Goldman Sachs projects jobless rate falling to 4.1 percent

The unemployment rate could drop to 4.1 percent or even lower this year, according to a Goldman Sachs forecast released late Sunday night.

“The main reason that we expect a hiring boom this year is that reopening, fiscal stimulus, and pent-up savings should fuel very strong demand growth,” the economic research note from the firm said. It added that it was possible the rate could dip to below 4 percent.

The research outlook suggests that as the virus recedes, many of the industries that have been stuck in limbo such as leisure and hospitality will spring back to life, and workers who have been on the sidelines will make their way back to the job market.

Ultimately, the bank forecasts that unemployment will drop to 3.2 percent by 2024. If that were to happen, it would surpass the 50-year record set in the Trump administration, notching a significant win for President Biden and boosting his chances for reelection.

But the research note also pointed out that generous unemployment benefits approved in the $1.9 trillion relief plan may play a role in pushing the recovery toward the end of the year.

“We find that increases in unemployment insurance (UI) benefits have been associated with lower reemployment rates for workers on permanent (but not temporary) layoff, which suggests that generous federal benefits could modestly slow the employment recovery until they expire in September,” the paper said.

That finding will be a welcome affirmation to Sen. Joe Manchin (D-W.Va.), who pushed to lower the level of weekly additional benefits from $400 to $300, and end them in early September instead of early October in a daylong fight that nearly derailed the process of passing the stimulus bill in the Senate on Friday.

But the bank also notes that its forecasts are among the most optimistic on Wall Street. It has projected both lower unemployment that other firms, and 7.7 growth in the fourth quarter.