Here's what the Democratic election rout could mean for the U.S. economy

Economist Mark Zandi, chief economist at Moody's Analytics, says the U.S. economy is "in a very kind of fragile place." He said a small shock could push it into recession, though that is not the case at the moment. Zandi said he was worried before the election about inflation, an underwhelming labor market and geopolitical dangers, and he remains concerned.

Democrats won House and Senate races along with governor and other state contests. Zandi argues the election will not change much economic policy because the main policies are set through executive action. He cited the Iran war, tariffs, trade policy and immigration policy as examples. He said he expects those policies to "restrain growth and add to inflationary pressures and interest rates."

Zandi called the AI data center buildout a key driver of growth and a source of risk. He said "the risks are decidedly to the downside" because growth depends heavily on AI and on equity market valuations. CNBC polling found local opposition to data centers was a fairly significant issue in the election, particularly for Democrats, though it ranked below cost of living and corruption.

The report cites mixed data. Gross domestic product grew at a 3.4% annualized pace in the third quarter, consumer spending grew 3.8%, and the unemployment rate was 4.2%. The consumer price index rose 3.7% in September, up from 2.3% in April 2025, according to the report. Inflation-adjusted wage growth was negative, down 0.7% from a year earlier in September, according to the Bureau of Labor Statistics.

Gary Cohn, who led the National Economic Council in Trump's first term, said in a CNBC interview that he sees room for compromise on tariffs. He suggested tariffs could be passed through Congress so they become law rather than executive orders.

Morgan Stanley analysts said Democrats would likely seek to roll back SNAP and Medicaid spending cuts in the One Big Beautiful Bill Act. The firm said other policies Democrats oppose would be harder to reverse. It expects policy uncertainty to continue, and it expects the federal deficit, which the report says ended the year just shy of $2 trillion, to persist.