Moody's top economist warns of US Recession again; says: Unemployment will rise

Published 7 June 2026 · politics

Concerns over federal reserve policy Path to stability The Iran war must end soon to normalize global oil production and prices. The AI buildout must

Concerns over federal reserve policy Path to stability The Iran war must end soon to normalize global oil production and prices. The AI buildout must continue to contribute to overall growth. US economy standing on a critical threshold Moody’s Analytics chief economist Mark Zandi has once again sounded the alarm over the state of the US economy. According to a report by Business Insider, in his latest newsletter, Zandi warned that while the GDP has increased this year, the pace of growth still remains below potential. “The economy is growing, but at a rate below its potential, so the situation is tenuous,” he wrote. “Unless growth picks up, unemployment will rise and participation will fall, and at some point, undermine growth altogether.” Zandi has repeatedly criticized the tariff and immigration policies of US PResident Donald Trump and has warned that they have pushed the US economy closer to recession.

He further added that consumer prices, mainly the cost of fuel, have witnessed a price hike by the Iran war, offsetting the benefits of recent tax cuts.“The soft job market is depressing wage growth, and with inflation accelerating, real wage growth has all but stalled,” Zandi said, adding that real disposable income has not grown over the past year.Along with this, Zandi has also expressed unease about the Federal Reserve under new chair Kevin Warsh. He believes that the below-potential growth and slack in the economy would normally justify interest rate cuts, but inflation running close to 4% — double the Fed’s target — leaves policymakers constrained.He warned that if inflation expectations continue to rise, the Fed may be forced to raise rates further, even at the risk of triggering a full recession.

“Economic pain in the short term should be preferable to worse economic conditions in the months ahead,” Zandi cautioned.For the economy to avoid being derailed, Zandi said two conditions are critical:In a recent interview to Bloomberg, Mark Zandi said that the increase in oil prices triggered by stalled negotiations has pushed the US economy to a critical threshold. Recently, Iran announced that it would halt negotiations and block the Strait of Hormuz until the important demands are met, sending Brent and US crude oil prices up by about 7%. This disruption threatens global energy supplies and has already driven the US national average gas price to $4.32 per gallon. Zandi has warned that if the prices climb to $5 per gallon, then consumer spending could collapse, tipping the US economy into recession.Zandi also emphasised that a peace deal must be reached within ‘the next day, to days, three days, next week or so.’ Beyond that, he said, ‘we’ve got a real problem’.