• Goldman Sachs lowered its 12-month US recession probability to 15% from 25%, citing improved economic data and easing policy uncertainty.
  • The revision aligns with a broader soft-landing narrative, supported by resilient labor markets and cooling inflation.
  • Analysts say further reductions are possible if growth holds, but risks from trade policy and global headwinds remain.

Betting on a Soft Landing

Goldman Sachs has dialed back its recession fears, cutting the 12-month probability of a US downturn to 15% from a prior forecast of 25%. The move, announced in a research note to clients, reflects a more optimistic near-term outlook as key economic indicators show resilience.

“We’ve seen a meaningful improvement in the macro backdrop,” said a Goldman economist who asked not to be named, adding that the drop in recession odds was driven by stronger-than-expected labor market data and signs that inflation is cooling in a controlled manner. The revision marks the first significant cut since the bank raised its odds during last year’s trade-related volatility.

Wall Street had been bracing for a potential slowdown after the Federal Reserve’s aggressive rate hike cycle, but recent payrolls and consumer spending figures have buoyed confidence. The bank now sees a higher chance of a “soft landing,” where the economy cools enough to tame inflation without slipping into a contraction.

A person familiar with the matter said the research team’s decision was also influenced by a perceived reduction in tariff-related trade policy uncertainty. Talks with major partners have stabilized, tempering earlier fears of a renewed escalation.

“Policy clarity is crucial for business investment,” noted the Goldman economist. “We’re not out of the woods yet, but the risk of a near-term policy shock has diminished.”

The revision puts Goldman more in line with other major banks that have recently trimmed their recession probabilities. Still, the firm emphasized that risks remain elevated compared to historical averages, and any adverse macro surprises could quickly reverse the trajectory.

“We’ll be watching wage growth and capex closely,” the economist added. “If labor markets stay tight and inflation remains contained, we could see further modest reductions. But global conditions—especially in Europe and China—could still weigh on the outlook.”

For markets, the lower recession risk is a positive signal, supporting risk appetite and lending stability to interest rate expectations. But the bank cautioned that structural factors, including productivity trends and monetary policy paths, will shape the longer-term view.

Correction: An earlier version of this article misstated the prior forecast as 20%. Goldman’s previous 12-month estimate was 25%.