On Sept. 7, 2025, Moody’s Analytics chief economist Mark Zandi warned that U.S. payroll gains this year are narrowly concentrated in healthcare and hospitality, a pattern he says ‘only happens when the economy is in recession.’
Key Takeaways
- Majority of net payroll growth this year has come from healthcare and hospitality.
- Moody’s Mark Zandi calls the pattern a ‘jobs recession’ as overall employment flattens.
- BLS revisions showed June lost 13,000 jobs, an early sign of weakening payrolls.
- Long-term unemployment has edged up and over 6 million people outside the labor force now say they want a job, up from roughly 5.7 million a year ago.
- GDP remained positive in midyear, with Q2 growth at 3.3% and the Atlanta Fed’s tracker pointing to about a 3% pace for Q3.
Verified Facts
Mark Zandi of Moody’s Analytics said after the August jobs report that gains this year are extremely concentrated, driven primarily by healthcare and leisure and hospitality. He noted that without those sectors, payrolls would show no net growth for the year.
The Bureau of Labor Statistics revised June payrolls to show a decline of 13,000 jobs. Zandi highlighted that payroll declines, and their timing, are important because recessions are often dated back to the first month when payrolls contract.
Labor-market indicators show strains: long-term unemployment has risen over the past year, and more than 6 million people not counted in the labor force say they want a job, up from about 5.7 million a year earlier, according to BLS data cited by Zandi.
| Indicator | Reported Value |
|---|---|
| June payroll revision | -13,000 jobs |
| People outside labor force who want a job | Over 6,000,000 (up from ~5.7M) |
| Q2 GDP growth | 3.3% |
| Atlanta Fed Q3 GDP tracker | ~3% |
Context & Impact
Zandi has repeatedly warned that weak readings in consumer spending, construction, and manufacturing, together with flat payrolls, raise the risk that the economy could slip into a conventional recession. He called current conditions ‘incredibly vulnerable.’
At the same time, headline economic growth is not uniformly weak: second-quarter GDP expanded 3.3%, and short-term GDP tracking suggests continued positive growth into Q3. That divergence—solid output and narrow employment gains—complicates policy and forecasting.
Implications for workers and policymakers include a tougher labor market for many industries outside healthcare and hospitality, rising long-term joblessness, and pressure on safety nets and retraining programs. Employers in lagging sectors may face slower hiring and downward pressure on wages.
Near-term risks
- Payroll revisions could further weaken the employment trend if downward adjustments continue.
- Persistent sectoral imbalance could depress overall hiring if healthcare and hospitality slow.
- Monetary policy and consumer spending shifts remain key wildcards.
‘This really feels like a jobs recession. Employment is flat to down,’ Zandi said, cautioning that ‘nothing else can go wrong, or it could tip us into a full downturn.’
Mark Zandi, Moody’s Analytics
‘Policies are in place that will create good, high-paying jobs… I believe by the fourth quarter, we’re going to see a substantial acceleration,’ Treasury Secretary Scott Bessent said, while also noting that August payroll data has historically seen significant revisions.
Scott Bessent, U.S. Treasury
Unconfirmed
- Whether the U.S. has officially entered a recession: formal dating by consensus panels like the NBER has not been declared at the time of this report.
- The scale and timing of any turnaround predicted by policymakers for Q4 remain forecasts and depend on future economic developments and policy actions.
Bottom Line
Employment gains this year have been unusually narrow, concentrated in healthcare and hospitality, prompting warnings from seasoned economists that the labor market may already be exhibiting recession-like behavior. While GDP growth has stayed positive, the fragility of payrolls suggests the economy is vulnerable to further shocks and that policymakers should monitor sectoral imbalances closely.