The U.S. economy isn\u2019t in a recession yet, but the number of industries cutting back on headcount is concerning, and future revisions to jobs data could show employment is already falling, according to Moody\u2019s Analytics chief economist Mark Zandi.<\/p>\n
In a series of X posts on Sunday<\/a>, he followed up his warning from last weekend that the economy is on the brink of a recession<\/a>.<\/p>\n This time, Zandi pointed out that the start of a recession is often unclear until after the fact, noting that the National Bureau of Economic Research is the official arbiter of when one begins and ends.<\/p>\n According to the NBER<\/a>, a recession involves \u201ca significant decline in economic activity that is spread across the economy and lasts more than a few months.\u201d It also looks at a range of indicators, including\u00a0personal income, employment, consumer spending, sales, and industrial production.<\/p>\n Zandi said payroll employment data is by far the most important data point, and declines for more than a month consecutively would signal a downturn. While employment hasn\u2019t started falling yet, it has barely grown since May, he added.<\/p>\n Payrolls expanded by just 73,000 last month<\/a>, well below forecasts for about 100,000. Meanwhile, May\u2019s tally was revised down from 144,000 to 19,000, and June\u2019s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000.<\/p>\n Because recent revisions have been consistently much lower, Zandi said he wouldn\u2019t be surprised if subsequent revisions show that employment is already declining.<\/p>\n \u201cAlso telling is that employment is declining in many industries. In the past, if more than half the \u2248400 industries in the payroll survey were shedding jobs, we were in a recession,\u201d he added. \u201cIn July, over 53% of industries were cutting jobs, and only health care was adding meaningfully to payrolls.\u201d<\/p>\n Last week, Zandi said data often sees big revisions when the economy is at an inflection point, like a recession. And on Wednesday, Federal Reserve Governor Lisa Cook similarly noted that large revisions are \u201ctypical of turning points\u201d in the economy.\u00a0<\/p>\n For now, the\u00a0Atlanta Fed\u2019s GDP tracker<\/a>\u00a0points to continued growth, and the third-quarter forecast even edged up to 2.5% from 2.1% last week, though that\u2019s still a slowdown from 3% in the second quarter.<\/p>\n There are also no signs of mass layoffs as weekly jobless claims haven\u2019t spiked, and the unemployment rate has barely changed, bouncing in a tight range between 4% and 4.2% for more than a year.<\/p>\n But Zandi said the jobless rate will be a \u201cparticularly poor barometer of recession\u201d as the recent decrease in the number of foreign-born workers has kept the labor force flat.<\/p>\n \u201cAlso note that a recession is defined by a persistent decline in jobs\u2014the decline lasts for at least a few months. We aren\u2019t there yet, and we are thus not in recession,\u201d he explained. \u201cThings could still turn around if the economic policies weighing on the economy soon lift. But that looks increasingly unlikely.\u201d<\/p>\n Wall Street is divided<\/a> on what the jobs data are saying, with some analysts attributing the slowdown to weak labor demand while others blame weak labor supply amid President Donald Trump\u2019s immigration crackdown.<\/p>\n Bank of America<\/a> falls into the supply camp<\/a> and said that \u201cmarkets are conflating recession with stagflation.\u201d But UBS warned of weak demand, pointing out the average workweek is below 2019 levels, and said the labor market is showing signs of \u201cstall speed<\/a>.\u201d<\/p>\n