Telling sign the US is headed for a recession
More than half of US industries are already cutting jobs — a glaring red flag that a recession is near, a leading economist has warned. Moody's Analytics chief economist Mark Zandi said that, although the country hasn't officially entered a downturn, cracks are widening in the jobs market.
He said on X that 'far and away' the most important recession indicator is 'payroll employment.' 'If employment declines for more than a month consecutively, we are in a downturn,' he wrote.
Though payrolls haven't fallen yet this time, growth has stalled since May — and recent data revisions suggest employment could already be shrinking. The most recent federal jobs reports showed hiring for May and June was much lower than initially thought. On that basis, the report for July is expected to show a decline.
'It wouldn't be surprising if we learn with the coming revisions that employment is already declining,' he explained. Zandi's warning comes a week after a report showed layoffs have risen 140 percent from a year ago. Zandi said that historically, it's not clear exactly when a recession starts until well after the fact.
However, he added that 'in the past, if more than half the 400 industries in the payroll survey were shedding jobs, we were in a recession. In July, over 53% of industries were cutting jobs, and only healthcare was adding meaningfully to payrolls.'
Zandi also issued a terrifying 'red flare' warning to homeowners last month. A 'red flare' warning suggests the market is experiencing major instability and a fall is imminent. 'I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate,' he wrote.
It comes as construction of new homes has slowed and sellers are being forced to reduce their prices or pull their homes off the market entirely. 'Home sales are already uber depressed,' Zandi wrote, adding that the housing market could become an issue for the wider economy. 'Housing will thus soon be a full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy's prospects later this year and early next,' he wrote.
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