Goldman Sachs CEO has 2-word response to recession talk

The influential investment bank chief shared his take on the economy.

Mar 5, 2025 - 01:20

Goldman Sachs CEO has 2-word response to recession talk

The big "R" word has been bandied about a lot recently.

A weak showing in consumer confidence surveys and worse-than-expected unemployment claims data have sparked recession chatter, contributing to recent stock market weakness.

Before rebounding mid-day on March 4, the S&P 500 had fallen about 5% from its recent peak because of worries that we're near a turning point to a slowing in the U.S. economy.

Recession risks shouldn't be ignored. After all, there's been a steady drumbeat of austerity in Washington, D.C., and a wave of high-profile layoffs in high-earning jobs, including technology workers.

Given the stock market's meteoric rise over the past two years (the S&P 500 has delivered back-to-back annual returns above 20%), investors are right to wonder if the stock rally has run its course.

This week, Goldman Sachs CEO David Solomon commented on the likelihood of the U.S. entering a recession.

David Solomon, chief executive officer of Goldman Sachs Group Inc., has candid words about the U.S. economy and artificial intelligence.
Bloomberg/Getty Images

The chance of recession may be rising

Let's face it. While unemployment is still at historically low levels, there's been a steady flow of concerning workplace news lately.

We've seen increased layoffs in previously desirable, high-paying industries like technology. Since 2022, major technology companies have announced nearly 407,000 job cuts, according to Challenger, Gray, & Christmas's January report.

The unemployment rate is 4%, solid, but up from 3.5% in 2023. Last week, 244,000 people filed for unemployment, up from 203,000 in early January. In absolute terms, the weekly claims data aren't terrible, but it's certainly not an encouraging trend.

Inflation also remains a problem. The January Consumer Price Index showed prices rose 3%. Again, not terrible. But, it's still up from a low of 2.4% in September, suggesting consumers are feeling more pinched.

Perhaps, that's why the latest consumer confidence survey results are worrisome. The Conference Board's Consumer Confidence survey plummeted to 98.3 in February from 104.1 in January. That's the largest one-month decline since mid-2021.

Not everyone is panicking over recession risk

Certainly, the data we've seen on the economy this quarter isn't reassuring.

The Atlanta Fed maintains a GDP tracking tool, GDPNow, and the latest update showed GDP at -2.8% this quarter, down from -1.5% last week. The decline was because "first-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 1.3 percent and 3.5 percent, respectively, to 0.0 percent and 0.1 percent," according to the Atlanta Fed.

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Of course, this number will change dramatically as new data flows in, so nobody should panic just yet. However, the textbook definition used by most in the market is two consecutive quarters of negative GDP growth, so perhaps it is unsurprising that this reading has raised some eyebrows.

One who isn't fazed yet appears to be Goldman Sachs CEO David Solomon.

When discussing the likelihood of a recession at Tuesday's Australian Financial Review Business Summit in Sydney, he said the chances are "very small."

Given that Goldman Sachs is one of the premier investment banks in the country and has its finger on the economic pulse, perhaps it's encouraging to hear that he doesn't consider a recession a very likely outcome yet.