There may be a path to a soft landing after all. Or so think economists at Goldman Sachs, who said the Federal Reserve still has a 65% chance of keeping the economy out of a recession while bringing inflation down to sustainable levels. In a pair of client notes filed on Sunday, the Wall Street firm buttressed its argument on two pillars — that the labor market is beginning to rebalance between supply and demand, and that wage growth is cooling sufficiently in two key sectors to suggest that a wage-price spiral can be thwarted. “The odds of a recession being necessary have diminished somewhat because the first two stages of the required adjustment – slowing GDP growth to below potential and rebalancing supply and demand in the labor market work – have gone remarkably well so far,” Goldman economist David Mericle wrote. The Goldman case is full of caveats, particularly that global events could overtake domestic efforts to cut costs, and that the Fed could yet get carried away with policy tightening and cause what the firm called a “unnecessary recession”. Still, the company said recent inflation and labor market data point to the possibility that while growth will be anemic through 2023, the worst-case scenario can be avoided. “So far, slowing growth and labor market rebalancing are going better than expected,” Goldman economist Joseph Briggs wrote in a separate note. “Industry-level data strongly suggests that the soft landing path assumed in our baseline economic forecast is possible.” More optimistic than most, Goldman assigns a 35% chance that the economy will enter a recession within the next 12 months. The company expects GDP growth of just 0.3% this year and 1.1% in 2023. Although this is well above what one would expect in normal times, it is actually more optimistic than some forecasts. The CNBC All-America survey for the third quarter, released last week, showed that 68% of respondents expect the United States to enter a recession soon, while 9% believe the country is in it. already. (The survey polled 800 registered voters and has a margin of error of plus or minus 3.5 percentage points.) Briggs said inflation-adjusted spending in the retail and accommodation and catering indicate that consumers are shrinking. At the same time, the gap between available jobs and workers is narrowing, and wage growth and price inflation are also slowing, although they remain at high levels. “Case studies in the retail and accommodation and food services industries strongly suggest that the path to a soft landing assumed in our baseline economic forecasts is possible,” Briggs wrote. Data from other industries, however, is not as encouraging. Labor market conditions are “grossly lopsided” in sectors including wholesale trade, professional and business services, and health care and social assistance, Briggs noted. Even with these imbalances, however, he said overall progress “generally supports prospects for a soft landing.” Similarly, Mericle said the odds of a Fed-induced recession through excessive interest rate hikes “have probably increased somewhat.” He also said the chances of a recession due to “an unforeseen factor” are also “a bit higher than usual” while geopolitical risks “are also higher than usual”. Markets will learn more about inflation and the state of the broader economy later this week. Third-quarter GDP figures will be released on Thursday, with the Dow Jones consensus looking for 2.4% growth after two consecutive negative readings in the first half. Personal consumer spending inflation, the Fed’s preferred measure, hits on Friday, with core inflation expected to grow 5.2% year-over-year in September, from 4.9% the previous month. .