Top economist warns the U.S. is ‘on the precipice of recession’ — and it will be hard for the Fed to come to the rescue

Economy·RecessionTop economist warns the U.S. is ‘on the precipice of recession’ — and it will be hard for the Fed to come to the rescueBy Jason MaBy Jason MaWeekend EditorJason MaWeekend EditorJason Ma is the weekend editor at Fortune, where he covers , the economy, finance, and housing.SEE FULL BIO "The economy is on the precipice of recession," Mark Zandi, Moody’s Analytics chief economist, warned.Getty ImagesIndicators from the past week paint an overall picture of an economy on the edge of a downturn, according to Moody’s Analytics chief economist Mark Zandi

Not only is the labor market weakening, but consumer spending is flat while construction and manufacturing are shrinking, he warned, adding that the Federal Reserve will have a hard time reviving growth with inflation still above its target

The shocking jobs report on Friday wasn’t the only red flag

Indicators from the past week paint an overall picture of an economy that’s headed for a downturn, according to Moody’s Analytics chief economist Mark Zandi

After months of looking remarkably resilient in the face of President Donald Trump’s tariffs, the economic outlook has suddenly turned gloomier. “The economy is on the precipice of recession

That’s the takeaway from last week’s economic data dump,” Zandi wrote in a series of posts on X on Sunday. “Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall

While Trump has claimed without evidence that the jobs data was “rigged” and fired the head of the agency that duces the report, Zandi noted that data often gets big revisions when the economy is at an inflection point, a recession

Separate reports also held warning signs

GDP rebounded more robustly than expected in the second quarter, but a metric that strips out the impact of foreign trade and looks instead at final domestic demand indicated slowing

Fed policymakers have held off on interest rate cuts as they wait to see how much tariffs impact inflation

Meanwhile, construction spending continued to decline in June amid a sharp drop in single-family s

And the Institute for Supply Management’s manufacturing activity index for July dipped, indicating the sector contracted at a quicker pace

But Zandi said the jobless rate is still low only because the size of the labor force has stagnated

As the supply of labor has softened, so has the demand

Zandi pointed to an “economy-wide hiring freeze, particularly for recent graduates.” The upshot is that the so-called neutral level of job gains needed to absorb new workers—and keep the unemployment rate steady—is now much lower. “It’s no mystery why the economy is struggling; blame increasing U.S. tariffs and highly restrictive immigration policy,” Zandi added. “The tariffs are cutting increasingly deeply into the fits of American companies and the purchasing power of American households

Fewer immigrant workers means a smaller economy.” On Friday, economists at JPMorgan similarly sounded the alarm on a potential downturn

Coupled with the lack of any signs that unwanted separations are surging due to immigration policy, this is a strong signal that demand for labor has cooled, they explained. “We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan added. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory

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