Mark Zandi warns America is ‘close to the edge’ with 40% recession risk — and says US stocks are detached from reality Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below.
With stocks soaring to fresh highs, recession may be the last thing on investors’ minds
But according to Mark Zandi, chief economist at Moody’s Analytics, America is uncomfortably close to one. In a recent interview with TheStreet, Zandi said the odds of a U.S. recession over the next 12 months are now sitting at 40% (1). “Just for context, in a typical economy, what economists would call the unconditional probability of recession is closer to 15%,” he said. “So, 40% is very elevated, very uncomfortable — it gives you a sense of how close I think things are to the edge here.” Top Picks Zandi’s warning came even after a better-than-expected jobs report, with the U.S. economy adding 115,000 jobs in April while the unemployment rate held steady at 4.3% (2). But the headline number didn’t change his view. “The labor market is still a vulnerability in the economy, still very soft,” he said, adding that recession risks remain “very high.” Zandi said businesses remain reluctant to hire, with hiring rates “still very low across most industries.” Hours worked also remain depressed, which Zandi said is “kind of consistent with what you’d see in a recession.” He also pointed to falling labor-force participation — meaning fewer people are actively working or looking for work — as a warning sign.
If participation had stayed steady over the past year, Zandi said, the unemployment rate would be closer to 5%. At the same time, inflation is becoming a bigger concern. Zandi said price pressures are picking up because of the Iran war, higher energy prices, tariffs and other factors — and that is eating into household purchasing power. “Real disposable income — that’s after tax, after accounting for inflation — is no higher today than it was a year ago,” he said. “So,…