Moody's Economist Warns of Imminent U.S. Recession by Year-End

2025-09-02 economy

Washington, D.C., Tuesday, 2 September 2025.
The U.S. economy risks entering a recession by end-2025, warns Moody’s Mark Zandi, citing stalled job growth and rising inflation, with California and New York as key economic indicators.

Economic Indicators Point to Recession

The U.S. economy is teetering on the brink of a recession, with Moody’s Chief Economist Mark Zandi highlighting stalled job growth and inflationary pressures as primary concerns. States like California and New York, which collectively account for over a fifth of the nation’s GDP, are showing signs of economic contraction. Zandi warns that if these states weaken further, it could drag the national economy into a recession by the end of 2025 [1][2].

Inflation and Consumer Spending Concerns

Inflation is expected to rise above 3% and potentially approach 4% by next year, exacerbating the economic strain [1]. Zandi emphasizes that consumer spending, a critical component of economic health, could be undermined by rising prices and declining real incomes [3][4]. These developments could initiate a cycle of reduced spending, further affecting job growth and economic stability.

Impact of Economic Policies

The current administration, under President Donald Trump, has implemented policies such as tariffs and restrictive immigration measures that are believed to be weakening the economy. While the administration cites GDP growth and foreign investment as indicators of economic success, Zandi argues that these policies contribute to the economy’s vulnerability [1][5]. The tariffs, in particular, are expected to generate significant revenue, but at the cost of increased consumer prices and reduced purchasing power [6].

Future Outlook and Economic Risks

Moody’s highlights the importance of monitoring inflation, consumer spending, and employment data as key indicators of a potential recession [1][5]. With the probability of a recession estimated at nearly 50% by Moody’s machine-learning model, businesses and policymakers must navigate these economic challenges carefully [2][5]. Upcoming employment data, expected to be released on September 5, 2025, could provide critical insights into the economy’s trajectory. As the year progresses, the balance between policy impacts and structural economic issues will likely determine the nation’s economic fate [4][6].

Sources

job growth recession risk