NEW YORK, Jan. 9 (UPI) -- Wall Street heavyweight Goldman Sachs on Wednesday predicted a recession in the United States this year and said the U.S. unemployment rate would rise.
Goldman Sachs said it also expected the Federal Reserve to continue cutting interest rates in an effort to restore growth, TheStreet.com reported Wednesday.
The firm said the gross domestic product would contract by 1 percent during the second and third quarters of 2008, meeting the definition of a recession, which is two consecutive quarters of contraction.
For the year overall, GDP should increase by 0.8 percent, Goldman predicted. However, because of the sour economy, the Fed likely will have to lower its fed funds target rate to 2.5 percent from the current 4.25 percent.
Additionally, Goldman said it believed the domestic unemployment rate will increase to 6.5 percent, higher than the 5 percent the U.S. Labor Department reported last week.
