Goldman Sachs Lowers Recession Probability to 25% as Labor Market Stays Resilient
Despite inflation concerns, Goldman Sachs reduced its 12-month recession probability to 25% from 30%, citing strong labor market data and healthy economic activity that suggest the economy can absorb higher energy prices.
Cautious Optimism on Economic Growth
Goldman Sachs has lowered its 12-month U.S. recession probability to 25% from 30%, citing a strong labor market and healthy economic activity. This more optimistic assessment contrasts with broader market anxiety about rate hikes.
Labor Market Strength
Employment growth in early 2026 underscores labor market resilience. Average monthly private payroll growth surged in 1Q26 to over 2.5 times above the monthly average in 2025. Worker wages continue to outpace inflation, even despite elevated price levels associated with the Iranian conflict.
Economic Expansion Momentum
The economic landscape under the Trump Administration is favorable, supported by robust business investment in equipment and intellectual property products, as well as solid household consumption growth. Moreover, data on investments, sales, and earnings indicate that the economy is poised for continued expansion. The Atlanta Fed's GDPNow tracker of incoming economic data is pointing toward economic growth of 3.7% in the second quarter.