U.S. Economy on the Brink: 22 States Already in Recession — Is Yours Next?
The U.S. economy is on shaky ground, with mounting evidence of regional slowdowns that could signal an approaching recession, warns Mark Zandi, chief economist at Moody’s Analytics.
According to Zandi, 22 states and the District of Columbia are already in decline, marked by job losses and weakening growth, while another 13 states show minimal economic momentum. “The economy isn’t in recession yet, but the risks are extremely high,” he told MarketWatch. “We’re standing right on the edge.”
Zandi noted that powerhouse states such as California and New York are barely staying afloat. A downturn in either, he cautioned, could easily drag the broader U.S. economy into contraction. A recent UCLA Anderson forecast even suggested a California recession is becoming likely, with Zandi citing policy headwinds as a major factor.
He attributed much of the current strain to President Donald Trump’s tariffs on imports, which he said have disrupted supply chains and dampened business investment. He also pointed to a stagnant labor force and the Trump administration’s Department of Government Efficiency (DOGE) layoffs—initiatives once led by Elon Musk—as key contributors to sharp economic declines in Washington, D.C., and surrounding states.
Zandi explained that his state-level recession assessments, while modeled on NBER criteria, involve some interpretation due to data limitations. Though a former adviser to congressional Democrats, he emphasized his nonpartisan stance, noting his past advisory role for Republican Sen. John McCain’s presidential campaign.
Despite Zandi’s warnings, other economists remain optimistic. Richard Moody, chief economist at Regions Bank, expects third-quarter GDP to rise at an annualized 3.8%, citing solid business investment, low jobless claims, and resilient consumer activity. “There’s no sign the economy is rolling over,” Moody told MarketWatch.
Zandi, however, maintains that the overall picture is weakening. “GDP and spending may be strong, but the job market is softening,” he said. He observed that states now in recession typically rely on vulnerable sectors like farming, mining, and manufacturing, which have been hit hard by higher costs and slowing demand.
New England’s slowdown, he added, is unsurprising due to its historically slow population growth. More unexpected, he said, is Georgia’s slump, which he attributes to falling domestic migration amid soaring home prices. Pennsylvania, by contrast, has performed better than expected thanks to strength in education and healthcare—showing how local dynamics can defy national headwinds.
