Moody’s Top Economist Says US Economy on ‘Precipice of Recession’

He cites tariffs and a ‘highly restrictive immigration policy’ as reasons for a probable economic downturn.

A sign for Moody's rating agency at the company headquarters in New York City in a file photo. Emmanuel Dunand/AFP via Getty Images

The top economist at credit rating agency Moody’s Analytics warned that the U.S. economy could be entering recession territory soon.

“The economy is on the precipice of recession. That’s the clear takeaway from last week’s economic data dump. Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall. And with inflation on the rise, it is tough for the Fed to come to the rescue,” said Moody’s Chief Economist Mark Zandi in a series of posts on social media platform X this week, referring to the Federal Reserve.

In one post, Zandi said that while unemployment is still low, “that’s only because labor force growth has gone sideways” because the “foreign-born workforce is shrinking, and labor force participation is declining.”

There is also, according to the analyst, an “economy-wide hiring freeze, particularly for recent graduates, and the decline in hours worked.”

Zandi then cited tariffs initiated by the Trump administration and a “highly restrictive immigration policy.” Tariffs are slashing into companies’ profits and Americans’ purchasing power, he said, and “fewer immigrant workers means a smaller economy.”

A recession is usually understood as a significant and major downturn in economic activity. Some economists define a recession as two consecutive quarters of negative gross domestic product (GDP) growth.

Zandi’s comments came as a report on Aug. 1 from the Department of Labor showed U.S. employers added 73,000 jobs in July, short of the 115,000 that forecasters had anticipated. Meanwhile, downward revisions removed 258,000 jobs from May and June payrolls, according to the report released by the Bureau of Labor Statistics (BLS).

After the report’s release on Aug. 1, President Donald Trump announced that he was firing Erika McEntarfer, who headed the agency. White House officials on Sunday said that Trump had “real concerns” about the data’s accuracy.

In a statement on Truth Social, Trump alleged that McEntarfer had “faked the jobs numbers” ahead of the 2024 election to boost his then-rival, Democratic Vice President Kamala Harris. “No one can be that wrong,” the president said.

In another Truth Social post, Trump stated that he believed that the Aug. 1 report on jobs was “RIGGED in order to make the Republicans, and ME, look bad.”

Two days before the BLS report was released, a separate analysis released by the Bureau of Economic Analysis showed that the U.S. GDP increased at an annual rate of 3.0 percent in the second quarter.

Meanwhile, Trump has called on the Federal Reserve to cut interest rates this year, with some Fed officials recently backing those calls. The president and others have said that the Fed may be too late in delivering rate cuts to support a weakening jobs market.

This past week, Fed Chairman Jerome Powell announced that the U.S. central bank would leave the benchmark lending rate between 4.25 percent and 4.5 percent, where it has remained since December 2024. Two members of the Fed voted against the plan, saying they had preferred to cut interest rates.

“Despite elevated uncertainty, the economy is in a solid position,” Powell said at a news conference, explaining that the central bank is attempting to maximize employment while keeping inflation low.

Trump and administration officials have said the global tariffs are necessary to reshore manufacturing and correct other countries’ unfair trade practices that have exploited the United States for years. They have also signaled that the White House is using those import taxes as leverage on other deals.

The Epoch Times contacted the White House for comment on Zandi’s statements on social media.