Economist Mark Zandi of Moody’s Analytics says two states—New York and California—could determine whether the United States enters a recession, as their economic performance mirrors broader national trends.
In an interview, Zandi called both states “bellwethers” for the country’s financial trajectory. While he noted that several U.S. states may already be in recession, New York and California are “treading water,” managing to hold steady despite significant economic headwinds.
“California and New York are struggling with the headwinds created by higher tariffs, restrictive immigration policy, and de-globalization,” Zandi said. “But they’re benefiting from the AI boom through rising investment and the impact of surging stock prices on consumer spending among wealthier households.”
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Economy On The Edge
Zandi has been warning for months that the U.S. economy is on the edge of a downturn. In August, he said the nation was “on the precipice” of recession and has since suggested conditions have worsened. Still, he believes the strength of the economies in New York and California could ultimately tip the balance.
In October, he also warned that the government shutdown, which is taking a toll on the economy, could still last for a record “five, six weeks.”
“If it’s more than a month, then it’s a deal,” Zandi stated. “Something is going to break,” he added.
Both states are heavily exposed to global trade and capital flows, making them sensitive to changes in tariffs, re-shoring trends, and global supply chain disruptions. Yet, tech-driven gains and resilient labor markets—particularly in healthcare and education—have offset the slowdown from layoffs in technology sectors.
Zandi added that limited federal data, due to delays from a partial government shutdown, has made it difficult to assess the national picture. He continues to rely on state-level metrics, such as migration trends, credit growth, and housing prices, to gauge economic health.
“They have powerful headwinds…but also have powerful tailwinds,” Zandi told Business Insider. “Right now, those forces are battling to a draw.”
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