The US will enter a mild recession as the economy deflates after its boost from unproductive stimulus cash, per Former Commerce Secretary

The U.S. is heading toward a recession, as the economy grapples with the aftermath of trillions of dollars in "unproductive" spending during the pandemic, according to former Commerce Secretary Wilbur Ross.

In a recent interview with Bloomberg, the former Trump administration official gave a pessimistic outlook on the U.S. economy. His forecast contrasts with many on Wall Street, where analysts are more optimistic, citing continued GDP growth and low unemployment as signs the U.S. could avoid a recession.

The S&P Global U.S. Services PMI for September came in at 55.4, slightly higher than economists' expectation of 55.2. On the other hand, the S&P Global U.S. Manufacturing PMI was weaker than anticipated, registering 47.0 compared to the expected 48.6.

Citi economist Veronica Clark joined Catalysts to discuss the report and its implications for the economy, as the Federal Reserve continues to ease interest rates. She noted that the services sector has remained "remarkably steady" over the past five months, although the employment subcomponent remains in "contractionary territory" below 50. Meanwhile, Clark pointed out that the manufacturing sector has slowed, with job losses in August contributing to the industry's weaker performance.

Looking ahead to the end of the year, Clark believes the risk of a recession remains "pretty elevated." She emphasized the critical importance of the labor market, noting, "We do think this is a genuine weakening of the labor market, and we'll likely see more evidence of that in the data next Friday. We'll have another jobs report before the November [Federal Reserve] decision, and both should reflect this ongoing weakening trend," she told Yahoo Finance.