The outlook for the U.S. economy is grim according to Mark Zandi, chief economist for Moody’s Analytics. In a post on X Sunday, he shared state-level data showing the nation is on the “edge of recession.”
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“Based on my assessment of various data, states making up nearly a third of U.S. GDP are either in or at high risk of recession, another third are just holding steady, and the remaining third are growing,” he wrote.
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States at risk of or already experiencing recession are spread out across the country, according to Zandi’s data, but the broader Washington D.C. area “stands out” because of recent federal government job cuts.
From January to May, D.C., Maryland, and Virginia — the area known as the DMV — lost about 22,100 federal workers, according to the Federal Reserve. The Department of Government Efficiency, or DOGE, started slashing federal jobs shortly after President Trump’s inauguration allegedly to reduce federal spending.
After the U.S. capital region, Zandi ranked West Virginia, Iowa, Maine, New Jersey, and South Dakota — in that order — as in or at high risk of being in a recession.
Overall, he ranked 22 states, including D.C., as “recession/high risk,” 13 states as “treading water,” and 16 states as in “expansion.”
“Southern states are generally the strongest, but their growth is slowing,” Zandi added. “California and New York, which together account for over a fifth of U.S. GDP, are holding their own, and their stability is crucial for the national economy to avoid a downturn.”
California makes up 14.5% of total U.S. GDP while New York makes up 7.92%, according to Zandi’s data.
Zandi ranked both California and New York in his chart as “treading water” while he ranked states like South Carolina, Idaho, and Texas, among others, as expanding.
On Aug. 17, Zandi also said a third of the U.S. economy’s industries is already in a recession, including the federal government, manufacturing, and agriculture.
In a response to one X user, Zandi said his assessment is based on payroll and household employment and industrial production, among other measures of economic activity. However, Zandi said this measure isn’t intended to be “predictive,” adding that Moody’s has created leading recession indicators based on a machine learning algorithm — but he noted, “more about that soon.”
Zandi had been warning that recent U.S. policies were acting as a drag on the economy since the beginning of August. “The tariffs are cutting increasingly deeply into the profits of American companies and the purchasing power of American households. Fewer immigrant workers means a smaller economy,” he posted on X.
He wrote that “the economy is on the precipice of recession.”
“Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall. And with inflation on the rise, it is tough for the Fed to come to the rescue,” he added.