Economist issues chilling recession warning

The U.S. economy is in trouble, a top economist has warned. “The economy is on the precipice of recession. That’s the clear takeaway,” Moody’s Analytics Chief Economist Mark Zandi wrote on social media, pointing to a recent release of U.S. economic data.

The red flags

The signs are all there, Zandi cautioned. “Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall,” he explained in a series of posts. “And with inflation on the rise, it is tough for the Fed to come to the rescue.” As Forbes.com explained, officials at the Fed are waiting to see how much President Donald Trump’s tariffs affect inflation before they can consider cuts to interest rates.

What’s to blame

According to Zandi, “It’s no mystery why the economy is struggling; blame increasing U.S. tariffs and highly restrictive immigration policy.” Trump’s tariffs, Zandi explained, “are cutting increasingly deeply into the profits of American companies and the purchasing power of American households.” On top of that, he added, “Fewer immigrant workers means a smaller economy.” Amid Trump’s immigration crackdown, the foreign-born labor force has fallen by 1.2 million in the last six months, figures show.

Worrisome jobs numbers

The July jobs report revealed that 73,000 payrolls were added — well below the estimate of 104,000. But even more problematic are the significant revisions to figures initially reported for the prior two months: The May numbers dropped from 144,000 to 19,000 while June’s went from 147,000 to 14,000 — which means the average jobs gain over the last three months is at just 35,000. According to Charles Schwab, a low like that is “very much consistent with the start of prior recessions,” the financial services company stated in a recent report.

Jobs figures explained

Trump has claimed the recent jobs data was “rigged,” though he hasn’t presented evidence of that. According to Zandi’s social media posts, “any notion that the economic data misrepresents the reality of how the economy is performing is way off base. The data always suffers big revisions when the economy is at an inflection point, like a recession. It’s thus not at all surprising that we are seeing big downward revisions to the payroll employment numbers.” Government employment cuts — like those made by the Department of Government Efficiency, or DOGE, which was previously led by Elon Musk — since the start of Trump’s second term, Zandi noted, “are being picked up in the revisions.”

More warnings

Much like Zandi, economists at JPMorgan have also voiced concern, Fortune.com reported. Private sector jobs data revealed a significant drop in the last three months, business demand for labor has dropped, and aside from health and education, other sectors have stalled. “We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan explained. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory. In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.”

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