Goldman Sachs has raised the probability of a U.S. economic recession over the next year by 10 percentage points to 25%.

Economists at Goldman Sachs raised the odds of a U.S. recession next year from 15% to 25%. However, they also noted that despite the sharp rise in unemployment, there are "several reasons not to worry about a recession." "We continue to believe that the risk of a recession is limited. The overall economy still looks good, there are no major financial imbalances, and the Fed has plenty of room to cut rates, and it can do so quickly if necessary," said Goldman economists led by Jan Hatzius. It is worth noting that Goldman's forecasts for the Fed are less aggressive than those of JPMorgan and Citigroup. Hatzius' team expects the Fed to cut its benchmark interest rate by 25 basis points in September, November and December; in contrast, JPMorgan and Citigroup expect a 50 basis point cut in September. "Our forecast assumes that job growth will resume in August and that the FOMC will consider a 25 basis point cut sufficient to address any downside risks," the Goldman Sachs report said. "If we are wrong and the August jobs report is as weak as in July, a 50 basis point cut could be in order in September," the economists added, adding that they are skeptical about whether the U.S. labor market is "at risk" of a rapid deterioration. They say this because job openings suggest demand remains solid and there is no obvious shock to trigger a downturn.