14 states are close to a recession: What it means for residents

As the U.S. economy faces uncertainty, some states are feeling the strain more than others.

According to Moody’s Analytics (2025), nearly one-third of U.S. GDP is at risk, with 22 states either already in a recession or facing high risks of one. These states, heavily impacted by job losses, inflation, and slowed growth, are bracing for economic challenges that directly affect their residents.

But what does being “close to a recession” really mean? Is it a signal of an imminent economic collapse or simply a temporary slowdown? In this piece, we’ll explore what’s behind this warning, how it affects residents, and, most importantly, how you can prepare if your state is one of those at risk.

Illinois

Illinois’ manufacturing sector, which contributes about $107 billion of the state’s GDP, according to Statista, is facing significant challenges due to global trade disruptions and tariff increases. The state has also been hit hard by the decline in agricultural exports and rising costs in key sectors.

Job losses in the manufacturing and agriculture sectors are expected to rise. As of 2025, Illinois’ unemployment rate was at 4.4%, according to the Illinois Department of Employment Security (IDES). Residents may face longer job searches and economic instability, while public services such as education and healthcare may be cut due to reduced state revenues.

Virginia

Virginia’s close ties to federal government spending make it especially vulnerable to budget reductions. Cuts in federal programs and agencies are already being felt, particularly in Northern Virginia.

Federal job losses are impacting communities that rely heavily on government employment. Families dependent on these roles are facing uncertainty, and local economies are struggling to adjust to the reduced spending power.

Michigan

Michigan’s economy is heavily tied to the auto industry, which has been hit by both trade tariffs and a slowing global market. Automobile manufacturing makes up about 6-7% of Michigan’s GDP. Layoffs are already increasing as companies scale back production.

For instance, CNBC notes that General Motors alone announced the loss of over 1,700 jobs in Michigan and Ohio this fall, reflecting broader industry struggles. The impact of these challenges is being felt across the state.

Residents in smaller towns reliant on manufacturing are especially vulnerable, facing economic stagnation and greater difficulty finding new employment. The ripple effect of these changes threatens not only manufacturing workers but also the local businesses and services that depend on them.

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New Jersey

Residents are grappling with a tough combination of high property taxes and a slowdown in the financial services sector. This industry is a key part of the state’s economy, so any downturn here has a wider impact.

In areas like Jersey City and Newark, where living costs are already high, many households are feeling the strain. On top of that, recent job cuts in the financial sector are leaving workers worried about their job security. As the cost of living continues to rise, particularly in these expensive areas, many residents are finding it more challenging to afford housing.

Washington

With Amazon and Microsoft headquartered in Washington, the state’s tech sector accounts for a significant share of its economy. However, recent layoffs and global supply chain disruptions have slowed growth in Seattle and other tech hubs.

Tech workers are seeing job cuts as major companies reduce their workforce. This slowdown in tech could lead to greater job insecurity and increased competition for available roles, while consumer confidence in tech products and services continues to decline.

California

California’s tech industry, the largest in the State, has been severely impacted by widespread layoffs, with companies like Meta and Google cutting thousands of jobs. As the tech sector shrinks, many workers are facing job insecurity and uncertainty about their future employment prospects.

For residents, especially in tech hubs like Silicon Valley, this means fewer job opportunities and a more competitive job market. As the backbone of California’s economy, the tech industry’s decline has a ripple effect.  With fewer high-paying jobs, residents are also facing increased financial strain, as the cost of living remains high and job prospects become more limited.

Ohio

Manufacturing losses and a slowdown in agriculture are putting significant strain on the state’s economy. Steel production has fallen, and demand for farm exports has weakened, leaving Ohio under mounting pressure.

Many people, especially in rural areas, are experiencing job losses in both farming and manufacturing. This is creating financial strain across communities, affecting families in both small towns and larger cities.

