The US economy is facing growing signs of strain as new state-level data highlights the risk of an imminent downturn. Moody’s Chief Economist Mark Zandi has warned that the country “is on the edge of recession” after reviewing several economic indicators, including consumer spending, employment, and housing.
Zandi, who gained recognition for predicting the 2008 financial crash, said states that make up nearly one-third of the country’s gross domestic product are already at risk. He explained that about another third of the economy remains stagnant, while only a small portion is showing real growth.
“This is not a distant threat. Based on the data, many states are already weakening, and the risk is spreading,” he wrote on social media platform X. He also warned that the impact is beginning to be felt in people’s daily lives.
In an interview with Newsweek, Zandi said ordinary Americans will feel the recession in two clear ways: rising costs for everyday goods and job disruptions across key sectors. These include food supply chains, retail distribution, and manufacturing.
“Prices are already climbing. The issue is that they are about to climb to a level people simply cannot ignore. It will become clear with every shopping trip,” he added. His remarks point to an inflation trend that could soon stretch household budgets further.
The latest data show that inflation is currently at 2.7 percent, but Zandi expects it to rise beyond 3 percent and possibly approach 4 percent within the next year. If that occurs, the burden will fall hardest on middle- and low-income households, leaving many to adjust spending and delay major purchases.
While the warnings are national, the economic risk is not spread evenly. Some states such as Wyoming, Montana, Minnesota, Mississippi, Kansas, and Massachusetts are already showing signs of recession. Meanwhile, the Washington DC area is being affected by ongoing government job cuts.
Southern states still display relative strength, but Zandi noted that even there, growth is slowing at a noticeable pace. California and New York remain stable for now, but their combined share of the economy is so large that any decline could push the entire nation into a downturn.
Data on consumer spending paints an even more troubling picture. Spending from January to July this year has shown little to no increase compared to the end of 2024. Zandi remarked that such a pattern has not been recorded since the 2008-09 crisis. Weak household demand is seen as a critical red flag.
Concerns also extend to the housing market, which has long been a key driver for the US economy. Rising mortgage costs coupled with falling affordability are slowing home sales. Experts worry that this could ripple into construction, finance, and other industries tied to real estate.
Zandi added that trade policy could worsen the situation. He said that current US tariffs are hurting profit margins for American businesses at a time when they can least afford it. Higher costs for imported goods and strained supply chains may combine with domestic inflation to make recovery harder.
These warnings come at a time when Americans are already struggling with rising living costs. Food and fuel prices remain volatile, and many households are turning to credit cards or loans. This reliance on short-term borrowing risks adding pressure on families if interest rates rise further.
The outlook for jobs is also mixed. Some industries, like healthcare and technology, continue to hire, but others are freezing or cutting positions. Zandi stressed that employment disruptions in transport, retail, and government jobs are already clear signs that a national slowdown is unfolding.
Economists at Moody’s and other institutions emphasize that the stability of large states like California and New York is now crucial. If they remain steady, a prolonged economic slump might be avoided. But if either falters, the path into recession would be difficult to block.
Policymakers now face tough choices. Cuts in government jobs, higher tariffs, and fragile housing conditions will test national resilience. Zandi’s conclusions paint a warning that without careful policy steps, the US could find itself in its sharpest downturn since the last financial crash.
For now, the message is direct. The US economy is still standing, but warning lights are flashing. Without stronger growth, lower prices, and stable jobs, the risk of recession will only grow louder in the months ahead.
(IANS)
