Top economist warns US could be entering a 'jobs recession' — thanks to Trump's tariffs

Moody’s Analytics chief economist Mark Zandi warns the US may be slipping into a "jobs recession" as hiring has stagnated while layoffs rise and quit rates fall, with weak October employment data and private measures showing only modest job-openings growth since summer. ADP data cited by Zandi show private employers cut 32,000 jobs in November and small businesses have borne the brunt (roughly 120,000 positions eliminated over recent years), and he attributes much of the pressure to higher costs from President Trump’s tariffs. Zandi cautions that these early, sector-sensitive fractures could spread into broader layoffs and materially weaken consumer spending and overall economic activity if the trend continues.

Analysis

Moody’s Analytics chief economist Mark Zandi warns the U.S. may be entering a "jobs recession" as hiring has stagnated while layoffs rise; he notes hiring remained roughly 3.2% and job openings have grown only by a few hundred thousand since summer. Private data cited by Zandi and ADP show private employers cut 32,000 jobs in November and small businesses have borne the brunt, eliminating roughly 120,000 positions over recent years, while quit rates have declined and unemployment is edging higher.

Zandi attributes a meaningful share of the stress to President Trump’s tariffs, which he says raised costs and produced early fractures among employers most sensitive to price and policy shifts; small firms, lacking financial buffers, are more likely to trim wage bills and headcount. He warns that these sector‑sensitive dislocations can spread outward into broader layoffs if the current trend accelerates.

Market signals in the report are strongly negative (sentiment_score -0.7) and the potential market impact is material; an intensifying jobs downturn would weigh on consumer spending, cyclical earnings and credit performance for small‑business lenders. Investors should therefore monitor ADP/private payrolls, job openings, quit rates and tariff policy as near‑term economic and market risk indicators.

Key Decisions for Investors

• Reduce exposure to small‑cap names and businesses with concentrated small‑business customer bases and lenders heavily weighted to SMB loans,
• Increase allocation to companies with strong balance sheets, pricing power and stable cash flows (defensive sectors) that can absorb tariff‑driven cost shocks,
• Monitor ADP monthly private payrolls, government employment releases (including delayed October data), job openings and quit rates as explicit triggers to tighten risk controls or add hedges,
• Watch tariff and trade policy developments closely and be prepared to adjust positions if policy changes remove or exacerbate cost pressures on small businesses