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Right now, 22 U.S. states are either already slipping into an economic recession or are perilously close to one. That doesn't mean the U.S. as a whole is officially in a recession, but it does mean parts of the country are under serious economic strain, and if you live in one of these states, the impact could touch everything from your job prospects to your cost of living.
Here's what you need to know to prepare yourself financially in this uneven economy.
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What exactly is a recession?
A recession is broadly defined as a period of declining economic activity. At the national level, economists often look for two consecutive quarters of negative GDP growth, but at the state level, researchers use broader economic activity measures (like jobs, income, industrial output, retail sales, and housing permits) to assess strength.
In this case, Moody's Analytics chief economist Mark Zandi used a similar mix of data to what the National Bureau of Economic Research (NBER) considers when dating national recessions, but applied it at the state scale to see where activity is contracting or losing momentum.
Which states are under stress, and what's driving it?
The states identified as being in recession or on the brink aren't clustered in one region; they're spread across the country. Common challenges include:
- Slowing industries: Many states heavily tied to manufacturing, agriculture, or commodities are feeling pressure as demand softens and tariff dynamics reshape trade.
- Federal job cuts and budget uncertainty: Regions with significant public sector employment (including the D.C. metro area) have seen rising layoffs that drag on local economic activity.
- Population and labor dynamics: Slowing migration and workforce participation can reduce economic dynamism, especially in states dependent on new workers to fuel growth.
Here's one published list of states most at risk (ranked from relatively stronger to weaker economies within the group): Wyoming, Montana, Minnesota, Mississippi, Kansas, Massachusetts, Washington, Georgia, New Hampshire, Maryland, Rhode Island, Illinois, Delaware, Virginia, Oregon, Connecticut, South Dakota, New Jersey, Maine, Iowa, West Virginia, and the District of Columbia.
Why this matters to residents
If your state is on this list, the local economy might feel tighter even if national indicators look stable. For instance, jobs could be harder to find as employers delay hiring or cut positions. Wages might stagnate if businesses hold off on raises in response to weaker demand. Local government revenues could tighten, leading to pressure on services and tax changes.
These effects don't happen overnight, but they can compound, especially if household budgets are already stretched.
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How this compares to the national picture
It's important to be precise: most national economic indicators aren't yet signaling a full U.S. recession. Unemployment at the national level remains relatively low, and some GDP measures are still positive. The current "state-by-state recession" narrative comes from a mix of data signals and expert judgment, not a formal national recession declaration.
That said, when many states contract at once, especially those representing a significant share of U.S. GDP, it raises the odds that national weakness could follow if underlying trends don't improve.
Practical financial tips if you live in a struggling state
If your state's economy is weak or weakening, you don't need to panic, but you do want to be proactive:
- Build or reinforce an emergency fund. Cash cushions help you cover basics if job prospects tighten or hours drop. Aim for at least 3–6 months of essential expenses.
- Diversify your income if possible. Multiple income streams, from part-time work, freelancing, or passive sources, can soften the blow if your primary job is affected.
- Monitor local job trends. Keep an eye on hiring data in your area and industries that are still growing. Pivoting skills toward more resilient fields can improve your prospects.
- Reevaluate large financial commitments. When the economy slows, big expenses like buying a home or refinancing debt might need extra caution. Make sure your budget supports stability under various scenarios.
- Stay financially informed. Economic conditions evolve. Trusted data sources and regular check-ins on your personal finances can help you adjust your plan early.
Bottom line
A growing number of states are showing clear signs of economic stress, even though the U.S. as a whole hasn't been formally declared in a recession. That disconnect matters: local slowdowns can affect job security and household budgets long before national headlines change.
Regional downturns can expose surprising financial mistakes, like relying too much on one employer or overcommitting to fixed expenses. Paying attention early (and adjusting spending and savings habits as necessary) can make a big difference in how households weather uneven economic conditions.
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