The NewsWorthy: Special Edition

Episode Title: Is the Economy Getting Better or Worse?
Host: Erica Mandy
Guest: Mark Zandi, Chief Economist at Moody’s Analytics
Date: December 20, 2025

Episode Overview

This special Saturday edition of The NewsWorthy features an in-depth and fast-paced conversation with Mark Zandi, a leading economic analyst, on the state of the U.S. economy. Host Erica Mandy delves into questions on job growth, recession risks, inflation, AI’s impact, tariffs, and political polarization, with Zandi offering candid, data-driven insight. The duo unpacks not just the headlines, but how current policies and global trends influence the daily lives and pocketbooks of Americans as the nation heads into 2026.

Key Discussion Points & Insights

1. Current State of the Economy

[01:08]

• Fragile Growth:

  • Zandi describes modest GDP growth (~2% after inflation) as “fragile”—not recessionary, but not robust enough for labor market health.
  • "We're not creating any jobs...since in the wake of Liberation Day when the president announced reciprocal tariffs...unemployment has pushed up." (Mark Zandi, [01:13])

• Job Market Overview:

  • Job creation stalled; only healthcare is growing, rest of the economy is “uncomfortable, but not a recession.”
  • Zandi estimates the probability of recession in the next year at 40-45%, emphasizing the precarious position.
    • “If anything doesn't stick to script, then recession odds will increase significantly.” (Mark Zandi, [02:45])

2. Recession Risks and What to Watch For

[03:06]

• AI as a Double-Edged Sword:

  • Pace of AI adoption is pivotal.
    • Rapid adoption could drive layoffs if productivity rises faster than demand for labor.
    • "If it happens too fast...we start to lose jobs, businesses are not only going to not hire, they will begin to fire. And that's a concern." (Mark Zandi, [03:27])
  • Conversely, if AI doesn’t deliver as investors expect, it could trigger a stock market sell-off and cut into wealth-driven spending.

• The Narrow Path:

  • Zandi sees the “most likely scenario” as AI adoption just fast enough to keep investors content— but not so fast it slashes jobs.
    • "But you know, I don't say that with a whole lot of confidence...it's kind of a tricky path forward." (Mark Zandi, [04:49])

3. Potential AI Bubble

[05:17]

• Market Froth:

  • Zandi cautiously labels current market conditions “bordering on frothy.”
    • “Bubble-like conditions are starting to develop...if AI disappoints...we could see a sell off and that would be a problem.” (Mark Zandi, [05:26])

• Impact on Americans:

  • Immediate effects felt by wealthier Americans as their portfolios fluctuate, but broader impacts would hit spending and trigger recession risks:
    • “If those well to do...become more cautious, then that's when businesses could say...I need to lay off some workers.” (Mark Zandi, [06:15])

4. Tariffs, Trade Policy & Stagflation

[06:53]

• Economic Drag:

  • Tariffs have suppressed job creation, especially in manufacturing, transportation, and agriculture.
    • “The tariffs are what economists call stagflationary. They're weakening the economy's growth and they're raising inflation.” (Mark Zandi, [07:10])

• Compounding Immigration Policy:

  • Restrictive immigration adds to economic malaise, hampering workforce availability and growth.
    • "You can't find workers because they've been deported or too scared to go to work...leads to slower growth and higher inflation." (Mark Zandi, [07:56])

5. Inflation Realities

[08:23]

• Skepticism Toward Recent Data:

  • Recent inflation statistics distorted by a government shutdown; “throw them out the window.”
    • “There's nothing but noise in that." (Mark Zandi, [08:38])

• Underlying Numbers:

  • Underlying CPI inflation is ~3%, up from earlier 2.3%, driven by tariffs and immigration controls.
  • Inflation above the Fed target (~2.3%) and likely to rise unless policy shifts or tariffs are struck down.
    • “If the tariffs go away...that would mitigate the impact...in 2026.” (Mark Zandi, [09:29])

6. Affordability Crisis & Political Polarization

[10:43]

