No matter how you slice it, the August jobs report showed a weakening labor market. Nonfarm payrolls came in well below forecasts, while unemployment rose.
Moody's economist Mark Zandi has been closely watching what he describes as a "labor recession" unfold, with revisions for June showing a contracting workforce for the first time since 2020.
Friday's report did nothing to dissuade him of the notion, and now the Moody's economist told Business Insider he's looking ahead for signs that the job-market downturn could spill into the broader economy.
Zandi sees a potential bump in the road coming on September 9, when preliminary benchmark revisions come in for earlier in 2025. The markdown in job additions is expected to be significant.
Zandi also noted that these downward revisions and outright job losses are coming without a significant increase in layoffs. If companies were to accelerate on that front, Zandi says it would worsen the labor recession and possibly impact overall economic strength.
"If businesses start laying [people] off, then I think this will not just be a jobs recession, will be an overall economic downturn," he told BI.
Zandi compared the current state of the US economy, as reinforced by the slowing labor market, to someone clinging to the edge of a cliff.
"Everything is clinging tightly to the lip of the cliff," he stated. We had 10 fingers on the edge of the cliff a couple months ago, we now [have] seven fingers."
"A couple more fingers, and we're going, then we're going over the edge," he said.
The economist added that while more interest rate cuts are likely coming as a result of the jobs report, they still likely won't be enough to stave off recession.
"A lot of the benefit of the lower rates is already in the [market] because investors anticipated the rate cuts," he said.
