Understanding Recession Risk: Are We Currently In One?

The United States economy presents a paradoxical picture. While the nation hasn’t officially been declared in a recession, economic distress isn’t evenly distributed across the country. According to analysis from Moody’s Analytics chief economist Mark Zandi, roughly 22 states are currently experiencing recession conditions or stand precariously close to the edge of economic contraction. This fragmented picture reveals why broader recession fears persist despite mixed national indicators.

Regional Economic Divergence Shows Mixed Recession Signals

The recession risk isn’t confined to a single geographic region but rather scattered across diverse areas of the country. Some states display unmistakable signs of economic slowdown, while others are only beginning to show weakness after periods of stronger growth. Zandi’s research demonstrates that state-level data tells a starkly different story than national aggregates.

The Washington D.C. region faces particular vulnerability due to significant government employment cuts, creating concentrated economic pain in that area. Meanwhile, Southern states have generally maintained stronger positions, though growth momentum is decelerating faster than previously anticipated. California and New York, which collectively represent over one-fifth of total U.S. GDP, remain relatively resilient—and their continued stability is critical, as any significant downturn in these two economic powerhouses could trigger a broader national contraction.

Zandi emphasized in his analysis that “state-level data makes it clear why the U.S. economy is on the edge of recession.” He further noted that states accounting for nearly one-third of GDP are either already contracting or face heightened recession probability, while another third are merely stagnating with minimal growth.

The 22 States Experiencing Economic Pressure

The states grappling with recession risk or active economic deterioration include:

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, and the District of Columbia.

These 22 jurisdictions represent substantial economic weight within the nation’s overall GDP. What’s striking is that they span diverse regions and include both industrial powerhouses and smaller economies, suggesting that recession vulnerability transcends geographic boundaries and economic size. From New England to the Mountain West, from the Mid-Atlantic to the Midwest, recession pressures are surfacing across varied economic landscapes.

Why State-Level Recession Risk Matters to the National Economy

The interconnected nature of the American economy means that concentrated recession activity in 22 states cannot remain isolated indefinitely. Economic weakness in major employment centers, reduced consumer spending in vulnerable regions, and financial stress among businesses in contracting areas all have ripple effects through national supply chains and credit markets.

If these states representing substantial GDP continue deteriorating, the probability that the nation slides into an officially recognized recession increases substantially. The current situation represents a warning signal—the early stages where aggregate economic data masks underlying fragmentation and regional stress. Understanding this state-level economic fragmentation is essential for policymakers, businesses, and investors evaluating the true health of the American economy and recession probability going forward.