'On the precipice of recession': A top economist warns that not even the Fed may be able to rescue the US from a downturn

The top economist at Moody’s has some thoughts on the economy’s future, and they’re not particularly upbeat.

Mark Zandi, chief economist at Moody’s Analytics, said over the weekend that he believes a recession is likely, and that even eagerly anticipated rate cuts from the Federal Reserve probably won’t stave off a downturn.

The economist said in a series of posts on X that the US economy is “on the precipice of recession,” with consumer spending weakening and risks facing both construction and manufacturing.

“With inflation on the rise, it is tough for the Fed to come to the rescue,” Zandi said.

President Donald Trump has repeatedly demanded that the central bank slash interest rates this year, with some officials recently backing those calls. They argue that the Fed risks being too late to support a weakening labor market.

But Zandi thinks a recession is coming regardless, and rate cuts won’t be able to offset two forces he thinks are pressuring the economy: tariffs and immigration policy.

“The tariffs are cutting increasingly deeply into the profits of American companies and the purchasing power of American households,” he said. “Fewer immigrant workers means a smaller economy.”

While Zandi acknowledged that the unemployment rate has remained low, he added that the growth of the US labor force has “gone sideways” as participation falls and the foreign-born workforce continues to shrink.

Recent data show that the US labor market is struggling more many observers thought. Figures from the Bureau of Labor Statistics showed that US employers added 73,000 jobs in July, much less than economists were expecting. Many job seekers have also reported bleak prospects as companies scale back hiring.