Goldman Sachs warns of imminent U.S. recession!
January 10, 2008 -Goldman Sachs has become the second Wall Street bank this week to declare the U.S. economy is headed for recession this year.
The bank's chief U.S. economist, Jan Hatzius, argues that the latest economic data shows recession has now arrived in the world's biggest economy - or will shortly.
Hatzius, whose warning comes a day after economists at Merrill Lynch issued a U.S. recession alert, added that the Federal Reserve will now cut interest rates from the current 4.25pc to as low as 2.5pc by the end of this year.
In a research note distributed to the bank's clients, Mr. Hatzius said real gross domestic product would contract by 1pc on an annualized basis in both the second and third quarters.
Goldman, one of the few Wall Street banks to increase profits during the credit crisis, warned in November that ballooning losses from the U.S. mortgage market could force the global financial industry to scale lending back by $2 trillion.
The bank's economists now argue the trigger point for its forecast is the fact the unemployment rate has risen by more than a third of a percentage point from the cycle trough.
"Historically, this has invariably been associated with recession, typically starting immediately and almost always within three months," he writes.
