boosted the odds of a quarter-percentage-point reduction in November to 95.2 per cent from 71.5 per cent before the report, CME Group’s FedWatch tool showed.
While the job numbers have been volatile, they can likely be taken at face value as there are no clear indications for further persistent negative revisions, the Wall Street brokerage said.
“More broadly, we see no obvious reason for job growth to be mediocre at a time when job openings are high and GDP (gross domestic product) is growing strongly,” Mr Hatzius said.
However, October is likely to be a particularly complicated month, with both a hurricane and a major strike threatening to depress payrolls, the brokerage cautioned. REUTERS
