Goldman Sachs top economist Jan Hatzius said in a recent research note there is a “very plausible” path for the U.S. economy to avoid a recession despite the current economic climate. In fact, Hatzius puts the likelihood of a recession in the U.S. over the next 12 months at 35 percent – a number far lower than most predictions.
“We still see a very plausible non-recessionary four-step path from the high-inflation economy of the present to a low-inflation economy of the future,” Hatzius wrote.
Goldmans Sachs pointed to sustainable but still positive economic growth that is already occurring and “looks durable.” The bank expects gross domestic product growth to be around 1 percent over the next year.
Hatzius also pointed to changes in the job market and wage growth as part of their forecasting.
“The most encouraging recent step on the narrow path to a soft landing has been the slowdown in nominal wage growth,” Hatzius writes.
Federal Reserve Chair Jerome Powell has acknowledged that increases in unemployment and decreases in wage growth would be an inevitable part of the fight to decrease inflation.
“Fiscal and monetary policy tightening has so far managed to slow demand growth sharply without accidentally overdoing it and sparking a recession, an impressive achievement,” he said.
Goldman Sachs and Hatzius have conceded there has been “much less progress” on the price side, with inflation still above 7 percent. Though the inflation rate has declined from its peak earlier this year, there is still a long way to go to reach the Fed’s goal of 2 percent.