Goldman Sachs Predicts 8.75% Unemployment at End of 2012

Following the White House tradition of dropping bad news bombs on Friday afternoon in order to reduce the media coverage, Goldman Sachs published an very gloomy economic forecast late yesterday. The forecast cut estimates for real GDP growth significantly and predicted President Obama would have to deal with unemployment being 8.75% during the 2012 presidential election cycle. This forecast must scare the pants off Obama's campaign advisers.The latest Gallop poll numbers already have a generic republican beating Obama by 8 points.

Via NewsBusters:

Per Reuters blogger James Pethokoukis, Goldman Sachs, demonstrating Democratic-friendly timing similar to that seen at the New York Times a month or so ago, published an extraordinarily gloomy economic forecast last night.

Here are some of the details he quotes:

"Following another week of weak economic data, we have cut our estimates for real GDP growth in the second and third quarter of 2011 to 1.5% and 2.5%, respectively, from 2% and 3.25%. Our forecasts for Q4 and 2012 are under review, but even excluding any further changes we now expect the unemployment rate to come down only modestly to 8¾% at the end of 2012."
"The main reason for the downgrade is that the high-frequency information on overall economic activity has continued to fall substantially short of our expectations ..."
"... the slowdown of recent months goes well beyond what can be explained with ... temporary effects. … final demand growth has slowed to a pace that is typically only seen in recessions ..."

Pethokoukis also quotes Goldman saying that, though they're not predicting it, a return to recession is "clearly a possibility given the recent numbers."