U.S. Economy in “Pre-Recession” Danger Zone, Warns Economist Mark Zandi

Mark Zandi, chief economist, Moody’s Analytics, says the U.S. economy has entered a “danger zone” on the run-up to a recession. Officially, there’s no slump yet, but labor market and sectoral indicators point to rising vulnerabilities.

The situation, Zandi warns, can turn fast. A drag on hiring and workforce reductions across broad industries are seeding the conditions for a slump, even while unemployment remains low. “The economy is on the precipice of recession,” he wrote recently on X.

Who is Mark Zandi and Why People Pay Attention

As chief economist at Moody’s Analytics, Mark Zandi is a highly influential macroeconomist in the U.S. He has provided economic advice to Congress and the White House. His outlooks are frequently published in major financial press, affecting investor and policymaker expectations.

Zandi’s track record includes forecasts and analyses of pivotal crises, notably the 2008 collapse and the economic slump during the pandemic. His commentary regularly sets the agenda for debates among investors, market analysts and government officials.

U.S. Economy Teeters Near Recession

Zandi argues the U.S. economy sits close to the edge of a recession. While formal evidence of a slump is not yet present, the picture is unsettling. Historically, he says, the moment a recession starts is hard to identify in real time and often only visible later.

“The economy is on the precipice of recession. How will we know if we are in one? Historically, it’s not clear-cut until well after the fact. The pandemic was one time that it was. Even then, there were deniers claiming that the recession calls were politically motivated,” Zandi wrote on X on August 10.

Zandi reminded readers that disputes about the mere fact of a recession have occurred before, despite apparent signs. Today, he says, the mounting threat comes from a cooling labor market and job cuts in core sectors.

Workforce Data and Industry Warnings

For Mark Zandi, the labor market is the NBER’s primary recession yardstick: the organization treats months-long employment declines as evidence of a downturn. Officially, no such decline has been recorded – yet job creation has almost stopped since May, and downward revisions are common. He argues that this combination may mean job losses have already begun, only the public figures lag behind.

Industry-level data add to the concern: roughly half of some 400 sectors reduced payrolls in July, with only healthcare showing meaningful hiring. Zandi recalls that such broad-based cutbacks have often accompanied past recessions.

At the same time, the low unemployment rate doesn’t tell the full story. It trails real-time labor-market shifts and can create a misleading sense of calm. Zandi cautions that in 2025 the metric’s reliability is compromised by a stagnant labor force and fewer foreign-born workers.

Unemployment will be a particularly poor barometer of recession,

he said.

Bottom Line

Zandi’s view: formal signs of recession haven’t appeared, but policy continues to dampen expansion and the probability of turning positive is falling. He points out that recessions are typically recognized only after sustained month-to-month employment declines – something that hasn’t occurred yet – yet current labor-market dynamics and sectoral contractions raise the alarm.

As a result, businesses and households may respond with slower hiring, revised pay and budgets, and reduced investment and spending. In light of rising uncertainty, Zandi recommends proactive planning for a possible economic slowdown and putting adaptive measures in place ahead of time.