Top economist sounds alarm: US economy teetering on recession and is on the brink of big trouble

Time of India

a day ago

US recession 2025:
The US economy may be headed for rocky times ahead, as it is showing troubling signs of an impending recession, warned Mark Zandi, chief economist at Moody's Analytics, as per a report.
US Consumer Spending Flatlines, Raising Recession Concerns
In an analysis shared on social media, Zandi pointed to a range of warning signs that suggest the country is inching dangerously close to a recession, according to a Franknez Media report.
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From weakening consumer spending to a cooling labor market and a slowdown in key industries, Zandi pointed out that the economic data is painting a troubling picture and Americans should be paying attention, as per the report.
He wrote that 'Economic activity is stalling,' as he pointed to declining labor force participation and a shrinking foreign-born workforce as key contributors to the slowdown, as reported by the Franknez Media.
Zandi emphasised that consumer spending, the engine that drives about two-thirds of US economic output, has flatlined, and that alone is enough to raise concern, but it's not the only sector flashing red, according to the report.
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Manufacturing and Construction Sectors Are Shrinking Fast
Even construction and manufacturing are contracting at an alarming rate, reported Franknez Media, citing Zandi's analysis.
Low Unemployment Masks Deeper Labor Market Weakness
While the official unemployment rate remains low, Zandi highlighted that it does not reveal all the details. Behind the headline numbers are deeper issues, a shrinking workforce, fewer hours worked, and growing difficulty for new graduates to land jobs, as reported by Franknez Media.
Hiring freezes are widespread, and the once-strong demand for labor is cooling, a potential sign that employers are bracing for tougher times, according to the report.
He pointed out that the foreign-born workers, who have long helped fill labor shortages and drive economic growth, are also leaving the workforce in greater numbers due to restrictive immigration policies, as per the Franknez Media report.
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Tariffs Are Hurting Corporate Profits and Consumer Budgets
Zandi warned that 'Tariffs are eroding corporate profits and household purchasing power,' adding that reduced immigration is leading to a smaller workforce and, consequently, a smaller economy, as reported by Franknez Media.
Revised Job Growth Data Reveals Alarming Drop in Employment
The economist also addressed concerns about the accuracy of recent economic data, arguing that large revisions to employment figures are usual signs during economic turning points, according to Franknez Media.
Just like July's job growth was reported at 73,000, which was well below the expected 115,000, and more concerning was the revisions to May and June payrolls removed 258,000 jobs, with May's initial estimate of 139,000 jobs revised down to just 19,000, which is the largest revision since March 2021, as per the report.
The Federal Reserve's Cautious Stance
Meanwhile, the Federal Reserve's decision to hold interest rates steady for the fifth consecutive meeting indicates the delicate balance it must strike, even after pressure from US president Donald Trump to cut borrowing costs, Fed Chair Jerome Powell emphasised the need to manage inflation, which remains 'somewhat elevated,' while supporting employment, as reported by Franknez Media.
Powell had said during a recent press conference that, 'The economy is in a solid position, but uncertainty remains elevated,' as quoted in the report.
Recession Odds Have Dropped, But Don't Relax Yet
However, even after the dark outlook, prediction market platform Kalshi found that the odds of a US recession has fallen to 14%, down from a high of nearly 70% on May 1, as reported by Franknez Media.
These platforms, which allow users to bet on future events, show the shifting sentiment but do not negate the underlying risks highlighted by Zandi and other economists, according to Franknez Media.
FAQs
Is the US in a recession now?
Not officially, but several economic indicators suggest we may be close.
What is the Federal Reserve doing?
The Fed is keeping interest rates steady but is carefully watching inflation and growth.
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