Goldman Economists Cut US Q3 GDP Projections

Economists at Goldman Sachs slashed U.S. GDP forecasts for the second time in a month following a weak jobs report on Friday (Sept. 3) and the increasing spread of the delta variant, Forexlive, Bloomberg and other news outlets reported.

“There are now signs that the Delta wave is cresting …We therefore expect a job market rebound in coming months and have also offset part of the Q3/Q4 GDP downgrade with stronger numbers in the first half of 2022,” Goldman Sachs economist Ronnie Walker wrote in a report to clients.

See also: US Jobs Report Misses Forecasts in Hiring Downshift

Aside from jobs and the coronavirus, the third-quarter forecast downgrade — 5.25 percent to 3.5 percent — is also in response to July’s stagnation in manufacturing and trade inventory as well as a drop in the seasonally adjusted annual rate (SAAR) of the car market in the country.

Overall growth in the country is expected to be 5.7 percent for 2020, Walker said in the report. In August, Goldman Sachs had forecasted overall growth would be 6 percent, Bloomberg reported.

Related: Cutting Unemployment Benefits Generated Minimal Job Gains

Walker indicated the soft growth would result in a stronger 2022, with Goldman upping its forecast for next year to 4.6 percent from 4.5 percent.

Walker pointed to delta variant’s negative impact on spending, combined with the end of financial support, supply chain snags, and the change in demand for services over goods, as contributing factors to the downgrade.

Also read: Biden Blames Delta Variant for Jobs Report

“The hurdle for strong consumption growth going forward appears much higher: the Delta variant is already weighing on Q3 growth, and fading fiscal stimulus and a slower service- sector recovery will both be headwinds in the medium term,” Walker said in the report.

The Labor Department was anticipating that there would be 720,000 new hires in August but instead the number was a disappointing 235,000, the smallest jobs total for any month since January, PYMNTS reported.

“There’s no question the delta variant is why today’s job report isn’t stronger,” Biden said on Friday (Sept. 3). “We need to make more progress in fighting the delta variant.”