If the American economy is a three-legged stool, one of those legs is broken, the other is wobbly and the final one is holding it all up (for now). That’s how Mark Zandi, chief economist at Moody’s Analytics described the results of his analysis of state-level economic 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,” Zandi said in a post on X (formerly Twitter).
In early-August, the economist raised a similar alarm after reviewing labor market statistics and concluding that “The economy is on the precipice of recession.” The risk is clear: if one more leg gives way, the whole stool — that is, the national economy — could dip into a downturn. The real question is where does your state fall on the map of winners and losers?
Trending Now
Winners and losers
Roughly 21 states and the District of Columbia are experiencing negative economic growth, putting them into a technical recession, according to Zandi. States like Minnesota, Delaware, Washington and Virginia could be experiencing the brunt of the ongoing trade war while the DC area has experienced significant job losses under the Trump administration’s cost-cutting efforts.
In contrast, 16 states including Florida, Texas, Nebraska and Arizona are still expanding at a relatively healthy clip. “Southern states are generally the strongest, but their growth is slowing,” Zandi says.
However, the list of winners doesn’t include two key states that could make or break headline GDP figures on a national level.
Read more: Do you own rental properties in the US? These 6 hacks can help you boost your income and lower your tax burden
All eyes on two key states
Zandi points to New York and California as the pivotal states for the national economy. California’s share of the U.S. GDP is 14.5% while New York accounts for 7.92%. Combined, these two regions hold just over a fifth of the country’s economy.
In fact, California recently overtook Japan as the fourth largest economy in the world, according to the BBC. What happens in the tech-heavy Golden State could be crucial for the global economy. However, persistent layoffs in the tech sector and an unemployment rate that is higher than the national average could put a drag on this crucial state, according to the Public Policy Institute of California.
A wave of layoffs is also hitting Wall Street as major investment banks cut back on staff, according to the New York Times. That could drag New York State’s economy into a downturn as well.
Put simply, the second leg of the stool is looking wobbly.
What can you do?
Even if you’re an optimist about the national economy and currently live in one of the thriving states, it helps to be prepared for a broader downturn.
Focus on what you can control and shore up your emergency fund in case layoffs hit your industry too. This could also be a good time to diversify your portfolio and reduce any high-interest debt that is dragging your personal finances.
Finally, diversify your income streams, whether through freelance work, side hustles, or skill-building, so you’re less vulnerable if your main job is affected.
What to read next
Stay in the know. Join 200,000+ readers and get the best of Moneywise sent straight to your inbox every week for free. Subscribe now.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.