The economic landscape of the United States presents a fractured picture, with a significant portion of state economies teetering on the edge of contraction or already experiencing recessionary conditions. This nuanced reality, detailed by Mark Zandi, chief economist at Moody’s Analytics, underscores the delicate balance of the national economy, where a substantial segment of GDP is under strain, while others are merely stabilizing or continuing to expand.
According to Zandi’s late August assessment, approximately 21 states, alongside the District of Columbia, are either in a recession or face a high probability of entering one. An additional 13 states are characterized as “treading water,” indicating stagnant economic activity, leaving the remaining 15 states as the drivers of economic growth. Zandi emphasized on X that nearly a third of the U.S. GDP is associated with states currently in or at high risk of recession, while another third are in a holding pattern, and the final third are experiencing expansion.
Key Economic Contributors at Risk
Several states with considerable contributions to the national Gross Domestic Product (GDP) were identified as being in recession or at high risk. These include Illinois (3.85% of U.S. GDP), Georgia (3.03%), Washington (3.02%), New Jersey (2.93%), Massachusetts (2.73%), and Virginia (2.66%). The broader Washington D.C. area, in particular, stands out due to government-related job cuts as a factor contributing to its economic pressure.
States Maintaining Stability and Growth
Conversely, states classified as “treading water” represent economies that are not contracting but also not significantly expanding. This group includes large economies like California (14.5% of U.S. GDP) and New York (7.92%), along with Ohio (3.14%) and Michigan (2.44%). The economies exhibiting expansion, indicating positive growth, are led by Texas (9.41%) and Florida (5.78%), followed by Pennsylvania (3.54%) and North Carolina (2.86%). Zandi noted that while Southern states generally exhibit strength, their growth momentum is decelerating. The stability of California and New York, which together represent over 20% of U.S. GDP, is particularly crucial for preventing a national economic downturn.
Context of Economic Data Release Delays
Zandi’s analysis has garnered increased attention amidst the backdrop of an ongoing government shutdown. This situation has already led to the postponement of the September jobs report and is expected to delay the release of the consumer price index (CPI) initially scheduled for the following week. The Bureau of Labor Statistics has since announced the recall of some furloughed workers to expedite the preparation of the CPI report, now slated for release on October 24th. Inflation has persisted above the Federal Reserve’s 2% target throughout the year, with recent increases partly attributed to the implementation of tariffs. Despite concerns over inflation, Federal Reserve policymakers recently reduced interest rates for the first time in 2025, citing indications of a weakening labor market.
Oliver brings 12 years of experience turning intimidating financial figures into crystal-clear insights. He once identified a market swing by tracking a company’s suspiciously high stapler orders. When he’s off the clock, Oliver perfects his origami… because folding paper helps him spot market folds before they happen.