CNN Business/Matt Egan
Economists are growing more worried about the recovery. Blame Congress

The US economic recovery will slow more than feared during the final three months of the year because Congress almost certainly will not provide more federal aid, Goldman Sachs said Thursday.

The Wall Street bank slashed its fourth-quarter US gross domestic product growth forecast in half to just 3% on an annualized basis because of the deadlock in Washington.

That would mark an extreme deceleration from the rapid growth economists are predicting for the third quarter, when Goldman expects US GDP to grow at an annualized pace of 35%.

“At this point we think it is clear that Congress will not pass additional fiscal stimulus this month,” Goldman Sachs economists wrote in a note to clients. “We now think any further stimulus will wait until early 2021.”

That’s a big deal because the economy has been screaming out for more help from Uncle Sam. For example, another 870,000 Americans filed for first-time unemployment benefits last week, a level that’s four times higher than before the pandemic.

“It’s crazy that we could be adding more than 800,000 new people to the unemployment rolls and we’re not talking about finding relief or rescue for these people,” Austan Goolsbee, a former economic adviser to President Obama, told CNN’s Poppy Harlow on Thursday.

Like many on Wall Street, Goldman Sachs had been assuming another $1 trillion of stimulus was coming to boost the recovery. However, lawmakers have been unable to reach a deal on the size and composition of a recovery package. And that was even before the death of Supreme Court Justice Ruth Bader Ginsburg set off a huge scramble in Washington over her replacement.

Failure to get a stimulus deal will cause a “meaningful hit” to disposable income in the fourth quarter, causing it to drop to pre-pandemic levels, Goldman Sachs said. That in turn will pressure consumer spending.

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CNBC/Fred Imbert
Weekly jobless claims rise unexpectedly as stimulus boost fades

The number of first-time filers for unemployment benefits were slightly higher than expected last week as the labor market continues its sluggish recovery from the coronavirus pandemic.

The Labor Department reported Thursday that initial jobless claims for the week ending Sept. 19 came in at 870,000, adjusted for seasonal fluctuations. Economists polled by Dow Jones expected first-time claims at 850,000, down slightly from the previous week’s 860,000.

Without the adjustment, about 825,000 people filed last week, up from the previous week’s 796,000. More than 6 million people a week filed during the peak of the layoffs in the spring, when Congress approved $600 a week in supplemental benefits. The supplemental benefits expired this summer.

“Bottom line, we have a mix of people going back to work because they are now greater incentivized to do so without the extra $600 per week and those that are still challenged in finding a job that matches their skills in this unfortunate pandemic landscape,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Thursday’s data comes as U.S. lawmakers struggle to move forward with a new fiscal stimulus package, something economists and the Federal Reserve argue is needed for the economic recovery to continue.

On Wednesday, Fed Chairman Jerome Powell called for more fiscal support, telling lawmakers: “We’ve come a long way pretty quickly, and that’s great. But there’s a long way to go. So I just would say we need to stay with it, all of us. The recovery will go faster if there’s support coming both from Congress and from the Fed.”

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Yahoo Finance/Lewis Krauskopf
‘Healthy correction’ or something more? Stock swings keep investors on edge

A barrage of worrisome news is rocking the U.S. stock market after a nearly six-month surge, leading some investors to question whether the recent selloff in equities heralds a longer period of volatility.

The S&P 500 index was on the verge of a correction, defined as a 10% drop from its all-time closing high, after ending 9.6% below its Sept. 2 record on Wednesday. The benchmark index was higher in Thursday afternoon trade after shuffling between gains and losses earlier in the session.

The tech-heavy Nasdaq Composite confirmed a swift correction earlier this month, and remained down more than 10% from its Sept. 2 high even as the index was rising on Thursday.

The rapid selloff has occurred amid fading hopes of further coronavirus-related fiscal stimulus from Congress, looming political uncertainty over the U.S. presidential election and fears of a COVID-19 resurgence in the fall.

“The action that we have seen this week makes me less confident that this is a healthy correction,” said Willie Delwiche, investment strategist at Baird.

During the recent selloff, the focus has centered on large technology and growth stocks that have carried the market for much of the year, but have also been hit harder this month.

The S&P 500 technology sector had fallen 12.8% from the market’s Sept. 2 high as of Wednesday, while Amazon and Netflix each had declined about 15% over that time.

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Kitco/Anna Golubova
U.S. election risk ‘under-appreciated’, gold price could see new record highs above $2K before year-end, Citi says

After dropping to a two-month low this week, gold could climb back above $2,000 an ounce and hit new record highs before the year-end as the U.S. election risk remains underpriced in the precious metals space, according to a report published by Citigroup Inc.

Uncertainty surrounding the November 3rd U.S. election, including potentially contested results, could “be under-appreciated by precious metals markets,” Citi analysts wrote in a quarterly commodities outlook.

This would mean the gold price would have to rise more than $200 from its current levels. At the time of writing, December Comex gold futures were trading at $1,870.00, up 0.51% on the day.

A record high in gold was set back in August when December futures climbed above $2,070 an ounce for the first time.

Fear and uncertainty surrounding the global economy amid the COVID-19 pandemic, including extremely loose monetary policy worldwide, have been driving the gold sector this year. Prices are currently up 17% since the start of the year.

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