US economic system on the verge of a recession says Moody’s Chief Economist – Fed cannot rescue

The U.S. economy is on the verge of a recession, according to Mark Zandi, Chief Economist at Moody’s Analytics, who issued a stark warning following a raft of disappointing economic data last week.

Zandi said the latest indicators point to a stalling economy, with consumer spending having flatlined, construction and manufacturing sectors slipping into contraction, and employment poised to weaken. He added that rising inflation is further complicating any potential policy support from the Federal Reserve.

“Unemployment remains low, but only because labor force growth” has stalled, Zandi noted, citing a shrinking foreign-born workforce and a drop in labor force participation. He flagged a broad hiring freeze, especially for new graduates, and a decline in hours worked as signs of growing stress in the job market.

Zandi attributed much of the current economic drag to policy choices in Washington. “It’s no mystery why the economy is struggling,” he said, pointing to escalating tariffs and restrictive immigration policies. The tariffs, he argued, are eroding corporate profits and household purchasing power, while reduced immigration is limiting the economy’s overall capacity to grow.

The warnings from Moody’s Chief Economist come amid growing market concerns that a policy-induced slowdown could tip the U.S. into a full-blown downturn later this year.