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Goldman Sachs: Student Loans, Strikes, and Shutdowns – Hindering Growth


Sep 16, 2023

On Friday, auto workers in Detroit III went on strike, which Goldman Sachs said could depress GDP growth in the fourth quarter. The U.S. economy is now showing signs of resilience, with many on Wall Street declining to call it a recession. However, Goldman Sachs is warning that growth will “slow significantly” in the fourth quarter due to factors such as student loan repayments, an auto worker strike, and a possible government shutdown.

Goldman Sachs says although the economy may seem resilient now, there are three headwinds that could change the situation in the final three months of 2023. The bank warns about the restarting of student loan payments, an autoworker strike, and possible business closures. It predicts that GDP growth will slow significantly from the third quarter to the fourth quarter and expects economic growth in the second half to be only 1.3%. However, the bank believes that the economic slowdown will be shallow and short-lived, with GDP growth rebounding to 1.9% in the first quarter of 2024. It anticipates that income growth will accelerate again due to strong employment growth and rising real wages.

Millions of Americans will have to start repaying their federal student loans next month as House Republicans lifted a moratorium on additional loans. Goldman Sachs warns that this restart could weigh on spending and reduce U.S. GDP growth by about half a percentage point. Additionally, the bank highlights the Detroit 3 auto strike, layoffs that began on Friday, and the possibility of a temporary federal government shutdown as other economic headwinds to watch into the fourth quarter.

The bank’s outlook is seen as bleak and could pose a greater threat the longer each impasse continues. Top Wall Street firms, including Bank of America and the Federal Reserve, are concerned that the U.S. may be headed for a recession this year. This comes at a time when markets are buoyed by positive economic indicators. Despite this, Goldman Sachs’ chief economist, Jan Hadzius, believes there is currently only a 1 in 7 chance of a deep economic downturn and does not expect the Fed to raise rates again in 2023.

By Editor

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