Colin Barr: “Double dip, here we come.” Key bit:
Even if we don’t end up with an economic downturn, slower growth means unemployment will stay higher for longer — which will make it hard to tell the difference. Goldman now expects joblessness to fall just slightly by the end of next year, to 8.75% from a recent 9.2%. Earlier this year the firm was predicting end-of-2012 joblessness of 8.25%, which is not exactly something to celebrate but actually looks pretty good now.
And if a recession does take hold, it could mean another round of Federal Reserve stimulus, as much as Ben Bernanke might like to stop running that particular play.
“If the economy returns to recession—not our forecast, but clearly a possibility given the recent numbers—Fed officials would undoubtedly ease anew even if inflation is close to their target,” Hatzius writes.
Goldman Sachs — AKA: Bankers to the Political Stars! — is so enmeshed with the Obama Administration that together they look like the acid-fueled melted-flesh nightmare child of M.C. Escher and H.R. Giger. And even I’m sorry I came up with that mental image.
Anyway, if Goldman Sachs is forecasting 8.75% unemployment at the next year, then the demagoguery we’ve seen from the White House these last two weeks is nothing compared with what’s to come during the election.