And Goldman Sachs is intertwined with the Obama administration like no other company, in ways GE can only dream about. They wouldn’t release a report predicting this much gloom and doom unless they were certain of it.

(Reuters) — After looking at today’s anemic unemployment report, Goldman Sachs drops this H-bomb on the Obama campaign:

We have lowered our forecast for US real GDP growth further and now expect real GDP to grow just 2%–2½% through the end of 2012. Our forecast for annual average GDP growth has fallen to 1.7% in 2011 (from 1.8%) and to 2.1% in 2012 (from 3.0%). Since this pace is slightly below the US economy’s potential, we now expect the unemployment rate to be at 9¼% by the end of 2012, slightly above the current level.

2. Even our new forecast is subject to meaningful downside risk. We now see a one-in-three risk of renewed recession, mostly concentrated in the next 6–9 months. There are three specific issues that concern us. First, a worsening of the European financial crisis, and a failure of European policymakers to respond adequately, could lead to a further tightening of financial conditions and credit availability, which would worsen the economic outlook globally. Second, our forecast assumes that the payroll tax cut — currently scheduled to expire at the end of 2011 — is extended for another year, but if that failed to happen the fiscal drag in early 2012 would increase significantly. Third, increases in the US unemployment rate have historically had a tendency to feed on themselves, and this could happen again.

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HT: CapnAngus

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