According to new research by Moody’s Analytics, twenty-two U.S. states are either in or near an economic recession.
According to Mark Zandi, Chief Economist of Moody, states that account for over one-third of the country’s GDP are either in or at high risk of going into recession, while another third is just staying the same, and the remaining thirds are expanding.
“State-level data makes it clear why the U.S. economy is on the edge of recession,” wrote Zandi in a post on X.
Zandi pointed out that while recession-stricken states are dispersed around the nation, the region around Washington, DC, stands out due to government employment losses and the possible effects of the federal government shutdown.
“Southern states are generally the strongest, but their growth is slowing,” Zandi said. “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.”
Economic Uncertainty Plagues U.S. Amid Government Shutdown
The latest assessment comes in the wake of alarming national economic data, including declining adjustments to recent job growth figures that cast doubt on the labor market’s resilience.
The most recent data available from the Labor Department shows that the nation created a pitiful average of 27,000 new jobs per month between May and August.
During a time of economic uncertainty, consumers, investors, and policymakers were left in the dark when the Labor Department failed to release a September jobs report on time due to the government shutdown.
In fact, private firms cut 32,000 positions in September, according to ADP payroll data. The monthly government reports are more thorough than the ADP report, though.
A national economic crisis would probably result in lower mortgage rates for the housing market, but only those homebuyers who were certain that their income and jobs would not be impacted by the recession would profit.
Meanwhile, if fewer people are employed and earnings decline, state-level economic downturns may have an impact on their housing markets.
“Whether nationwide or localized, recessions are bad for housing markets,” said Jake Krimmel, Senior Economist at Realtor.com. “The direct effects of an economic slowdown are higher unemployment, less hiring, and lower wages—all killers for would-be homebuyers and all warning signs for current homeowners trying to make mortgage payments.”
According to Krimmel, the indirect consequences of a recession also affect the housing market by increasing future uncertainty, which may have an impact on property prices and sales.
“The silver lining in the case of Moody’s projections is that the states at highest risk, especially those located in the Northeast, happen to have the strongest housing markets right now,” Krimmel said.
Moody’s has identified places like Texas, Florida, and Arizona as having still-expanding economies, which may minimize the fall in housing in those states. These states have the softest housing markets, as indicated by slow-moving inventories and weak price increases.
“As long as local economic fundamentals and housing markets don’t weaken simultaneously, a major economic downturn is unlikely,” Krimmel said.
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