Moody's Analytics Warns of Rising U.S. Recession Risk Within a Year

Moody's Analytics has raised concerns about the United States facing an elevated risk of entering an economic recession within the next 12 months. Using its advanced machine-learning economic indicators, the firm estimates the current probability of a recession at 48%, just under the 50% threshold that often signals an imminent downturn.

Released on September 14, this analysis from Moody’s Chief Economist, Mark Zandi, highlights growing economic instability. The data points to vulnerabilities that could significantly impact the U.S. economy in the near term, warranting closer scrutiny.

Historical Trends Signal Cause for Concern

Though the probability remains below the 50% tipping point, Zandi emphasized the historical relevance of the current figures. He pointed out that similar mid-to-high 40% probability levels in past decades have often preceded or coincided with economic recessions.

Drawing on economic data going back to the 1960s, Zandi explained that spikes in recession probabilities typically serve as harbingers of impending contraction. “These patterns warrant special attention,” he stated, adding that the current situation mirrors historical warning signs that should not be overlooked.

A Nation Divided: States Entering Economic Weakness

Echoing his ongoing concerns, Zandi highlighted that significant portions of the U.S. economy already show signs of strain. According to his analysis, approximately one-third of U.S. states—accounting for the same proportion of national GDP—are either in a recession or at elevated risk of recession.

An additional one-third of the economy appears stagnant, showing little to no growth. The remaining states are experiencing marginal economic expansion, though the growth remains tepid. Key industries are bearing the brunt of this weakening trend, with sectors like manufacturing, construction, and transportation seeing pronounced challenges. Employment in these areas, in particular, has decelerated considerably.

Policy Choices Exacerbate Economic Strains

Zandi also attributed some of the growing economic pressures to specific policy decisions. He singled out trade policies—such as escalating tariffs—and stringent immigration restrictions as key catalysts for economic imbalances. Budget cuts have contributed further to the fragility, alongside a labor market constrained by lower workforce participation, especially among immigrant workers.

The economist argued that these policy-driven pressures have stymied growth and created ripple effects across various sectors. Labor shortages and disruptions in supply chains are adding to the challenges, exacerbating vulnerabilities.

Employment Metrics Paint a Worrisome Picture

Employment data has become a central indicator of the country’s precarious economic position. Zandi highlighted several troubling trends in job markets, including slower job creation rates, a gradual uptick in unemployment, and downward revisions to previous employment data, which have collectively undermined optimism.

While these developments stop short of confirming a technical recession, Zandi warned that the U.S. economy remains precariously “on the brink of one.”

The Bigger Picture: A Warning for the Economy

As Moody's Analytics continues to monitor the evolving economic landscape, Zandi’s analysis underscores the growing need for vigilance. The convergence of historical patterns, weakening state economies, policy-driven challenges, and troubling labor market indicators paints a sobering picture. Though the economy hasn’t crossed into full recessionary territory, the signs suggest it remains at risk of doing so in the near future.

For ongoing updates and insights into economic trends, readers can follow Block Media’s Telegram channel. Stay informed as new developments emerge regarding the state of the U.S. economy.

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