The U.S. economy is flashing warning signals of a potential recession, according to Mark Zandi, chief economist at Moody’s Analytics. In a detailed social media post, Zandi pointed to stagnant consumer spending, contraction in construction and manufacturing, and a deteriorating labor market as key red flags. These insights follow last week’s troubling data showing major slowdowns across several economic pillars.
Consumer spending has stalled, construction and manufacturing are shrinking rapidly, and while the unemployment rate appears low, deeper problems are emerging—such as a declining labor force and widespread hiring freezes. “Economic activity is stalling,” Zandi warned, attributing part of the slowdown to falling labor force participation and a shrinking foreign-born workforce. He also cited fewer work hours and job scarcity for recent graduates as alarming signs of strain.
Zandi linked much of the distress to flawed policy moves, especially higher tariffs and tighter immigration controls. “Tariffs are eroding corporate profits and household purchasing power,” he explained. Lower immigration, he added, has resulted in a smaller workforce and a more constrained economy. Zandi also questioned the reliability of recent economic figures, noting that dramatic data revisions often signal a turning point.
July’s job gains were only 73,000—far below the expected 115,000—and revisions to May and June payrolls slashed a combined 258,000 jobs. May’s figures alone were cut from 139,000 to just 19,000—the largest such revision since March 2021.
Meanwhile, the Federal Reserve has kept interest rates unchanged for the fifth time in a row, trying to maintain stability amid conflicting pressures. While Donald Trump has pushed for rate cuts, Fed Chair Jerome Powell stressed the importance of keeping inflation in check while supporting job growth. “The economy is in a solid position, but uncertainty remains elevated,” Powell said recently.
Despite Zandi’s bleak assessment, prediction market platform Kalshi shows recession odds have dipped to 14%, down sharply from nearly 70% in early May. Still, economists argue that such market sentiment doesn’t reflect the deeper risks Zandi outlines. With inflation still high and policies like tariffs and immigration restrictions weighing heavily on economic output, experts warn the U.S. could be nearing a downturn more quickly than most anticipate. Zandi’s analysis calls for strategic policy adjustments to avoid a full-blown recession.
