Goldman Sachs cuts US recession odds to 15% after better-than-expected jobs report By Reuters

(Reuters) – Goldman Sachs cut the odds that the United States will enter a recession in the next 12 months by five percentage points to 15 percent after its latest jobs report showed better-than- expected.

U.S. job growth rose by the most in six months in September and the unemployment rate fell to 4.1 percent, the Labor Department reported on Friday.

The September jobs report “reset the narrative of the labor market” and calmed fears that “demand for labor is weakening too quickly to prevent the upward trend in the unemployment rate,” Goldman Sachs’ chief economist said on Sunday , Jan Hatzius, in a note.

The Wall Street brokerage maintained its forecast of consecutive cuts of 25 basis points to reach a terminal rate of 3.25-3.5% by June 2025.

“We now see much less risk of another rate cut of 50 bps,” Hatzius said.

The Federal Reserve cut its policy rate by 50 bps in September to a range of 4.75%-5.00%, its first cut since 2020.

Financial markets raised the odds of a cut in November by a quarter of a percentage point to 95.2% from 71.5% before the report, CME Group’s (NASDAQ: ) FedWatch tool showed.

While the jobs numbers were volatile, they can probably be taken at face value as there are no clear signs of further persistent negative revisions, the Wall Street brokerage said.

“Broadly speaking, 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,” Hatzius said.

However, October is likely to be a particularly tricky month, with both a hurricane and a major strike threatening to weaken wages, the brokerage warned.