Goldman-Sachs took a second look in its crystal ball and… well… yikes:
Goldman Sachs downgraded its forecast for U.S. growth Friday, saying there is now a one-in-three chance the U.S. will lapse back into recession.
U.S. unemployment also will edge up to 9.25% by the end of 2012, the firm’s U.S. economists said.
Still, “even our new forecast is subject to meaningful downside risk,” the economists said. A worsening European financial crisis–and the failure of European policy makers to respond adequately–could worsen the global economic outlook, they said.
The firm lowered its forecast for U.S. real gross domestic product, expecting 2% to 2.5% growth through 2012. The forecast for annual average GDP growth has fallen to 1.7% in 2011 (from 1.8%) and to 2.1% in 2012 (from 3%).
The good news? Disinflation, not inflation. I guess Bernanke can keep pushing on that string pretty much as long as he likes.
But that line that reads, “even our new forecast is subject to meaningful downside risk,” is what will keep me up at night. Forget Greece and Spain — they’re already gone. Lately it looks like Italy and Belgium are the next euro dominoes (eurominoes?) to fall.
That ought to keep investors very interested in the relative safety of the dollar, which ought to keep our interest rates low. Combined that with near-zero inflation, and I’d guess that will be what keeps us from falling off the cliff.
What I mean is, 9.25% unemployment is bad; but 25% unemployment is far worse.
RELATED: President Obama says “things will get better.”
Shut up. Just shut up already.