Goldman Sachs economists say recession risks in the United States are rising again as the labor market weakens and new economic shocks emerge.
In a new CNBC interview, Goldman Sachs chief economist Jan Hatzius says recent data shows job growth has been weaker than expected despite solid underlying economic activity.
He also sees a developing energy shock amid tensions in the Middle East that could create additional economic pressure.
“If I do take an average, though, it’s still a pretty weak labor market, with very little job growth and negative job growth if you take out healthcare, which is a pretty narrow base. And now, of course, we’re getting an energy price shock, which is unfolding. So we’re going to have to see how big it is.”
According to Hatzius, the firm had previously dialed down the probability of a recession over the next year, but recent events have changed the bank’s outlook.
“I don’t think we’re in a stagflationary environment yet, but yeah, the shocks have been pointing that way… We came into the year with a 30% recession risk estimate for the next 12 months… and directionally, it’s obviously going higher at this point.”
Goldman Sachs executives say the current environment of economic uncertainty calls for a more cautious investment approach.
Josh Shifrin, the firm’s chief strategy officer and head of financial risk for global banking and markets, says investors should focus on investing in high-conviction plays.
“I think it’s generally a time to keep things closer to home, appreciating that uncertainty is extremely high. So I think it’s generally a position to keep things closer to home and only trade on things you have a strong long-term conviction on.”
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