updated 3/29/2007 12:14:22 PM ET 2007-03-29T16:14:22

The Goldman Sachs Group Inc. top economist believes the odds of a full-blown U.S. economic downturn have risen, but a recession is still unlikely.

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“There are a lot of credible arguments” that suggest the U.S. economy could soon face a recession, said Jan Hatzius, Goldman’s chief economist. He was speaking Thursday as part of a panel discussion at the University of Dayton.

The forecaster noted that the size of the housing market and the trouble it now faces is comparable to the stock market bubble of the late 1990s and early part of this decade. Meanwhile, “the economy is already pretty weak” and periods of protracted subpar growth are a particularly vulnerable period for any expansion, he said.

Also, “inflation is still too high from the Fed’s perspective,” which limits the central bank’s willingness to cut interest rates to help boost growth, Hatzius said.

The economist’s comments came on a day when the government reported upwardly revised data for the fourth quarter gross domestic product. But even with the upward revision, U.S. GDP only grew by a 2.5 percent annualized rate, a level most policy makers consider below the economy’s potential.

Still, even with these looming problems, “the odds still favor a ’no recession’ outcome,” Hatzius said. That’s because housing bubbles tend to rupture differently than stock market bubbles, and the process of a housing-related adjustment tends to move more slowly, and is more easily remedied and addressed by monetary policy, he said.

Hatzius said that another factor supporting the U.S. economy is a strong global economy.

Hatzius’ ultimate skepticism about the chance of recession is shared with most other forecasters. Much of the current round of recession fears are rooted in comments by former Federal Reserve Chairman Alan Greenspan, who has said in several recent speeches that a downturn is possible this year.

New York-based Goldman Sachs Group is an investment, banking and securities firm.

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