US Economy Shows Signs of Recession as Moody's Zandi Warns of Worsening Conditions

According to Moody's Analytics chief economist Mark Zandi, nearly a third of the US economy is already in recession or at high risk of entering one. The US economy is divided into three groups: 22 states in recession or at high risk, 13 states "treading water," and 16 states still expanding, albeit at a slower pace. Zandi's machine-learning model puts the odds of a recession within the next year at 49%.

Moody's Analytics chief economist Mark Zandi has issued a stark warning, stating that nearly a third of the U.S. economy is already in recession or at high risk of entering one. Zandi's assessment, based on various datasets, indicates that 22 states are in recession or at high risk, another 13 are "treading water," and 16 states are still expanding, albeit at a slower pace [1].

Zandi's machine-learning model puts the odds of a recession within the next 12 months at 49%. He attributes this risk to several factors, including President Trump's tariff policies and immigration restrictions, which are cutting deeply into company profits and household purchasing power. Zandi believes that even if the Federal Reserve (Fed) implements rate cuts, these structural pressures will drive the economy into recession [2].

The U.S. economy is showing signs of distress across multiple sectors. For instance, Campbell's Soup reported a surge in preference for home-cooked meals, indicating that consumers are turning to cheaper alternatives as budgets tighten. Similarly, luxury champagne sales have declined dramatically, reflecting a broader shift in consumer spending patterns [2].

Zandi's analysis is supported by recent employment data. Payrolls expanded by just 73,000 in July, well below expectations, while revisions to May and June figures showed significant job losses. More than half of industries are already shedding workers, a trend that has accompanied past recessions [1].

While the Atlanta Fed's GDP tracker points to continued nationwide growth, it is expected to decelerate to 2.3% in the third quarter from 3% in the second quarter. This deceleration, coupled with the current economic indicators, suggests that the U.S. economy is at a critical juncture.

Zandi's warning is not without precedent. In the past, when more than half of the industries in the payroll survey were shedding jobs, it has been a clear sign of a recession. The current situation, with over 53% of industries cutting jobs, aligns with this historical trend [1].

References:
[1] https://finance.yahoo.com/news/third-u-economy-already-recession-070200026.html
[2] https://moguldom.com/463111/top-economist-mark-zandi-predicts-a-recession-is-on-its-way-to-hit-america-7-predictive-signs/