Economist: Two States Could Push US into Recession, Another in Danger Zone

The United States economy remains on the edge of a recession, with key states like California and New York playing crucial roles in its stability. Mark Zandi, chief economist at Moody’s Analytics, has emphasized that these two states represent nearly one-third of the nation’s GDP and are currently at high risk of entering a recession.

The Economic Landscape

Zandi’s recent analysis revisits earlier warnings, indicating that another third of states are “treading water,” while the remaining states show some growth but with diminishing momentum. Notably, Zandi has placed Michigan into the recession category due to ongoing challenges, particularly heightened tariffs impacting the auto industry.

Changes in Job Markets

Job growth has become virtually stagnant, with a sharp downturn in several sectors, including construction, manufacturing, and finance. Only health care and hospitality are currently contributing to payroll growth. Zandi has specifically noted that September data suggests negligible job creation, raising concerns about the labor market’s health.

States at Risk of Recession

• Recession/High Risk (23 States):
  • Wyoming
  • Montana
  • Minnesota
  • Mississippi
  • Kansas
  • Massachusetts
  • Washington
  • Georgia
  • New Hampshire
  • Maryland
  • Rhode Island
  • Illinois
  • Delaware
  • Virginia
  • Oregon
  • Connecticut
  • South Dakota
  • New Jersey
  • Maine
  • Iowa
  • West Virginia
  • Michigan
  • District of Columbia*
• Treading Water (12 States):
  • Missouri
  • Ohio
  • Hawaii
  • New Mexico
  • Alaska
  • New York
  • Vermont
  • Arkansas
  • California
  • Tennessee
  • Nevada
  • Colorado
• Expanding (16 States):
  • South Carolina
  • Idaho
  • Texas
  • Oklahoma
  • North Carolina
  • Alabama
  • Kentucky
  • Florida
  • Nebraska
  • Indiana
  • Louisiana
  • North Dakota
  • Arizona
  • Pennsylvania
  • Utah
  • Wisconsin

Future Projections

Despite the struggles, recent reports from the Atlanta Fed indicate a third-quarter GDP growth estimate of 3.9%, suggesting a potential acceleration from previous quarters. The economic outlook appears mixed, as external factors like inflation and consumer stress raise concerns about the upcoming holiday season.

Diane Swonk, chief economist at KPMG, warns of a significant downturn in the economy, expecting challenges to intensify as the year concludes. Factors such as rising delinquencies and the impacts of tariff-related costs are expected to affect consumer spending and the overall economic landscape.

Overall, the potential for two major states to push the U.S. into recession remains a pressing concern, highlighting the fragile balance between growth and decline in the current economic climate.