Summary
⚈ May CPI data expected on Wednesday;
⚈ 139,000 nonfarm payrolls in May, unemployment at 4.2%.
With markets awaiting Wednesday’s May CPI inflation data, investors got some relief from Friday’s jobs report. The economy added 139,000 nonfarm payrolls in May while unemployment held steady at 4.2%, sending markets higher into the weekend.
Goldman Sachs has adjusted its recession forecasts multiple times in 2025, with probabilities ranging from 35% in March to a peak of 65% in April due to trade tensions and tariff policies.
The latest data by the banking giant presents a markedly different picture. According to market indicators shared by financial analyst Mike Zaccardi, Goldman Sachs’ market-based recession probability model now shows just a 17% chance of entering a recession within the next year.
Just a 17% implied chance of entering a recession in the next year, per market indicators GS pic.twitter.com/nm18KNequB
— Mike Zaccardi, CFA, CMT 🍖 (@MikeZaccardi) June 9, 2025
Recession probability by indicator
The model uses univariate logit analysis across multiple financial indicators, drawing on historical data since 1950. The indicators are divided into two categories: those predicting the start of a recession and those indicating current recession status.
The highest recession signal comes from the 12-month forward implied change in Federal Reserve rates, indicating a 38% recession probability. Mortgage-backed securities spreads show 12% recession odds, while the 10-year to 2-year Treasury yield spread indicates 11% probability.
Current market stress indicators remain low. The VIX volatility index implies 3% recession risk, high-yield credit spreads show 0% recession probability, and the S&P 500 one-year drawdown indicator shows 4% odds.
The model averages these “recession starting” indicators to arrive at the 17% overall probability, while current recession indicators average just 3%.
Recent trade truce developments between the U.S. and China have prompted major brokerages to scale back their recession forecasts, with Goldman Sachs among institutions reducing their outlook from spring 2025 peak levels.
Featured image via Shutterstock.
