Recession warning: just a few industries are driving job growth, Zandi says

The latest jobs report revealed the U.S. economy added just 22,000 jobs in August with revisions to prior months showing June actually saw a decline. Meanwhile, the unemployment rate edged up to a four-year high of 4.3%.

In a note on Saturday, Torsten Sløk, chief economist at Apollo Global Management, observed that job growth in tariff-impacted sectors is negative. Manufacturers alone cut 12,000 workers last month.

By contrast, the health care and social assistance sectors added 46,800 jobs, while the leisure and hospitality industry added 28,000. In fact, they have been doing the heavy lifting throughout the year, a trend that concerns Mark Zandi, chief economist at Moody’s Analytics.

“What’s perhaps most disconcerting about the flagging job market is how dependent it is on healthcare and hospitality for what little job growth is occurring,” he wrote on X on Sunday. “Since the beginning of the year, the economy has created a paltry 600k jobs, but without the job growth in these industries, there would be zero job growth.”

The year-to-date gains of the health care and social assistance sectors plus the leisure and hospitality industry total 855,900, according to data from the Bureau of Labor Statistics, meaning the economy would actually be in the hole by more than 250,000 jobs if not for those groups.

Zandi also pointed out that less than half of the industries tracked by BLS have added to payrolls over the past six months, adding that “this only happens when the economy is in recession.”

The diffusion index in the jobs report gauges the concentration of growth. A reading below 50 means more industries cut jobs than added. In August, it was 49.6, and the three-month average was 47.9.

‘Jobs recession’

Zandi has been steadily ringing alarms bells on the economy. Last month, after the shockingly bad July jobs report, he warned that “the economy is on the precipice of recession,” pointing to weak consumer spending and shrinkage in construction and manufacturing.

After the August jobs report was released on Friday, Zandi told Fortune’s Eva Roytburg that the economy is on the edge of recession and may already be in one.

He called the revision to June, which showed a loss of 13,000 jobs, especially significant as downturns are typically dated back to the first month of payroll declines.

Meanwhile, long-term unemployment has ticked higher over the past year, and more than 6 million people outside the labor force now say they want a job, up from roughly 5.7 million about a year ago, according to the BLS.

“This really feels like a jobs recession,” Zandi told Fortune. “Employment is flat to down. Output and incomes are still growing, but the economy is incredibly vulnerable. Nothing else can go wrong, or it could tip us into a full downturn.”

To be sure, the economy remains in positive territory for now. GDP expanded by 3.3% in the second quarter, and the Atlanta Fed’s GDP tracker shows the third quarter is on pace for a 3% increase.

Earlier on Sunday, Treasury Secretary Scott Bessent was asked to respond to Zandi’s jobs recession comment.

In an interview on NBC’s Meet the Press with Kristen Welker, he said policies are in place that will create good, high-paying jobs. Bessent also said payroll data collected in August has historically been prone to big revisions later, and he blamed the Federal Reserve for not cutting rates sooner.

“President Trump was elected for change, and we are going to push through with the economic policies that are going to set the economy right. I believe by the fourth quarter, we’re going to see a substantial acceleration,” he predicted.