Nearly Half of U.S. States Facing Recession or High Risk, Moody’s Analysis Shows

A new analysis released today indicates that nearly half of U.S. states are currently in a recession or at significant risk of entering one, raising concerns about the national economic outlook.

The report from Moody’s Analytics found that 22 states, representing approximately one-third of the nation’s gross domestic product, are already contracting or face a high probability of contraction. An additional 13 states, including economic powerhouses California and New York, are described as “treading water,” while the remaining 16 continue to experience growth. Chief economist Mark Zandi stated, “State-level data makes it clear why the U.S. economy is on the edge of recession.” He noted the geographically diverse nature of the struggling states, adding that the stability of California and New York – which together account for over 20% of U.S. GDP – is critical to avoiding a national downturn.

Several factors are contributing to the economic weakness, including slowing immigration, increased tariffs, and reductions in federal employment. States heavily reliant on agriculture and manufacturing, such as Iowa, Kansas, and Illinois, have been particularly hard hit. While southern states like Texas and Florida have shown relative strength due to population growth, that momentum is beginning to decelerate. California’s unemployment rate remains elevated at 5.5% as of August, the second-highest in the country, but its technology and entertainment sectors have so far prevented a wider economic decline; understanding Gross Domestic Product is key to understanding these trends. This news arrives as the federal government shutdown continues to delay the release of crucial economic data, creating uncertainty for analysts and investors.

The warnings extend beyond economic analysis, with JPMorgan Chase CEO Jamie Dimon echoing these concerns this week, suggesting a U.S. recession could arrive as early as 2026. Dimon cautioned that rising tariffs, the ongoing government shutdown, and potentially overheated markets could trigger a “sharp correction” in the near future, as reported by Bloomberg. A recession would likely impact consumer spending and investment across the country.

Officials say they are closely monitoring the situation and assessing the potential impact of these regional economic challenges on the national economy.