3 reasons the US is closer to a recession than GDP suggests, according to a top economist

• Mark Zandi isn't convinced that the US economy is on a stable trajectory.
• In his latest outlook, the economist shared his take on why he still thinks a recession may be coming.
• GDP growth has been strong, but Zandi thinks the data masks underlying weakness.

Mark Zandi isn't feeling great about the economy as 2026 get underway.

The top economist at Moody's Analytics was ringing the alarm all throughout 2025, and he's still convinced that the headlines about strong GDP and a stable economy are masking other issues.

Zandi's thesis centers on the weakness he sees in the labor market, which he believes is being masked by a strong headline GDP number.

In his latest outlook for 2026, Zandi wrote that while the US economy is expanding, the growth is fragile. Whether it becomes stronger in the coming year will largely depend on the Trump administration's policies, specifically regarding tariffs and immigration.

If economic policy continues in its current direction, Zandi maintains that the problems that plagued the US last year are likely to persist, and even reasonably high GDP growth can't cover up the cracks below the surface.

Zandi said there are several reasons to believe the likelihood of a recession is high.

The economy is growing, but not fast enough

The economy may look strong, but Zandi said that the numbers look misleading. Accounting for the six-week government shutdown, he estimates that real GDP growth in the fourth quarter will be 2%. That's short of the growth rate needed to employ everyone entering the labor force, and continued growth below potential will ultimately be a hindrance to further expansion.

"Of course, the economy cannot consistently grow below its potential for long. This is not sustainable. Consumers and businesses will eventually lose faith in the economy and become more cautious in their spending and investment, leading to even more job losses and higher unemployment," he said. "Recession will ultimately ensue."

The deteriorating labor market is a clear recession indicator

Zandi has repeatedly flagged problems in the labor market as an indication of an oncoming downturn. For 2026, he is still deeply concerned about cracks in the labor market, as the economy isn't able to absorb new labor supply fast enough.

"That unemployment is definitively on the rise is evidence that the economy's 2% underlying growth rate is falling short of its potential rate of growth—the rate at which it needs to grow to employ all those entering the labor force," he noted.

Zandi added that hiring has fallen to levels historically in line with other economic downturn cycles, something that often precedes a recession.

Stock market risk remains high

Zandi has cautioned against relying on the stock market as an economic scorecard, and has said the wealth effect of rising asset prices could be clouding the broader picture of consumer health.

He acknowledged that the market's strength provided a much-needed tailwind for the economy in 2025, but also highlighted the possibility of the AI bubble bursting and creating wider systemic risks.

"If the stock market is a bubble and it bursts, wiping out this wealth, consumer spending will suffer a significant blow, triggering a recession," he stated. "This is precisely what happened in the wake of the bursting Y2K bubble."