Goldman Sachs Sees Deeper Recession, Higher Unemployment

Wall Street firm changes its economic outlook to reflect deteriorating conditions

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Shortly after today’s ugly employment report, Goldman Sachs has changed its economic forecast. It now expects a deeper recession and higher unemployment.

From a report by economists at Goldman Sachs:

BOTTOM LINE: We have marked down our near-term forecasts for real GDP – to annualized declines of 3½% and 2% in the fourth and first quarters, respectively – and we have added another 50 basis points of Fed easing by year-end. These changes reflect the accumulation of evidence that US domestic demand and production continue to fall sharply. As a result, we now expect the unemployment rate to reach 8½% by year-end 2009. We continue to assume enactment of a $200 billion (bn) package of fiscal stimulus early next year; although prospects of a larger package are rising, we prefer to wait until its timing and outlines become clearer before incorporating it into our outlook.