United States, October 17, 2025
News Summary
Economists warn that the economic health of California and New York is crucial to prevent a national recession. Together, these states account for over 20% of U.S. growth. Despite a reported GDP growth of 3.8% in Q2 2025, risks including tariffs and a weakened labor market remain. If either state enters recession, it could trigger a nationwide decline. Currently, 21 states and Washington D.C. face recession risks, highlighting the importance of the stability of these two economic powerhouses.
California and New York‘s economic stability is crucial for preventing a national recession, according to recent warnings from economists. The health of these two states may dictate whether the U.S. can avoid a downturn, as they collectively account for over 20% of the U.S. economic growth. Scott Anderson, chief U.S. economist at BMO Capital Markets, referred to California and New York as potential “canaries in the coal mine” for the national economy.
Although fewer concerns about an imminent recession have emerged due to stronger-than-expected GDP growth of 3.8% in the second quarter of 2025, significant risks still linger. Factors such as tariffs, inflation, and a weakened labor market could hinder the national economy’s recovery. Mark Zandi, chief economist at Moody’s Analytics, highlighted that 21 states and Washington D.C. are either in recession or face a high risk of one. While California and New York are currently “holding their own,” both states have the potential to heavily influence the economic trajectory of the entire nation.
According to Zandi, if either California or New York were to slip into recession, it could trigger a nationwide decline. The Bureau of Economic Analysis (BEA) reported that most states have experienced GDP growth during this period, but underlying economic weaknesses are still present. Zandi defines a recession as a persistent decline in economic activity typically marked by weakening job growth.
The delay in job growth data attributed to a government shutdown has raised concerns of another weak period for the labor market, with projections suggesting a potential loss of 4,000 jobs in September. Zandi described the current job market as “sputtering,” indicating that monthly job growth is nearly at zero. Factors contributing to this instability include higher tariffs and restrictive immigration policies that generate uncertainty for businesses and affect labor demand.
Despite less positive economic indicators, firms have not resorted to layoffs, which Zandi identifies as a crucial buffer against a potential recession. The BEA is expected to release its first estimates for GDP growth in the third quarter, with projections indicating annual growth of around 1%. Zandi’s assessments show that 21 states, which account for about one-third of U.S. economic activity, are already in recession or on the brink of one.
Meanwhile, other states are either experiencing growth or struggling to maintain stability. New England states, in particular, are facing difficulties due to slow population growth. Industries such as agriculture, mining, manufacturing, and transportation are grappling with challenges that amplify recession risks.
While economists remain cautiously optimistic, predicting thin chances of sidestepping a national recession, they acknowledge that recent fiscal and monetary policies may provide some reinforcement. Consumer sentiment has notably dropped in September, reflecting widespread anxiety over inflation and labor market conditions. Despite some encouraging economic signs, experts advise caution, pointing to numerous risks that could shift the economy toward a recession.
Frequently Asked Questions
Why are California and New York’s economies important for the U.S.?
California and New York collectively account for over 20% of U.S. economic growth, and their economic stability is crucial for preventing a national recession.
What recent economic growth figures have been reported?
The second quarter of 2025 saw stronger-than-expected GDP growth of 3.8%, leading to a lessened fear of an imminent recession.
What factors threaten the national economy?
Concerns remain due to tariffs, inflation, and a weakened labor market, which could significantly impact the national economy’s recovery after the recent GDP growth.
How many states are currently in recession or at high risk of one?
21 states and Washington D.C. are currently in recession or are at high risk of entering one, according to analysis.
Key Features
| Feature | Description |
|---|---|
| States Impacting National Economy | California and New York |
| Current GDP Growth Rate | 3.8% in Q2 2025 |
| States in Recession | 21 states and Washington D.C. |
| Projected Annual Growth for Q3 | About 1% |
| Estimated Job Loss in September | 4,000 jobs |
Deeper Dive: News & Info About This Topic
- Newsweek: US Recession Chances in California and New York
- MarketWatch: New York and California’s Economic Stability
- San Francisco Chronicle: California Recession Concerns
- USA Today: California and New York’s Economic Decisions
- Wikipedia: Recession
Author: STAFF HERE HOLLYWOOD
The Hollywood Staff Writer represents the experienced team at HEREHollywood.com, your go-to source for actionable local news and information in Hollywood, Los Angeles County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Hollywood Bowl summer concerts, the Hollywood Christmas Parade, film premieres at TCL Chinese Theatre, and festivals at the Magic Castle. Our coverage extends to key organizations like the Hollywood Chamber of Commerce and Visit Hollywood, plus leading businesses in entertainment, dining, and tourism that define the local economy. As part of the broader HERE network, including HERELosAngeles.com, HEREBeverlyHills.com, HEREAnaheim.com, and HEREHuntingtonBeach.com, we provide comprehensive, credible insights into Southern California's dynamic landscape.
