Goldman Predicts Unemployment Rising in 2012

Economists at Goldman Sachs now put the odds of the United States officially slipping back into recession at roughly 40 percent.  They also forecast that even without a technical recession, stalled growth could force unemployment to rise in 2012. From CNBC

“The obvious risk with our (non-recession) forecast is that the slowdown in growth and the associated deterioration in the labor market is going to start feeding on itself and pushes the economy into recession via the stall-speed dynamic,” [Jan Hatzius, Goldman’s chief US economist] said.

That would take unemployment up to 9.5 percent and “if that comes without recession it would be the first time in history that the unemployment rate has risen by more than (0.35 percentage points) without a…recession.”

Any individual economic projection in this uncertain era should be taken with a grain of salt, and it’s probably impossible to know if the chance of a new contraction is 40 percent, 50 percent, or 25 percent. The important thing is that many experts are now claiming it’s likely the America economy could take a downward turn in the near future. Even Fed Chairman Ben Bernanke is saying that the US economy is “close to faltering.”

What this means politically is that Obama’s re-election hopes are in serious danger. It is extremely hard to imagine how Obama could win in 2012 if the unemployment crisis actually gets worse as we get closer to November. Voters normally tend to vote based on the state of the economy, and right now the American people claim unemployment is the most important problem in the country.

If the economists at Goldman Sachs are right and the unemployment rate is likely to head upward next year, Obama really is going to be the underdog.

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Jon Walker

Jon Walker

Jonathan Walker grew up in New Jersey. He graduated from Wesleyan University in 2006. He is an expert on politics, health care and drug policy. He is also the author of After Legalization and Cobalt Slave, and a Futurist writer at