More than half of industries are already shedding workers, a ‘telling’ sign that’s accompanied past recessions, top economist says

• Moody’s Analytics chief economist Mark Zandi followed up his earlier warning that the economy is on the brink of a recession. On Sunday, he pointed out that the start of a recession is often not clear until after the fact. For now, the jobs data don’t signal a recession yet, but more than half of U.S. industries are already shedding workers.

The U.S. economy isn’t in a recession yet, but the number of industries cutting back on headcount is concerning, and future revisions to jobs data could show employment is already falling, according to Moody’s Analytics chief economist Mark Zandi.

In a series of X posts on Sunday, he followed up his warning from last weekend that the economy is on the brink of a recession.

This time, Zandi pointed out that the start of a recession is often unclear until after the fact, noting that the National Bureau of Economic Research is the official arbiter of when one begins and ends.

According to the NBER, a recession involves “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” It also looks at a range of indicators, including personal income, employment, consumer spending, sales, and industrial production.

Zandi said payroll employment data is by far the most important data point, and declines for more than a month consecutively would signal a downturn. While employment hasn’t started falling yet, it’s barely grown since May, he added.

Payrolls expanded by just 73,000 last month, well below forecasts for about 100,000. Meanwhile, May’s tally was revised down from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000.

Because recent revisions have been consistently much lower, Zandi said he wouldn’t be surprised if subsequent revisions show that employment is already declining.

“Also telling is that employment is declining in many industries. In the past, if more than half the ≈400 industries in the payroll survey were shedding jobs, we were in a recession,” he added. “In July, over 53% of industries were cutting jobs, and only healthcare was adding meaningfully to payrolls.”

Last week, Zandi said data often sees big revisions when the economy is at an inflection point, like a recession. And on Wednesday, Federal Reserve Governor Lisa Cook similarly noted that large revisions are “typical of turning points” in the economy. 

For now, the Atlanta Fed’s GDP tracker points to continued growth, and the third-quarter forecast even edged up to 2.5% from 2.1% last week, though that’s still a slowdown from 3% in the second quarter.

There are also no signs of mass layoffs as weekly jobless claims haven’t spiked, and the unemployment rate has barely changed, bouncing in a tight range between 4% and 4.2% for more than a year.

But Zandi said the jobless rate will be a “particularly poor barometer of recession” as the recent decrease in the number of foreign-born workers has kept the labor force flat.

“Also note that a recession is defined by a persistent decline in jobs — the decline lasts for at least a few months. We aren’t there yet, and we are thus not in recession,” he explained. “Things could still turn around if the economic policies weighing on the economy soon lift. But that looks increasingly unlikely.”

Wall Street is divided on what the jobs data are saying, with some analysts attributing the slowdown to weak labor demand while others blame weak labor supply amid President Donald Trump’s immigration crackdown.

Bank of America falls into the supply camp and said “markets are conflating recession with stagflation.” But UBS warned of weak demand, pointing out the average workweek is below 2019 levels, and said the labor market is showing signs of “stall speed.”

Last week, economists at JPMorgan also sounded the alarm on a potential downturn. They noted that jobs data show hiring in the private sector has cooled to an average of just 52,000 in the last three months, with sectors outside health and education stalling.

Coupled with the lack of any signs that unwanted separations are surging due to immigration policy, this is a strong signal that business demand for labor has cooled, they said.

“We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan added. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory. In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.”

This story was originally featured on Fortune.com