Very telling sign that US is on course for recession

Omodele Adigun

More than half of US industries are already cutting jobs a glaring red flag that a recession is near, a leading economist has warned.

Moody’s Analytics chief economist Mark Zandi said that although the country hasn’t officially entered a downturn, cracks are widening in the jobs market.

He said on X that ‘far and away’ the most important recession indicator is ‘payroll employment.’

‘If employment declines for more than a month consecutively, we are in a downturn,’ he wrote.

Though payrolls haven’t fallen yet this time, growth has stalled since May — and recent data revisions suggest employment could already be shrinking.

The most recent federal jobs reports showed hiring for for May and June was much lower than initially thought. On the basis, the report for July is expected to show a decline.

‘It wouldn’t be surprising if we learn with the coming revisions that employment is already declining,’ he explained.

Zandi’s warning comes a week after a report showed layoff have risen 140 percent from a year ago.

Zandi said that historically, it’s not clear exactly when a recession starts until well after the fact.

However, he added that ‘in the past, if more than half the ≈400 industries in the payroll survey were shedding jobs, we were in a recession. In July, over 53% of industries were cutting jobs, and only healthcare was adding meaningfully to payrolls.’

Zandi also issued a terrifying “red flare’ warning to homeowners  last month.

A ‘red flare’ warning suggests the market is experiencing major instability and a fall is imminent.

‘I sent off a yellow flare on the housing market in a post a couple of weeks ago, but I now think a red flare is more appropriate,’ he wrote.

It comes as construction of new homes has slowed and sellers are being forced to reduce their prices or pull their homes off the market entirely.

‘Home sales are already uber depressed,’ Zandi wrote, adding that the housing market could become an issue for wider economy.

‘Housing will thus soon be a full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy’s prospects later this year and early next,’ he wrote.

If the housing markets woes do tip into the wider economy it could increase the likelihood of a recession, Zandi warned.

On Sunday Zandi offered a ray of hope in the otherwise gloomy outlook, writing that ‘things could still turn around if the economic policies weighing on the economy soon lift.

‘But that looks increasingly unlikely,’ he added. In June the Organization for Economic Co-operation and Development (OECD) warned that US would tip into recession as a result of Trump’s aggressive trade policies.

The OECD also criticized other key Trump policies including his vast reduction in the federal workforce and curbs on immigration, both of which are also dragging on the economy.

The report also warned that the US budget deficit will expand further as weaker economic activity will override the gains made by spending cuts and revenue from tariffs.