Moody's Analytics chief economist Mark Zandi has warned that the United States faces a high risk of recession unless policymakers change course on various key economic fronts. According to a report by Business Insider, speaking during a webcast hosted by Marcus & Millichap, Zandi said that the odds of a downturn in the next 12 months stand at about 40%, reflecting fragile growth conditions.
Policy threats to the economy
Zandi argued that the biggest threats to the economy are 'counterproductive policy choices' such as broad-based tariffs, restrictive immigration measures, and foreign policy missteps. He also emphasized that the Federal Reserve must remain independent and avoid politically driven decisions. 'It is the policy headwinds that are significantly raising the threat of recession,' he told Business Insider.
A path to avoid downturn
Despite the elevated risk, Zandi said that he still sees a path to sidestep a recession if the government pivots away from damaging policies. He revealed that the path includes abandoning tariffs, ending the Iran war, and allowing the Fed to keep interest rates steady until inflation data shows clear improvement. 'You just kind of try to thread the needle and sit on your hands and do nothing,' he said of the Fed's stance.
Jobs and the role of AI
Zandi noted that monthly job growth has slowed to 50,000–75,000, far below past levels, but he believes the labour market could recover if policy direction improves. He also credited the rise of AI innovation with helping offset some of the drag from tariffs and geopolitical tensions, though its impact on corporate margins and employment has yet to fully materialize.
US economy very close to recession
Last year, Zandi warned that the US economy is close to recession. A new analysis of state-level data suggests the US economy is 'on the edge of recession,' said Zandi. 'Based on my assessment of various data, states making up nearly a third of US GDP are either in or at high risk of recession, another third are just holding steady, and the remaining third are growing,' he wrote on social media.
Impact on everyday Americans
The economic pressure is expected to directly impact everyday Americans in two key ways: higher prices and job instability. In a recent interview, Zandi noted that rising costs will soon become impossible to ignore, especially for essential items. 'Prices are already rising; you can see it in the data, but they're going to rise to a degree that it will be impossible for people to ignore,' he said.
Zandi's assessment points to several factors, including sluggish consumer spending, which has seen its weakest growth since the 2008-09 financial crisis. He also raised concerns about the impact of US tariffs on company profits and continued struggles in the housing market.
