Tags: Goldman Sachs | recession | Larry Summers

Goldman Sachs: Be Wary of a Double Dip

By    |   Friday, 05 Aug 2011 01:05 PM

Goldman Sachs analysts have added their voices to the chorus of those worried about a double-dip recession in the U.S.

Increasing unemployment could push the economy into a vicious cycle of lower incomes, less spending, and less business income, which in turn leads to more unemployment, Goldman Sachs economists wrote in a note to clients, according to an article on the FoxBusiness.com website.

Goldman Sachs analysts predicted that if the Labor Department reported as little as a 0.1 percentage point increase in the jobless rate for July, and unemployment then remains the same or increases in August, the economy would tumble into recession territory within six months.

Fortunately, the government today reported an uptick in employment of 117,000, much more than the 84,000 new jobs economists had predicted. Private employers added 154,000 jobs in July, offsetting the loss of 37,000 government jobs. Most of those public jobs were lost in the partial government shutdown in Minnesota.

Still, the new jobs were not enough to make any real dent in the unemployment rate, which remained nearly the same, now at 9.1 percent. "Since April, the unemployment rate has shown little definitive movement," the Labor Department stated in a news release.

Goldman analysts used a “statistical regularity,” which more like a rough guideline than an advanced statistical model, to make the double-dip prediction.

Since World War II, a 0.3 percent to 0.4 percent increase over the recent low point in the three-month average unemployment rate has served as an indicator that an economy not in recession for at least 18 months prior would slip into one within six months more than half the time, as noted by Fox Business.

Economists at Bank of America's Merrill Lynch, former top Fed officials, and former White House Economic Advisor Larry Summers are some of the other experts on record saying there is a notable chance of a double-dip recession.

There is at least a one-in-three chance of a double-dip recession if nothing new is done to stimulate the economy, Summers wrote in an op-ed in the Washington Post.

The U.S. must extend the payroll tax cuts past 2012 and end the Bush tax cuts for the wealthy, he wrote.

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Goldman Sachs analysts have added their voices to the chorus of those worried about a double-dip recession in the U.S.Increasing unemployment could push the economy into a vicious cycle of lower incomes, less spending, and less business income, which in turn leads to more...
Goldman Sachs,recession,Larry Summers
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2011-05-05
Friday, 05 Aug 2011 01:05 PM
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