Breaking Down U.S. Recession Risks by State: Where the Economy Stands in 2025

As concerns about the U.S. economy continue to mount, state-level data reveal a patchwork of growth, stagnation, and decline, according to Mark Zandi, Chief Economist at Moody’s Analytics. His analysis indicates that while some states are expanding, a significant portion of the country is either at high risk of a recession or has already begun to experience one.

“Based on my assessment of a variety of economic indicators, states representing nearly a third of U.S. GDP are either in recession or are highly vulnerable to one,” Zandi shared on X over the weekend. “Another third of states are holding steady, showing neither significant growth nor decline, and the remaining third are continuing to expand.”

Zandi, widely regarded for his foresight in economic forecasting including his early warning before the 2008 financial crisis has been outspoken about the current national outlook. Earlier this month, he highlighted concerning trends in manufacturing output, employment figures, and consumer spending, suggesting that the broader economy is teetering on the edge of a downturn.

He also cited the ongoing weakness in the housing market and the impact of tariffs on U.S. companies’ profitability as key reasons for heightened caution.

State-Level Risk Assessment: Expanding, Treading Water, or At Risk

Zandi’s recent breakdown categorizes states based on their economic performance, measured by coincident indicators such as industrial output, payroll employment, and other key economic data.

Expanding States: South Carolina, Idaho, Texas, Oklahoma, North Carolina, Alabama, Kentucky, Florida, Nebraska, Indiana, Louisiana, North Dakota, Arizona, Pennsylvania, Utah, Wisconsin.

States in Recession or High Risk: 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, District of Columbia.

Treading Water: Missouri, Ohio, Hawaii, New Mexico, Alaska, New York, Vermont, Arkansas, California, Tennessee, Nevada, Colorado, Michigan.

According to Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, states heavily reliant on agriculture or trade are particularly exposed to economic risks under current policy conditions. “Many of these regions are dependent on sectors most sensitive to tariffs and global supply chain disruptions,” Thompson noted.

Recent National Trends: Contrasting Signals

National economic data paint a mixed picture. According to the Bureau of Economic Analysis (BEA), the economy contracted in the first quarter of 2025, marking the first quarterly decline since early 2022. GDP fell in 39 states, underscoring the unevenness of the slowdown. However, preliminary estimates for the second quarter suggest a rebound, with the national GDP expanding at an annualized rate of 3%, exceeding expectations. The BEA will release final state-level figures on September 25.

For everyday Americans, these disparities translate into tangible impacts. As Thompson explained, “The economic risk manifests in higher grocery and retail prices, as well as potential job disruptions across industries tied to food production, goods manufacturing, and transportation.”

Methodology Behind the Rankings

Zandi clarified that his state rankings are subjective assessments informed by multiple coincident economic indicators, including industrial production, nonfarm payroll employment, and other real-time measures of economic activity. “If the majority of these indicators show persistent declines, I classify the state as either in recession or at serious risk,” Zandi said. This methodology mirrors that used by the Business Cycle Dating Committee at the National Bureau of Economic Research (NBER).

The most recent nonfarm payroll report underscored the economy’s fragility, revealing the addition of just 73,000 jobs in July, far below forecasts. The Bureau of Labor Statistics (BLS) commissioner was dismissed by President Donald Trump following the release of the report and subsequent downward revisions for May and June.

Signs of a Looming Downturn

Zandi emphasized that while the economy is not technically in recession yet, all key indicators point to a precarious situation. He described job growth as having slowed to a “virtual standstill”, with payroll data and manufacturing output signaling that the economy is on the precipice of contraction.

The divergence among states is striking: while some regions, particularly in the South and parts of the Midwest, continue to grow, others especially states reliant on farming, manufacturing, and trade are showing clear signs of weakness.

“Economically, the U.S. is facing a split reality,” Thompson said. “Some states enjoy growth, while others are confronting recessionary pressures that could ripple across industries and labor markets if the trends continue.”

Looking Ahead: Monitoring Economic Vulnerability

As the second half of 2025 unfolds, economists will closely monitor state-level data for signs of either recovery or deeper economic contraction. While preliminary GDP figures suggest a rebound, persistent challenges ranging from high inflation and trade disruptions to sluggish employment gains could make the recovery uneven.

Zandi concluded, “Right now, the economy is balanced on a knife-edge. While we aren’t officially in a recession, we are very close. Policymakers and businesses alike must remain vigilant, as any negative shock could tip the scales.”

For Americans, these developments underscore the need to plan for uncertainty, whether in household budgeting, employment stability, or investment strategies, as regional economic conditions continue to diverge. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.