Mark Zandi, chief economist at Moody’s Analytics, has warned that U.S. recession risks have risen to concerning levels.
The warning is based on a machine learning model developed by Moody’s, which now estimates a 45% chance the U.S. economy will enter a recession within the next 12 months.
While a 45% probability is technically below the 50% threshold, it still signals considerable economic strain and uncertainty. According to Zandi, the risk would typically hover closer to 15% in a stable economy.
“Recession risks are uncomfortably high. How high? Our newly developed machine learning model puts the probability of a recession starting in the next 12 months at 45%. It is good that the odds are less than even, but not that good,” Zandi said in an X post on May 28.
The model incorporates various economic indicators and historically aligns with actual downturns when the estimated probability exceeds 50%. The latest data shows a sharp rise in risk, nearing that critical point.
Growing economic headwinds concern
This elevated risk reflects growing economic headwinds, with recent trade tensions playing a central role.
Although tensions have eased somewhat, thanks to progress in U.S. trade negotiations with key partners, the risks suggest these issues are still weighing on future economic momentum.
On May 16, Moody’s Ratings downgraded the U.S. government’s credit outlook from “stable” to “negative,” citing rising debt, widening deficits, and weakening governance.
At the height of the trade tensions, recession risks for 2025 were estimated to exceed 60%, a view held by institutions like JPMorgan.
The bank had initially warned that a recession seemed likely, but later lowered its probability to below 50% following progress in trade talks with China.
Meanwhile, as reported by Finbold, economist Steve Hanke has maintained that there’s a 90% chance the U.S. could face a downturn, citing the lingering effects of the Trump-era tariffs.
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