The U.S. economy is teetering on the edge of recession, according to Mark Zandi, chief economist at Moody’s Analytics, who sounded the alarm Monday in a blunt post on X.
“The economy is on the precipice of recession,” Zandi wrote, citing weak jobs data, rising inflation, and sluggish consumer spending. The warning comes as multiple indicators point to a troubling economic slowdown that could complicate the Federal Reserve’s ability to respond.
“Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall. And with inflation on the rise, it is tough for the Fed to come to the rescue,” Zandi said.
The July jobs report, released Friday by the Bureau of Labor Statistics (BLS), showed the U.S. added just 73,000 jobs—far short of the 110,000 forecast. Making matters worse, employment figures for May and June were revised downward by a combined 258,000 jobs, according to Fox Business.
That sparked political fireworks.
Former President Donald Trump, citing alleged manipulation of the numbers, fired the BLS commissioner, claiming — without evidence — that the agency “manipulated jobs data for political purposes” ahead of last year’s election.
Zandi quickly came to the defense of the agency and the credibility of the data.
“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,” he wrote.
He added that recent job number adjustments are tied to delays in government payroll reporting — not political gamesmanship.
“Particularly given the DOGE cuts – not because the BLS has had to cut staff, although that can’t help, but because the government often reports payrolls to the BLS late. This didn’t matter much when government employment was stable, but now that government jobs are declining, the cuts are being picked up in the revisions,” Zandi explained.
Other troubling signs are piling up. The Commerce Department reported Thursday that the Fed’s preferred inflation measure — the PCE index — rose from 2.3% to 2.6% in June, far above the 2% target.
That puts the Federal Reserve in a bind. Chair Jerome Powell has said that when inflation and employment goals diverge, the Fed will adjust policy to support whichever is furthest off target — meaning it may not be able to aggressively intervene to support jobs if inflation remains elevated.
Zandi also pointed to long-term policy issues, slamming Trump-era economic decisions for worsening the current slowdown.
“It’s no mystery why the economy is struggling; blame increasing U.S. tariffs and highly restrictive immigration policy,” Zandi said. “The tariffs are cutting increasingly deeply into the profits of American companies and the purchasing power of American households. Fewer immigrant workers means a smaller economy.”
He noted that while unemployment remains low, the labor force has stopped growing, and fewer foreign-born workers are contributing to the economy. Meanwhile, businesses are implementing hiring freezes, especially targeting recent graduates, and workers are seeing declining hours — signs of a labor market losing steam.
As economic pressures mount and political tensions flare, Zandi’s assessment is stark: “The economy is at an inflection point.”
Whether that point bends toward recovery or collapses into full-blown recession remains to be seen — but the storm clouds are gathering.
