NEW YORK — A leading economist has raised the alarm on the fragility of the U.S. economy, pegging the probability of a recession within the coming year at nearly 50%—a level that has never been reached without an eventual downturn in modern history.
As housing data and Federal Reserve decisions loom large, experts are scrutinizing whether upcoming interest rate cuts can avert a slide into contraction.
Mark Zandi, chief economist at Moody’s Analytics, shared his latest assessment in a series of posts on X, highlighting slumping residential building permits as a critical red flag.
According to Moody’s data, the risk of the U.S. entering a recession over the next 12 months now stands at 48%.
“It’s less than 50%, but historically, the probability has never gotten this high, and a recession has not ensued,” Zandi stated.
This forecast builds on Zandi’s recent warnings, where he described the economy as teetering on the “precipice of recession.”
In August, he told Business Insider that the U.S. was at the “edge of a cliff,” pointing to factors like potential tariffs and immigration policies under the incoming Trump administration as exacerbating risks.
Even with anticipated Federal Reserve actions, Zandi has expressed doubt about their sufficiency to prevent a downturn.
Housing Market Signals Mounting Economic Strain
At the heart of Zandi’s concerns is the housing sector, where weak buyer demand has led to a buildup of unsold homes.
Builders are responding by scaling back new projects, driving residential construction permits toward lows last seen during the pandemic.
This trend, Zandi noted, is a reliable harbinger of broader economic weakness.
August’s permit figures, set for release on Wednesday, September 17, are expected to underscore these pressures just as the Federal Open Markets Committee convenes for its next policy meeting.
Zandi anticipates the data will reinforce the case for monetary easing.
“They are sure to provide another reason why the Fed should and will announce a rate cut later that day,” he said.
The Federal Reserve is widely projected to lower interest rates on that date, marking a potential pivot to support growth amid cooling inflation and softening job market signals.
However, Zandi’s analysis suggests this may not be enough to counteract the headwinds from housing and other indicators.
What’s Next for the U.S. Economy?
Zandi’s outlook aligns with his prior commentary on interconnected threats, including trade policies and labor market shifts.
In recent Business Insider interviews, he linked rising recession risks to uncertainties around tariffs and immigration enforcement, which could crimp job growth and consumer spending.
The 48% probability, while below the tipping point of 50%, represents an “uncomfortably high” threshold based on historical patterns tracked by Moody’s Analytics.
No prior instance has seen such elevated odds without a recession materializing, underscoring the urgency for vigilant policymaking.
As markets await the Fed’s decision and fresh housing data, Zandi’s voice adds weight to growing calls for proactive measures to safeguard the expansion that has endured since 2020.
Also Read: Recession Fears Now Surge as Labor Market Slows Down, Mortgages Rise
