Moody’s Analytics chief economist Mark Zandi has stressed that the United States economy is standing “on the precipice of recession,” though not officially in one yet.
In an X post on August 10, Zandi explained that the official determination of a recession comes from the National Bureau of Economic Research (NBER), which examines a range of economic indicators.
The most critical, he noted, is payroll employment. A recession is typically declared when employment declines for more than a month in a row.
So far, payroll employment has not posted consecutive declines, but growth has been minimal since May. Zandi pointed out that recent revisions to job numbers have consistently come in lower, raising the possibility that updated data could reveal job losses already underway.
At the same time, Zandi highlighted industry-level trends that add to the caution. In July, more than 53% of the roughly 400 industries tracked in the payroll survey were cutting jobs, with healthcare being the only sector meaningfully adding to employment. Historically, when more than half of the industries shed jobs, the economy has been in recession.
Recession lagging indicator
While the unemployment rate has only inched higher and remains low, Zandi stressed that it is a lagging indicator. This year, he noted, the labor force has stagnated as the number of foreign-born workers declines, making unemployment an especially unreliable measure of economic health.
Finally, Zandi emphasized that a true recession requires a persistent job decline lasting several months. That threshold has not yet been crossed, but the likelihood of a turnaround is fading as economic policies continue to weigh on growth.
“Also note that a recession is defined by a persistent decline in jobs – the decline lasts for at least a few months. We aren’t there yet, and we are thus not in recession. Things could still turn around if the economic policies weighing on the economy soon lift,” Zandi stated.
Indeed, throughout the year, Zandi has warned that despite recession odds easing, caution is warranted as several indicators continue to flash warning signals of a possible economic downturn.
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