Suddenly, there is a new potential threat to the economy – a serious mistake by the Federal Reserve. This risk was brought to the fore by this past week’s FOMC meeting. I’m not concerned about the Fed’s decision to keep rates unchanged.

The economy is soft and vulnerable. This is the clear message in today’s GDP, income, and spending data. Abstracting from the vagaries of the data, real GDP growth is at best 2%, driven largely by AI-related investment and wealth effects that support consumer spending among the well-to-do.

I was away last week and didn’t have a chance to weigh in on the June employment report. But even though belated, I can’t help myself, as I thought the commentary was much too dismissive of how weak the numbers looked, all the noise in the data notwithstanding.

The raft of economic data released last week isn’t sending off red flares, but it is sending off yellow ones. No red flares because real GDP is still growing at a 2% pace, with AI and corp tax cuts powering business investment. But yellow flares because consumers struggle to maintain their spending

$1,000. That's what the Iran war has cost the typical American household so far — at the pump, at the grocery store, in higher mortgage rates, and in what we're spending as taxpayers. And the total keep climbing. Full piece in The Philadelphia Inquirer: www.inquirer.com/economy/iran...

Iran war has cost your household $1,000 — and counting | Expert Opinion

The war's impact on gas and grocery prices has hit consumers' wallets in a meaningful way.

inquirer.com

The Fed meets this week, and while it will be the first with Kevin Warsh as chair, it is tough to see any significant changes to monetary policy. The Fed is stuck between surging inflation, which argues for rate hikes, and a soft job market, which argues for cuts, thus no change.

Enjoyed joining Stephanie Flanders and Andrew Sacher on @Bloomberg's Trumponomics podcast last week to dig into a question that's top of mind for many: is the U.S. economy dangerously dependent on the wealthy? podcasts.apple.com/us/podcast/i...

Is the US Economy Dangerously Dependent on the Rich?

Podcast Episode · Trumponomics · June 3 · 23m

podcasts.apple.com

$100 billion. That’s our estimate of the cost of the Iran War to American households. That’s nearly $750 per household. This includes the additional U.S. military costs and the higher energy and other prices resulting from the war.

The economy isn’t just soft, it’s struggling. That's the clear message in the flood of economic data released today. Ordered from least to most worrisome: First-quarter real GDP was revised down to just 1.6% and this includes the bounce back from the government shutdown at the end of last year.

This week’s economic data will tell a familiar story: resilience, but growing strain beneath the surface. The good, the okay, the bad and the ugly. 🧵

I wouldn’t take solace in the April employment numbers, despite the solid payroll employment gain. There are a bunch of reasons why, but one particularly worth calling out is the slide in labor force participation. This is putting a lid on unemployment as the unemployed leave the labor force.

We have a year’s worth of economic data since Liberation Day, when President Trump announced much higher tariffs on most imported goods and countries, and the data are definitive; the tariffs have done significant damage to the economy.

The economy is growing, but it is fragile growth. Looking through the vagaries of the quarterly data, real GDP is growing at a 2% pace. Growth, yes, but less than the economy’s potential growth rate, and not sufficient to support any meaningful job growth.

The economic damage from the war with Iran is mounting. Just the surge in gasoline prices has cost Americans an estimated additional $21.3 billion since the start of the war over 6 weeks ago.

Last week’s economic data show just how fragile the economy is, even before the fallout from the Iran war hits with full force. Critical to whether the economy can avoid a recession is whether the consumer holds tough, and that looks increasingly iffy.

Don’t take solace in the big March payroll employment gain. It comes after a big decline in February, when brutal winter weather and a labor strike at Kaiser Permanente weighed heavily on jobs.

With tenuous prospects for resolving the conflict with Iran, and financial markets under pressure, recession probabilities are high and rising. We don’t yet anticipate an outright downturn in our baseline (most likely) outlook for the economy, but we’ve been aggressively marking down our forecast.

Recession is once again a serious threat. Even before the recent disconcerting events in the Middle East, our machine learning based leading economic indicator model put the probability of a recession starting in the next 12 months at an uncomfortably high 49%.

The escalating conflict involving Iran is sending shockwaves through energy markets. Oil prices are swinging amid concerns about disruptions to the Strait of Hormuz. Even temporary disruptions could have significant consequences. Join us for a live webinar: events.moodys.com/the-iran-oil...

Businesses appear to be nearing a Cortes moment with artificial intelligence. That’s my takeaway from fintech company Block’s move to slash its workforce by 40%. While Block didn’t explicitly pin the cuts on AI, it all but did.

If you felt like last week was an economic whirlwind, you weren’t wrong. Jared Bernstein and Jim Parrott joined #InsideEconomics to sort through the SCOTUS decision, GDP numbers, and what AI, housing, and jobs say about the economy. Econ nerdfest — and worth it. podcasts.apple.com/us/podcast/n...

Financial markets feel increasingly fraught to me, with the elements for a meaningful selloff coming into place. This threat is highest for stocks and corporate bonds, but even crypto, gold, and silver remain at risk despite recent pullbacks.

New episode: Wurm on Warsh. No, this isn’t a Bavarian dish. On the latest episode of the #InsideEconomics podcast, colleague Martin Wurm joins to take a close look at Kevin Warsh as a potential next Chair of the #FederalReserve.

Wurm on Warsh

Podcast Episode · Moody's Talks - Inside Economics · 02/02/2026 · 1h 13m

podcasts.apple.com

Kevin Warsh is a reasonable choice for the next Federal Reserve chair. His obvious strength is his previous stint on the Fed during the Global Financial Crisis. He knows the institution and everyone in global central banking circles.

The uncomfortable financial stress on low- and middle-income Americans is evident in the December 2025 consumer delinquency rates.

The K-shaped economy is becoming steadily more K-shaped. That’s the message in our updated estimate of personal outlays by income group.

President Trump says he is directing Fannie Mae & Freddie Mac to purchase $200 bil of mortgage-backed securities in an effort to bring down mortgage rates and address the severe housing affordability problem. Fixed mortgage rates have, in fact, declined by 10-20 bps to just over 6% on the news.

After cogitating a bit on the December jobs data, I’m increasingly convinced that the job market is struggling, and the broader economy is fragile, in big part due to U.S. tariffs.

Despite the considerable drama, the economy’s performance in 2025 is set to come in close to what we had forecast for the year when we did our projections at the end of 2024. That is, the economy did okay in 2025, although it fell well short of its 2024 performance.

@markzandi.bsky.social joins EconoFact Chats to discuss the state of the economy, focusing on consumer sentiment, Fed Independence, and likely trends in inflation, unemployment, and GDP growth in early 2026. econofact.org/podcast/the-...

The Uncertain and Uneven Economy | Econofact Chats

Mark Zandi discusses the state of the economy, focusing on consumer sentiment, Fed Independence, and likely trends in inflation, unemployment, and GDP growth in early 2026.

econofact.org