US economy on ‘precipice of recession,' Moody's chief economist warns

The Hill

17 hours ago

Moody's Analytics chief economist Mark Zandi said the U.S. economy is 'on the precipice of recession,' citing indicators from last week's economic data releases.
In a social media post Monday, Zandi pointed to stagnant consumer spending, contracting construction and manufacturing sectors and projected employment declines.
Rising inflation makes it difficult for the Federal Reserve to provide economic stimulus, the economist said
While unemployment remains low, Zandi attributed this to declining labor force growth rather than economic strength.
'The foreign-born workforce is shrinking and labor force participation' is falling, he wrote.
An economy-wide hiring freeze affecting recent graduates and declining work hours signal deeper problems, according to Zandi.
He blamed the economic struggles on increasing 'U.S. tariffs and restrictive immigration policies.'
The tariffs are 'cutting increasingly deeply into the profits of American companies and the purchasing power of American households,' while fewer immigrant workers mean 'a smaller economy,' Zandi noted.
The economist defended recent economic data against suggestions it misrepresents economic reality. Large revisions to employment figures are normal during economic turning points like recessions, he said.
'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 wrote.
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Downward revisions shaved 258,000 jobs off May and June payrolls, erasing 88 percent of their previously reported additions. May's initial estimate of 139,000 jobs was slashed to just 19,000, the steepest revision since March 2021.
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The Federal Reserve held interest rates steady Wednesday, as officials remain cautious amid a swirl of recent economic data.
The pause marked the Fed's fifth straight meeting without a rate change, despite mounting pressure from President Trump to ease borrowing costs.
In announcing the decision, policymakers noted that while unemployment remains low and labor market conditions are solid, inflation remains 'somewhat elevated.'
'Despite elevated uncertainty, the economy is in a solid position,' Powell said at a press conference, emphasizing the Fed's dual mandate of maximizing employment while keeping inflation in check.