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Economists at Goldman Sachs, one of the world’s leading global investment firms, have highlighted recent retail sales and unemployment data, revising the likelihood of a US recession next year back to 20%, the same as previous forecasts.
Current State of the US Economy
In a report shared by Bloomberg on August 17, Goldman economists led by Jan Hatzius noted that the probability had decreased from the previous estimate of 25% back to 20%. They also mentioned that the August US employment report, to be released on September 6, could further reduce the recession probability to 15% if it appears “reasonably good.”
Another point highlighted by the economists is that the Federal Reserve is more confident about reducing interest rates by 0.25% at its September meeting. However, a downward price expectation on September 6 could “trigger” a 0.5% move.
US stocks rose last week as July retail sales figures exceeded analysts’ expectations, showing the largest increase since the beginning of 2023. The US Department of Labor also announced on August 15 that the number of new unemployment claims had fallen to its lowest level compared to the previous month.
Impact of the Economy on Bitcoin
In another statement by IG Markets analyst Tony Sycamore, the downgrade in Goldman’s forecast was described as a “small change,” and it was unlikely to lead to a significant risk-seeking flow in multiple asset classes, including cryptocurrencies.
Responses during an interview with Markus Thielen, research director at 10x Research, were also noteworthy. Thielen mentioned that Bitcoin investors might “welcome the rate cut,” but it also posed a risk of indicating a recession, potentially leading to a lower correction for Bitcoin as seen in 2019.
Thielen noted that when the Fed cut rates in July 2019, there was a short-term rally, with Bitcoin initially rising by 20%. Despite the Federal Reserve implementing two more rate cuts that year, Bitcoin ended 2019 with a 35% drop from its peak after the first rate cut.
JP Morgan’s chief global economist Bruce Kasman expressed his views, noting “sharper-than-expected weakening in labor demand and early signs of job losses,” and that job surveys indicated “a loss of momentum in global manufacturing.”
On the other hand, these forces are softened by continued solid gains in overall activity led by the service sector.
According to a review by JPMorgan, the likelihood of a recession by the end of 2025 remains at 45%, with Kasman also mentioning “additional uncertainties related to the political landscape.”
