The U.S. economy is showing troubling signs of an impending recession, according to Mark Zandi, chief economist at Moody’s Analytics.
In a detailed analysis shared on social media, Zandi highlighted stagnant consumer spending, shrinking construction and manufacturing sectors, and a weakening job market as critical warning signs.
Zandi’s assessment comes on the heels of last week’s economic data, which revealed a significant slowdown in key sectors.
Consumer spending, a cornerstone of economic growth, has flatlined, while construction and manufacturing are contracting at an alarming rate.
The labor market, while still showing a low unemployment rate, masks deeper issues, including a shrinking workforce and widespread hiring freezes.
“Economic activity is stalling,” Zandi stated, pointing to declining labor force participation and a shrinking foreign-born workforce as key contributors to the slowdown.
He also noted that work hours are decreasing, and recent graduates are struggling to find employment due to economy-wide hiring freezes.
Policy Missteps Exacerbate Economic Woes
Zandi attributed much of the economic strain to recent policy decisions, specifically pointing to increased U.S. tariffs and restrictive immigration policies.
“Tariffs are eroding corporate profits and household purchasing power,” he explained, adding that reduced immigration is leading to a smaller workforce and, consequently, a smaller economy.
The economist also addressed concerns about the accuracy of recent economic data, noting that large revisions to employment figures are typical during economic turning points.
For instance, July’s job growth was reported at a modest 73,000, well below the expected 115,000.
More concerning, revisions to May and June payrolls slashed a staggering 258,000 jobs, with May’s initial estimate of 139,000 jobs revised down to just 19,000—the largest revision since March 2021.
Federal Reserve Faces Tough Choices
The Federal Reserve’s decision to hold interest rates steady for the fifth consecutive meeting reflects the delicate balance it must strike.
Despite pressure from former President Donald Trump to lower borrowing costs, Fed Chair Jerome Powell emphasized the need to manage inflation, which remains “somewhat elevated,” while supporting employment.
“The economy is in a solid position, but uncertainty remains elevated,” Powell said during a recent press conference.
Despite the gloomy outlook, prediction market platform Kalshi reports that the odds of a U.S. recession have dropped to 14%, down from a high of nearly 70% on May 1.
These markets, which allow users to bet on future events, reflect shifting sentiment but do not negate the underlying risks highlighted by Zandi and other economists.
As inflation continues to challenge the Federal Reserve’s ability to stimulate growth, and policy decisions like tariffs and immigration restrictions weigh on economic activity, analysts warn that the U.S. may be closer to a recession than previously thought.
Zandi’s sobering analysis underscores the need for careful policy navigation to avoid a deeper economic downturn.Also Read: Economists Now Say Prices Will Continue To Rise, “This Is Just The Beginning”
Visit the Homepage for our extensive library of news, or read news for you below.
About The Author
