A top economist says these 2 states could determine whether the US enters a recession
A popular moniker in politics says, “As Ohio goes, so goes the nation.” When it comes to the economy, the same might now be said for New York and California.
Mark Zandi, the chief economist at Moody’s Analytics, says he’s closely watching the trajectory of those two states in particular as a bellwether.
The economist has been sounding the alarm on the US inching closer to a recession for months. After saying the US was on the precipice of a downturn in August, he updated his prediction a month later to note that he believed the conditions had deteriorated further.
Zandi said last week that he saw many states as already being in a recession, but he highlighted that New York and California, the two states he’s most closely watching, are both in the “treading water” category. He went on to say that their fortunes could ultimately tip the balance for the whole US.
“California and New York are struggling with the headwinds created by the higher tariffs and highly restrictive immigration policy, and de-globalization more broadly,” Zandi told Business Insider following his latest posts. “But are benefiting from the AI boom via the surge in investment and the impact of surging stock prices on consumer spending by the well-to-do in those wealthy states.”
He also said that both New York and California are economies that rely heavily on globalization and unrestricted trade, and trends around re-shoring and tariff policies could generate headwinds.
Zandi added that while the US government shutdown has delayed some key economic data reports, he’s using various state-level labor indicators and survey data to continue his analysis.
“I’ll look at everything from net, gross migration flows, regional Fed surveys, household delinquency data from Equifax, credit growth from Equifax, house prices, and commercial real estate values,” Zandi said.
He acknowledged that the trend of tech sector layoffs may pose a threat to California’s growth, but added that so far, it hasn’t been a problem, as sectors such as healthcare and education are adding jobs.
“They have pretty powerful headwinds to growth, but they also have some powerful tailwinds, and those things, those two are kind of battling to a draw at this point,” he said of the two states.