Growth is slowing, inflation is ticking up, and experts are divided
Fresh economic data over the summer has stirred fears that the US economy is faltering. Job creation slowed sharply in May and June, remained weak in July, and the number of discouraged workers is growing. August 1 jobs report sent stocks tumbling and prompted president Donald Trump to fire the Bureau of Labor Statistics commissioner.
Soon after, Moody’s Analytics chief economist Mark Zandi posted on X that the economy was “on the precipice of a recession.”
Zandi’s outlook: Policy at the core
Expanding on his remarks in an interview with Business Insider, Zandi said the US is not yet in a recession but is heading toward tougher times. He cited tariffs, restrictive immigration policies, and government spending cuts as the main drivers of the slowdown.
“These things aren’t enough to push businesses to start laying off workers,” Zandi said, “but they’ve been enough to cause businesses to put things on hold.”
He warned that tariffs will increasingly filter through to consumers, pushing up prices in the months ahead. Construction and manufacturing, he added, are already in recession.
Moody’s adjusts its forecast
While Zandi is sounding alarms, Moody’s overall outlook has softened slightly compared to earlier dire predictions. In a USA Today report, economist Justin Begley said Trump’s policies would significantly slow growth but stop short of triggering a full-blown recession or “stagflation.”
The White House’s July 4 budget law expanded Trump’s 2017 tax cuts, boosted defense and border security spending, and cut programs such as Medicaid and food stamps. Those measures, combined with sweeping tariffs and a historic immigration crackdown, are expected to shape economic performance through 2028.
Moody’s projects average annual growth of 1.7% under Trump’s term, well below the 2.3% pace after the 2007–09 Great Recession. Inflation, meanwhile, is forecast to average 2.6% during his presidency, peaking at 3.1% next year.
Consumers still spending
Despite mounting headwinds, households have not pulled back as sharply as many expected. According to BBC News, retail and restaurant sales rose 0.5% in July, and spending in June was revised upward. JPMorgan Chase executives recently told investors that “the consumer basically seems to be fine.”
Oxford Economics deputy chief US economist Michael Pearce added that “consumers are down but not out,” predicting a modest recovery in spending as tax cuts and stock market gains lift confidence.
The road ahead
Looking forward, Zandi said the biggest unknown is policy. “If we go into recession, just how deep and long it will be will be because of policy,” he told Business Insider.
The Federal Reserve may cut rates in September to cushion the slowdown, but Zandi warned that markets have already priced in much of that move. Meanwhile, tariffs and immigration restrictions remain in place, keeping uncertainty high.
For now, economists remain split. As Zandi put it, the US stands “on the precipice”—waiting to see if policy choices tip the balance.
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