Mark Zandi Analysis: 22 States in Economic Recession with Regional Divergence

This analysis is based on multiple credible reports [1][2][3][5] published in October 2025 regarding Mark Zandi’s comprehensive state-level economic analysis. Zandi, Chief Economist at Moody’s Analytics, has identified that 22 U.S. states plus Washington D.C. are currently experiencing recessionary conditions based on methodology that mimics the official NBER recession dating process [1].

The economic weakness is concentrated in states with economies dependent on goods-producing activities, agriculture, light manufacturing, and mining [1][3]. The affected states represent approximately one-third of U.S. GDP, creating significant systemic risk for the broader national economy [5]. Washington state serves as a prime example of these recessionary trends, having lost 5,400 jobs year-over-year through August 2025 [6]. The state’s professional and business services sector shed 18,400 jobs, while retail trade declined by 3,700 positions [6].

The tech sector, a crucial component of Washington’s economy, has been particularly hard hit, with employment falling 6% from mid-2022 to early 2025. Major workforce reductions at Amazon and Microsoft have contributed significantly to this decline [7]. Local economic strain is further evidenced by restaurant closures in Seattle, including establishments like Mbar and Kate’s Pub [7].

The analysis reveals several critical insights about the current economic landscape:

1. Regional Divergence
   : The U.S. economy is experiencing significant regional variation, with some states in recession while others maintain growth. This fragmentation suggests the national economy may be more resilient than individual state indicators would imply.

2. Policy-Driven Weakness
   : The recessionary conditions appear linked to specific federal policies including slowed immigration, increased tariffs, and federal job cuts tied to efficiency initiatives [1][3]. These policy impacts have been particularly pronounced in Washington D.C. and surrounding states.

3. Leading Indicators
   : California (5.5% unemployment) and New York (4% unemployment) are being closely monitored as potential tipping points that could trigger a national recession if they deteriorate further [4].

4. Sector-Specific Impact
   : The recession is disproportionately affecting manufacturing, agriculture, and goods-producing activities, while service sectors in some regions remain more resilient [1][3].

• 22 states plus D.C. show persistent economic weakness with ongoing job losses likely to continue [1][2][3]
• Another 13 states are “treading water” economically, indicating broader regional stress [2][4]
• If major economies like California or New York decline, the entire nation could enter recession [1][5]
• Federal data collection disruptions may be impacting the accuracy and timeliness of economic monitoring [6]

• Regional economic divergence may create investment opportunities in states maintaining growth trajectories
• Policy-driven weakness suggests potential for economic recovery if federal policies are adjusted
• The current fragmentation may allow for more targeted economic interventions at state and regional levels

Mark Zandi’s analysis employs a comprehensive methodology examining state-level employment data, industrial production, personal income, and housing starts [1]. The recessionary conditions are verified through multiple Tier 1 sources including Axios, The Hill, Yahoo Finance, and Newsweek [1][2][3][5]. Washington state’s economic data provides concrete evidence of these trends, with the unemployment rate remaining at 4.5% and showing persistent job losses across multiple sectors [6].

The analysis suggests that while a national recession has not yet been declared, the regional economic weakness is substantial and widespread. The situation warrants close monitoring, particularly of the 13 additional states described as “treading water” and the major economies that could serve as tipping points for broader economic deterioration [2][4].