The recession is here: These are the states experiencing negative growth and those on the brink

The United States’ economy has been slowing down over the past several months as economic data shows the number of new payrolls dropping. On the bright side, the nation’s GDP was up 3.8% in the second quarter of 2025 and the unemployment rate hasn’t spiked but has been rising slowly, currently at 4.3%.

Nevertheless, the mood among a majority of Americans on the economy is that it’s not very good according to Moody’s chief economist, Mark Zandi. That may not be that surprising according to research by Moody’s Analytics which found that the economies of nearly half of the US states are contracting.

However, for lower-income Americans, regardless where they live, they are living in a recessionary environment. Furthermore, the economist told Fortune that especially these households, financially speaking, are “hanging on by their fingertips.”

Despite still having jobs and having money to spend their “grip feels more tenuous because no one’s getting hired,” Zandi explained. If layoffs surge he warns, “that lower-middle-income group is gonna get nailed—and they have no options, because they really don’t have much in the way of saving.”

States that are already in a recession

Moody’s found that there are 22 US states that were either on the brink of a recession or have dipped into one by October this year. These include Connecticut, Delaware, Georgia, Illinois, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, New Hampshire, New Jersey, Oregon, Rhode Island, South Dakota, Virginia, Washington, West Virginia, Wyoming and the District of Columbia.

The Moody’s economist notes that one of the concerning aspects of this list is that it stretches from coast to coast. Also, that it isn’t necessarily just one industry that has been affected which is pulling down the statewide economy.

In Washington DC, the Trump administration’s funding cuts and mass layoffs of federal workers has been taking a heavy toll on the local economy. It is also playing its part in neighboring Maryland and Virginia like other states with large numbers of people employed by the federal government.

Trump’s tariffs and immigration policies are hitting industries in other regions. One that surprised Zandi the most was Georgia “because historically that’s been a stronger state.”

Fate of the US economy depends on two states

The company’s analysis showed that 16 state economies were growing, while another 13 states were “treading water.” Among the latter are California and New York.

Zandi says that the fate of the national economy rests with these two states and their large economies. For both the S&P 500 will play a big role in keeping their economies afloat, but California will also rely on its technology sector to either right or sink the ship.

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