Mark Zandi, Chief Economist at Moody’s, has issued a stark warning about the U.S. economy, stating that it is “on the edge of recession.” His assessment is based on recent state-level data indicating that nearly one-third of U.S. GDP is either in or at high risk of entering a recession. Another third remains stable, while the remaining third is experiencing economic growth
Zandi, who accurately predicted the 2008 financial crisis, highlights several factors contributing to the current economic uncertainty:
- Rising Inflation: The annual inflation rate, currently at 2.7%, is projected to exceed 3% and approach 4% by this time next year.
- Stagnant Consumer Spending: Consumer spending in 2025, up to July, has shown minimal growth compared to the end of the previous year, marking the weakest performance since the 2008-09 period.
- Job Disruptions: Economic challenges are leading to job disruptions across industries tied to food, goods, and transportation.
- Impact of U.S. Tariffs: The imposition of tariffs is adversely affecting American companies’ profits.
- Weakness in the Housing Market: Ongoing troubles in the U.S. housing market are adding to economic pressures.
Zandi also notes that the broader Washington, D.C. area is experiencing government job cuts, which further exacerbate regional economic challenges.
Despite these concerns, some states, particularly in the South, are showing resilience, though their growth is slowing. California and New York, which together account for over a fifth of U.S. GDP, are maintaining stability, which is crucial for the national economy to avoid a downturn.
In summary, while certain regions display economic stability, the overall national outlook is concerning, with various factors indicating that the U.S. economy is teetering on the edge of a recession.