Florida

Florida’s economy heavily relies on tourism and real estate, both of which are showing signs of decline due to rising costs and inflation. With fewer tourists visiting the state, the tourism industry is facing a slowdown that’s having a ripple effect across local economies. According to Newsweek, international visitor numbers are expected to fall from 72.4 million in 2024 to 67.9 million in 2025.

As the tourism sector shrinks, job losses in hospitality, retail, and entertainment are expected to rise, leading to economic hardship for many workers in these industries. The combined effects of these factors are contributing to the broader economic downturn, pushing Florida closer to a recession.

New York

New York’s economy remains strong overall, but high property taxes and a cooling housing market are creating headwinds. Rising mortgage costs have slowed home sales, and property values are slipping.

Residents are feeling the effects through job insecurity, particularly in real estate and finance. Businesses are tightening budgets, and layoffs are becoming more common, adding to the stress of households already burdened by high living costs.

Texas

Texas is facing economic vulnerability due to its heavy reliance on the oil and gas sector. Over the past decade, the state has seen a significant decline in energy-sector jobs, which has begun to ripple through broader regional economies.

According to Trey Cowan, an oil and gas energy analyst at IEEFA, “A stark pattern of declining employment in the oil and gas industry has taken shape over the last decade that has rippled out to have broader effects on regional economies.”

Analysts highlight that these unemployment spikes are putting pressure on residents’ financial health, as job security becomes increasingly uncertain. At the same time, inflation continues to drive up living costs, making it more difficult for people across the state to manage their finances and meet rising expenses.

Connecticut

Connecticut’s economy relies heavily on the financial services and manufacturing sectors, both of which are currently facing slowdowns. As companies in these industries scale back, job cuts are expected, leading to uncertainty for many workers in these fields.

For residents working in finance and manufacturing, this could mean job losses and greater competition in an already tight market. The high cost of living, especially in cities like Hartford and New Haven, makes it harder for workers to bounce back quickly from layoffs. This, in turn, increases financial pressure on households already struggling with the rising cost of everyday expenses.

Pennsylvania

Pennsylvania’s energy and manufacturing sectors, including coal and steel, have faced significant challenges due to both global competition and trade disruptions. The recent increase in tariffs from 25% to 50% on imports has elevated costs, leading to market suspensions and price uncertainty.

As a result, job losses are likely to continue, especially in areas where coal mining and steel production have historically been major industries. Rural Pennsylvania may see the hardest impact, with unemployment rising and fewer job opportunities in manufacturing and agriculture.

Alaska

Alaska is bracing for deep challenges as declining state revenues threaten cuts to public services. From education to healthcare, essential programs face strain, and the state’s vast geography only magnifies the problem. Many residents already struggle with limited access to schools, clinics, and infrastructure, and reduced funding could further widen these gaps.

The state’s reliance on industries such as oil and fishing makes it especially vulnerable to global market fluctuations. As the recession continues, residents may need to prepare for potential layoffs and reduced state support, which could significantly impact their daily lives.

Massachusetts

Massachusetts, with its strong tech and financial sectors, is feeling the effects of the broader economic slowdown. Companies are scaling back, and layoffs have begun in industries that once seemed untouchable.

The job market is becoming more competitive, especially in Boston. Workers in tech and finance are facing greater uncertainty, while rising housing costs continue to make it harder for residents—particularly first-time buyers—to afford homes.

Key Takeaways

As the U.S. economy faces regional slowdowns, states heavily reliant on industries like oil, manufacturing, and tourism are particularly vulnerable to recession risks. Job losses in key sectors, such as tech in California and manufacturing in Michigan, along with rising living costs due to inflation, are putting significant pressure on residents.

These challenges are compounded by potential cuts to public services and a cooling housing market, especially in high-cost areas like California and Florida. As state revenues decline and global trade disruptions persist, residents must adapt to job insecurity, tighter household budgets, and reduced access to essential services, while remaining vigilant about opportunities for financial support and relief.

Disclosure line: This article was developed with the assistance of AI and was subsequently reviewed, revised, and approved by our editorial team.

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