Moody's Analytics Forecasts 48% U.S. Recession Probability, Citing Unprecedented Risk

Mark Zandi, Chief Economist at Moody's Analytics, has issued a stark warning, stating there is an "uncomfortably high 48% probability that the U.S. economy will suffer a recession in the next 12 months." This forecast, derived from Moody's newly unveiled leading economic indicator utilizing a machine learning algorithm, marks an unprecedented level of risk, as historically, such a high probability has not occurred without a subsequent recession.

Zandi's assessment highlights a precarious economic landscape, noting that while the figure is "less than 50%, historically, the probability has never gotten this high, and a recession has not ensued." He has consistently voiced concerns about the economy's stability, likening its current state to "clinging to the edge of a cliff." Recent data indicating a shrinking workforce and flatlined hiring have led Zandi to describe the situation as a "jobs recession."

The economist attributes some of the economic struggles to factors such as aggressive tariff policies, restrictive immigration measures, and federal workforce cuts. These elements are reportedly impacting various regions and sectors across the nation. States accounting for nearly a third of the U.S. Gross Domestic Product are identified as either already in recession or at a high risk of one, particularly in the Midwest, Rust Belt, and the Washington D.C. area.

Specific sectors feeling the brunt of this downturn include agriculture, manufacturing, and construction. Zandi emphasized that a critical factor preventing a broader economic collapse is the current absence of widespread layoffs. He cautioned that if businesses begin significant workforce reductions, the "jobs recession" could quickly escalate into an overall economic downturn.

Despite the concerning outlook, some sectors like technology have shown resilience. Moody's Analytics' new machine learning model, which underpins this forecast, is designed to provide a forward-looking perspective on economic health. The 48% probability underscores a deeply concerning outlook for the coming year, with Zandi's warnings resonating across financial markets and policy discussions.