California and New York, October 17, 2025
News Summary
Economists are closely monitoring the economies of California and New York, as their performance could determine whether the U.S. avoids a recession. With these states contributing significantly to national economic growth, any downturn might trigger broader implications. While recent GDP growth of 3.8% has eased some fears, concerns about job growth, tariffs, and inflation persist. Analysis indicates that 21 states are at risk of recession, with California and New York’s stability being crucial for national economic health.
California and New York are being closely monitored by economists as their economic health could significantly impact whether the United States avoids a recession. With both states contributing over 20% of the nation’s economic growth, any downturn in their economies may trigger a nationwide recession. Scott Anderson, the chief U.S. economist at BMO Capital Markets, highlights these states as potential “canaries in the coal mine,” signaling broader economic health.
While fears of an imminent recession were alleviated by stronger-than-expected GDP growth of 3.8% in the second quarter of 2025, concerns remain regarding issues like tariffs, inflation, and a weakening labor market that could affect the overall economic outlook. Mark Zandi, the chief economist at Moody’s Analytics, has reported that 21 states and Washington D.C. are currently in or are at a high risk of recession. However, California and New York are “holding their own,” suggesting their performance will be critical in determining the course of the national economy.
Zandi predicts that if either California or New York falls into a recession, it could effectively lead the entire U.S. economy into a recession as well. The Bureau of Economic Analysis (BEA) notes that GDP has increased in nearly all states during the second quarter of 2025. However, the outlook for job growth remains uncertain due to data delays linked to a government shutdown. Predictions suggest a potential loss of 4,000 jobs in September, a development that Zandi describes as the job market “sputtering,” with monthly job growth nearing zero.
Various factors impacting the labor market include higher tariffs and restrictive immigration policies, which create uncertainties for businesses and limit labor demand. Despite these negative indicators, layoffs have been limited, providing a critical buffer against recession. As economists await the BEA’s upcoming estimates for GDP growth in the third quarter—projected at around 1%—they remain cautious, noting that risks continue to loom that could push the economy towards a recession.
The analysis by Zandi indicates that 21 states, representing about one-third of U.S. economic activity, are at or near recession. While other states experience growth or remain stable, regions like New England struggle due to slow population growth. Additionally, several industries, including agriculture, mining, manufacturing, and transportation, face challenges that contribute to rising recession risks.
As consumer sentiment appears to be declining in September, widespread concerns about inflation and the labor market are evident. Although recent fiscal and monetary policies may provide some support, economists caution against overconfidence. They suggest that despite a few positive economic signs, the likelihood of avoiding a national recession remains thin as underlying risks continue to persist.
FAQ
What do economists warn about California and New York’s economies?
Economists warn that California and New York’s economies could determine whether the U.S. avoids a recession.
What was the GDP growth rate in the second quarter of 2025?
The GDP growth rate in the second quarter of 2025 was 3.8%.
How many states are reported to be in or at high risk of recession?
According to analysis, 21 states and Washington D.C. are in, or at high risk of a recession.
What impact could a recession in California or New York have?
If either California or New York enters a recession, it may lead the entire nation into recession.
What is the current state of job growth?
Job growth data has shown a potential loss of 4,000 jobs in September, leading to suggestions that the job market is “sputtering.”
Deeper Dive: News & Info About This Topic
- Newsweek: Recession Chances in California and New York
- San Francisco Chronicle: California Recession Analysis
- MarketWatch: California and New York Impact on U.S. Economy
- Politico: Future Recession Analysis
- Wikipedia: Recession
- Encyclopedia Britannica: Economic Recession
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