The U.S. economy is teetering on the edge of a downturn, with several states already showing clear signs of recession, warns Mark Zandi, chief economist at Moody’s Analytics.
Zandi said that 22 states and the District of Columbia are already facing ongoing economic strain marked by job losses and slowing growth. He added that another 13 states are barely holding steady, showing little to no momentum in their local economies.
Overall, the data point to a fragile U.S. economy that could easily be knocked off balance by even a modest shock. “The economy is still not in recession, but the risks are very high. We’re on the precipice,” Zandi told MarketWatch.
According to Zandi, major economies like California and New York are currently just managing to stay afloat. A downturn in either, he cautioned, could be enough to push the entire nation into a recession.
READ: Trump-era education policies leave lasting impact on US universities (
A new forecast from the UCLA Anderson School of Management this week suggested that a recession in California is now a real possibility. Zandi attributed much of the current economic strain to the impact of government policies.
Zandi pointed to President Donald Trump’s tariffs on imported goods as a major source of economic uncertainty, saying they have discouraged business expansion and disrupted supply chains. The lack of labor-force growth this year, he added, has further weighed on the economy.
He also noted that federal job reductions linked to the Trump administration’s Department of Government Efficiency (DOGE), once headed by Elon Musk, have driven Washington, D.C., and nearby states into one of the sharpest economic declines in the country.
Zandi acknowledged that comparable data for state economies aren’t always available. He explained that while he attempts to mirror the methodology of the NBER, his assessments still require a degree of judgment. Although he has advised congressional Democrats, Zandi emphasized his independence, noting that he also served as a senior adviser to the late Republican Sen. John McCain during his presidential campaign.
Many economists continue to expect the U.S. economy to keep expanding, largely fueled by consumer spending. Richard Moody, chief economist at Regions Bank, pointed out that third-quarter GDP is projected to grow at a 3.8% annual rate, citing solid recent figures for business investment, jobless claims, and consumer activity.
READ: Trump tariffs killing the US economy? Tough times ahead for jobseekers and investors (
“Nothing suggests the economy is rolling over,” Moody told in an interview, as quoted by Market Watch.
However, Zandi noted that the new data have not altered his perspective. “GDP and consumer spending are stronger, but the job market is weaker,” he said.
He even explained that states currently in recession tend to share one key trait: struggling farm or light manufacturing sectors. Regions reliant on goods production, agriculture, mining, and light manufacturing are facing significant challenges, and a weakened transportation sector is making the economic slowdown even more severe.
Zandi noted that New England’s economic slowdown is not unexpected, given the region’s historically slow population growth. “That region doesn’t grow very strongly even in the best of times,” he shared.
Zandi expressed surprise at Georgia’s recession, attributing it in part to a sharp decline in domestic migration driven by soaring home prices. In contrast, Pennsylvania has exceeded expectations, bolstered by strong education and healthcare sectors, highlighting how local factors can shape economic outcomes even amid broader national weakness.