• Affordability Pain Points:

  • Zandi asserts that Americans themselves, across the political spectrum, report affordability is their main concern (in surveys and voting).
  • Wage growth is slowing, credit card, auto, and student loan debts are piling up—hitting everyday households hardest.
    • “If you're a lower or middle income American... point blank, we got a problem.” (Mark Zandi, [12:08])

• Staying Anchored in Data:

  • Despite the politicized landscape, Zandi stresses: “I try to root everything I say in economic data...Economists are in agreement. Broad based tariffs are a pretty bad idea.” ([12:29])

7. Federal Reserve Actions & Stimulus Policy

[15:05]

• Interest Rate Cuts:

  • Zandi agrees with the Fed’s latest cut, arguing it’s needed support for a fragile job market.
    • “If I were sitting on the board, I would have voted for a cut because I am worried about the job market and the economy.” ([15:05])

• Stimulus Checks & UBI:

  • Zandi dismisses the idea of further “one-off” stimulus checks as short-term fixes that worsen national debt.
  • He does, however, advocate for open debate about Universal Basic Income (UBI) in light of AI’s unpredictable impact.
    • “It’s premature...But those are the kinds of things we should be really thinking about and developing policies just in case.” ([15:46])

8. Predictions for 2026 & Advice to Listeners

[16:59]

• Outlook for 2026:

  • Status quo likely: “2026 is going to feel like 2025. It's going to be okay...not going into recession, but it's not going to feel great, particularly for lower and middle income Americans.” ([16:59])
  • Downside risks outweigh upside possibilities—AI, deficit, Fed independence, geopolitics all pose threats.

• Practical Guidance:

  • Investments: “Stay the course...save as much as you possibly can.”
  • Skills: “AI is coming on and...to be able to succeed, you need to gain those skills. So I think I'd dive headfirst into that as fast as possible.” ([18:04] and [18:44])

Notable Quotes & Memorable Moments

• On Fragile Growth:

  "The economy is okay. It's not in recession. It is expanding, but certainly not strong enough to make anyone feel really good about what's going on in the economy."
  —Mark Zandi ([01:40])

• On the AI Bubble:

  “I think it's fair to say the market's overvalued, bordering on frothy. Bubble-like conditions are starting to develop.”
  —Mark Zandi ([05:26])

• On Stagflation:

  “The tariffs are what economists call stagflationary. They're weakening the economy's growth and they're raising inflation. And so that's not a great combination.”
  —Mark Zandi ([07:10])

• On Political Realities:

  “Americans are saying there's an affordability crisis... it's not just about prices, it's about jobs...and wage growth...and also to debt.”
  —Mark Zandi ([11:02])

• On the Path Forward:

  “Broadly speaking, save as much as you possibly can save...AI is coming on...you need to gain those skills.”
  —Mark Zandi ([18:04], [18:44])

Timestamps for Key Segments

• State of the Economy & Labor Market: [01:08] – [03:06]
• Risks: AI, Stock Market, and Recession: [03:06] – [05:17]
• Discussion of an AI Bubble: [05:17] – [06:13]
• Tariffs and Trade Policy Analysis: [06:53] – [08:23]
• Inflation Trends and Policy Effects: [08:23] – [09:51]
• Affordability and Political Divide: [10:43] – [12:29]
• Fed Decisions & Stimulus Checks/UBI: [15:05] – [16:51]
• 2026 Predictions & Personal Advice: [16:59] – [18:55]

Summary

In under 20 minutes, this lively and deeply informed conversation delivers clarity on the economic “noise,” examining both the latest data and the ripple effects on American lives. Mark Zandi views the economic path ahead as fraught with risks—most immediately from restrictive trade and immigration policies, sluggish job growth, AI’s unpredictable labor impact, and political gridlock. Inflation remains stubbornly above target, and while a recession is not the “base case,” the downside is hard to ignore. At the personal level, Zandi urges listeners to keep investing with discipline and prioritize gaining AI-proof skills, forecasting a challenging but navigable 2026.