California and New York, October 17, 2025
News Summary
Economists emphasize the importance of California and New York’s economic performance in preventing a nationwide recession. Recent reports suggest if either state faces downturns, it could endanger the national economy. Although the second quarter of 2025 saw a notable GDP growth of 3.8%, concerns remain over tariffs, inflation, and job market fluctuations. Current economic indicators suggest resilience in these two states, but many others are at risk, raising alarms about potential recession impacts.
California and New York‘s economic stability is crucial for preventing a potential national recession, according to economists who have highlighted the significant influence these states have on the U.S. economy. Recent analyses indicate that if either state enters a recession, it could trigger a downturn across the entire nation.
Scott Anderson, chief U.S. economist at BMO Capital Markets, identified California and New York as possible “canaries in the coal mine” for the national economy. Their economic performance could be a strong indicator of the overall health of the U.S. financial system. Concerns had eased somewhat following a stronger-than-expected GDP growth of 3.8% in the second quarter of 2025, which provided a glimmer of hope for avoiding a recession.
Despite this positive growth, fears linger regarding factors such as tariffs, inflation, and a weakened labor market that could hinder future economic prospects. Mark Zandi, chief economist at Moody’s Analytics, noted that 21 states and Washington D.C. are already in, or at high risk of, a recession. However, he expressed that California and New York are currently “holding their own” yet have the potential to significantly impact national economic trends.
According to Zandi, if either California or New York faces an economic downturn, it could potentially lead to a nationwide recession. The Bureau of Economic Analysis (BEA) reported that GDP growth improved in almost every state during the second quarter of 2025, which is a positive sign for the economy as a whole.
Zandi defined a recession as a persistent decline in economic activity, characterized by weakening job growth. Recent job data has been delayed due to a government shutdown, but speculation indicates a potential loss of 4,000 jobs in September. The job market is described as “sputtering,” with monthly job growth close to zero. Contributing factors include higher tariffs and restrictive immigration policies that result in business uncertainties and affect labor demand.
Even with these negative indicators, companies are refraining from layoffs, which Zandi believes serves as a critical buffer against recession risks. The BEA is preparing to release its initial estimates for GDP growth in the third quarter, with expectations suggesting an annual growth rate of approximately 1%.
Zandi also identified 21 states that contribute about one-third of U.S. economic activity, either in recession or on the verge of one. While California and New York show some resilience, other areas, particularly in New England, are struggling due to slow population growth. Industries like agriculture, mining, manufacturing, and transportation encounter difficulties that contribute to recession risks. Notably, California and New York collectively account for over 20% of U.S. economic growth.
While economists express some optimism regarding recent fiscal and monetary policies that might help support the economy, the likelihood of avoiding a national recession remains slim. Additionally, consumer sentiment has dipped in September, signaling widespread concern about inflation and the labor market outlook. Despite positive trends, the overall economic landscape remains precarious, with numerous risks that could push the economy back towards recession.
FAQ
What do economists say about California and New York’s economies?
Economists warn that California and New York’s economies could determine whether the U.S. avoids a recession. If either state enters a recession, it could lead the entire nation into recession.
What was the GDP growth in the second quarter of 2025?
Fears of an imminent recession lessened due to stronger-than-expected GDP growth of 3.8% in the second quarter of 2025.
How many states are at risk of recession?
Mark Zandi analyzed that 21 states and Washington D.C. are in, or at high risk of a recession.
What does a recession entail according to Mark Zandi?
Zandi defines a recession as a persistent decline in economic activity, marked by weakening job growth.
What is happening to consumer sentiment?
Consumer sentiment has dropped in September, indicating widespread concern about inflation and labor market prospects.
Key Economic Features
| Feature | Details |
|---|---|
| States at Risk of Recession | 21 states and Washington D.C. |
| GDP Growth (Q2 2025) | 3.8% |
| Potential Job Losses (September) | 4,000 jobs |
| Projected Annual GDP Growth (Q3 2025) | 1% |
| Economic Contribution of CA & NY | Over 20% of U.S. economic growth |
| Consumer Sentiment (September) | Widespread concern |
Deeper Dive: News & Info About This Topic
- Newsweek: U.S. Recession Chances
- San Francisco Chronicle: California Recession
- USA Today: California and New York Recession Impact
- MarketWatch: New York and California Recession Risks
- Wikipedia: Recession
Author: STAFF HERE COSTA MESA WRITER
The COSTA MESA STAFF WRITER represents the experienced team at HERECostaMesa.com, your go-to source for actionable local news and information in Costa Mesa, Orange County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the OC Fair, Concerts in the Park, and Fish Fry. Our coverage extends to key organizations like the Costa Mesa Chamber of Commerce and Boys & Girls Clubs of Central Orange Coast, plus leading businesses in retail, fashion, and technology that power the local economy such as Vans, Experian, and South Coast Plaza. As part of the broader HERE network, including HEREAnaheim.com, HEREBeverlyHills.com, HERECoronado.com, HEREHollywood.com, HEREHuntingtonBeach.com, HERELongBeach.com, HERELosAngeles.com, HEREMissionViejo.com, HERESanDiego.com, and HERESantaAna.com, we provide comprehensive, credible insights into California's dynamic landscape.
