Moody’s Analytics chief economist Mark Zandi warns that the US economy is “on the precipice of recession” following a series of troubling economic reports released last week.
Payrolls in July increased by only 73,000, and revisions to prior months were steep: May and June job gains were revised down to 19,000 and 14,000, respectively. Those downward adjustments highlight a notable slowdown in labor-market momentum.
Multiple indicators point to weakening demand across the economy. Consumer spending has lost steam, both construction and manufacturing activity are contracting, and core inflation — which excludes volatile food and energy prices — rose to 2.8 percent. That uptick in core inflation reduces the Federal Reserve’s room to ease policy quickly; inflation remaining above the Fed’s target complicates the case for near-term rate cuts.
Zandi attributes part of the economic weakening to recent policy shifts, arguing that tariffs and changes to immigration enforcement have had measurable effects. He notes that roughly 1.2 million foreign-born workers have left the workforce over the past six months, a change that affects labor supply and can ripple through production and spending patterns.
The combination of slowing payroll growth, reduced consumer outlays, contracting industrial activity, and persistent core inflation creates a fragile backdrop. In this environment, achieving a soft landing becomes more difficult: policymakers face the challenge of supporting growth without reigniting inflation, while businesses and households must navigate higher prices alongside weaker demand. Zandi’s assessment underscores the risk that these crosscurrents could push the economy into recession if conditions do not stabilize.