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TIL CreativesIs California heading toward recession? Moody’s warns U.S. economy at risk U.S. economy is holding on — but barely. Moody’s Analytics chief economist Mark Zandi has warned that the nation’s fate could now depend on California and New York, which together drive more than 22% of U.S. GDP. In his latest analysis, Zandi said nearly one-third of the U.S. economy is already in or at high risk of recession, with another third “treading water.” California, which contributes 14.5% of national GDP, and New York, which makes up 8%, are now sitting on the edge. Zandi noted that while the U.S. is not in a recession yet, it’s struggling to avoid one. The slowdown is showing clearly in the job market, where payroll growth has nearly stalled. Key industries like manufacturing, construction, finance, technology, and professional services are shedding jobs, while only health care and hospitality continue to hire. He warned that the next round of data revisions may paint an even weaker picture of employment. The industrial state of Michigan has now fallen into recession territory, hit by Donald Trump’s tariffs that have raised costs for automakers. Both Ford and General Motors recently posted upbeat quarterly results but still face billions in tariff-related losses. Supply chain pressures have deepened as China’s rare-earth export restrictions—a countermeasure in Trump’s ongoing trade war—have squeezed production lines. For now, California and New York are the swing states of the economy, with both showing signs of stagnation. Zandi said, “Whether the national economy suffers a downturn appears to rest on the big California and New York economies.” He added that de-globalization, restrictive immigration policies, and trade tensions are weighing on growth, while AI-driven investments and stock market gains are offering a short-term lift. Despite fears, the Atlanta Fed’s GDPNow tracker still projects 3.9% U.S. GDP growth in Q3 2025, up slightly from 3.8% in Q2, signaling resilience. Inflation data, meanwhile, came in slightly above expectations but remains below forecasts, boosting chances of further Fed rate cuts this year. Yet economists like Diane Swonk of KPMG warn of a looming slowdown, predicting a dramatic drop in growth in Q4 as consumer stress, higher delinquencies, and weak retail sales converge. “We’re heading into a difficult holiday season,” Swonk said.Live EventsMichigan joins recession list as Trump tariffs bite In his latest state-by-state analysis, Zandi moved Michigan — an industrial bellwether — from the “treading water” list to “recessionary.” The reason: President Donald Trump’s tariffs are hitting automakers hard. Despite General Motors and Ford posting strong Q3 earnings, both companies are facing billions in tariff-related costs, dragging on production and profits. Supply chain strains have deepened the pain. China’s rare-earth export curbs, a retaliatory move in the ongoing U.S.–China trade war, have squeezed manufacturing output. California and New York on the edge For now, California and New York remain in the “treading water” zone — not in recession, but not growing either. Together, these two economic powerhouses could tip the national balance. California alone contributes 14.5% to U.S. GDP, while New York accounts for nearly 8%, according to Moody’s data. “Whether the national economy suffers a downturn appears to rest on the big California and New York economies,” Zandi said. “Both are struggling to gain traction.” He pointed to de-globalization, trade wars, and strict immigration policies as headwinds. On the other hand, artificial intelligence and rising investment and stock market gains are providing a temporary tailwind. U.S. GDP still strong — for now Despite these pressures, the broader economy remains resilient. The Atlanta Fed’s GDPNow model forecasts 3.9% growth in Q3 2025, slightly up from 3.8% in Q2 — signaling an unexpected acceleration. Still, the job market shows cracks. Payroll growth has “come to a virtual standstill,” Zandi noted, with industries like construction, manufacturing, tech, finance, and government all shedding jobs. Only health care and hospitality are adding workers. Earlier this month, Zandi warned that private-sector data shows “essentially no job growth” in September. Where each state stands According to Moody’s Analytics, here’s the latest breakdown: Recession/High Risk (23): Wyoming, Minnesota, Michigan, Washington, Georgia, Massachusetts, Virginia, Illinois, Oregon, Connecticut, New Jersey, and others. Treading Water (12): California, New York, Nevada, Ohio, Colorado, and more. Expanding (16): Texas, Florida, North Carolina, Arizona, and Utah among them. Inflation, rates, and the next test While many economic indicators are delayed due to the federal shutdown, the Labor Department’s CPI report for September came in slightly higher — but below expectations. That raised hopes for more Fed rate cuts later this year, offering a cushion for growth. Yet not all economists are optimistic. Diane Swonk, chief economist at KPMG, said the economy “looks better than it feels.” Inflation is still inching higher, and she expects a sharp slowdown in Q4 2025, worsened by the shutdown’s loss of 750,000 federal paychecks. “Consumer stress, rising delinquencies, and tariff pass-throughs will collide with a fragile labor market and weaker retail spending,” Swonk warned. “We’re going into a very difficult holiday season.”Add as a Reliable and Trusted News Source Add Now! 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