Mark Zandi on High Recession Risks and Immigration Policy's Economic Impact

Recession Risks and Job Market Weakness

• ⚠️ Recession risks are considered very high, with job growth coming to a virtual standstill.
• 📌 A clear indication of recession would be negative job numbers, which are seen as very possible.
• 💡 The SAM rule, historically signaling recession based on unemployment rate increases, may be less reliable due to current labor market dynamics.

Immigration Policy's Effect on Labor Force and Economy

• 📈 Immigration policy has significantly impacted labor force growth, causing it to flatten and even decline for the foreign-born population.
• 📉 This slowdown in labor force growth is keeping the unemployment rate artificially low, making it an unreliable gauge of economic strength.
• 📊 The reduced labor force growth also lowers the economy's potential growth rate without generating inflationary pressures.

Consumer Spending and Economic Outlook

• 🛒 Consumer spending has shown no aggregate growth this year, partly due to immigrants reducing spending amid policy uncertainties.
• 📉 This pullback in consumer spending is weighing on the broader economy.
• 🔑 A negative print in monthly employment numbers is a key indicator to watch for the potential start of a recession.