Analysis: 70% of U.S. in or near recession

Medora Lee

USA TODAY

Some people are likely confused about whether the U.S. economy is in a recession, near a recession or doing OK.

Turns out, the answer may depend on where they live, according to Moody’s Analytics economist Mark Zandi.

Twenty-one states and the District of Columbia, which contribute about a third of U.S. economic activity, are already in a recession, Zandi’s analysis shows. An additional 13 states, comprising roughly another third of the economy, are treading water, and the remaining 16 are growing, he said.

Even if the nation as a whole isn’t in a recession, Americans who live in one of the states that’s either in a recession or on the edge of one are likely already feeling a pinch.

“State-level data makes it clear why the U.S. economy is on the edge of recession.” Zandi said. Most of the states in or near a recession produce goods, Zandi said. Agriculture, mining and light manufacturing are currently frail, and a weak transportation sector is exacerbating that, he said.

But the “DC area stands out due to government job cuts,” Zandi said. The federal government is one of six industries he sees in recession. The other sectors are transportation and distribution, agriculture, mining, manufacturing, and construction.

“No surprise, those industries struggling the most are most impacted by the higher tariffs, highly restrictive immigration policy, and the DOGE (Department of Government Efficiency) cuts,” he said.

New England states generally tend to have weaker economies than the rest of the country, even in the best of times, due to slow population growth, Zandi said.

A few states such as Georgia and Illinois are also expensive to live in, which has hindered an uptick in population, he said.

States such as Texas and Florida generally always fare well, Zandi said, partly because of their low taxes.

Pennsylvania surprised him on the upside.

“It’s doing well because of health care and education,” he said. “Philadelphia and Pittsburgh are driving the train.”

Other growing industries include technology, state and local government, and real estate, he said.

California and New York, so far, have staved off recession, but they’re walking the line, Zandi said. If either one falls into recession, Zandi predicts it’ll take the rest of the nation with it.

Together, the two states account for more than a fifth of U.S. economic growth.

“Their stability is crucial for the national economy to avoid a downturn,” he said.

Most economists don’t expect a fullblown recession, defined by the National Bureau of Economic Research as a significant decline in economic activity spread across the economy and lasting more than a few months. The NBER is the official arbiter of when a recession occurs.