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The slowing GDP growth, impact of tariffs, and inflation, coupled with high interest rates, are all surefire signs that the U.S. is headed towards a recession. Unfortunately, more than half of Americans live in the states that are most at risk if a recession does hit in 2025. These are the states that will likely be hit the hardest by a recession in 2025, and some of the ones are better positioned to survive.
Why a Recession Impacts States Differently
A recession could be more difficult to overcome in certain states due to more exposure from job loss and unmanageable rises in living costs. High inflation and increased unemployment rates are typically felt in more populous states.
Metrics Used to Rank State-by-State Risk
There are a few key metrics to track when understanding the vulnerability of a state’s economy. Some important factors include state GDP, debt-to-income ratio, unemployment rate/change in unemployment rate, housing affordability, and tax burden.
High Risk: Louisiana
Based on these key metrics, Louisiana is at most risk if the U.S. heads into a recession in 2025. The state has a history of difficulty battling recession. The state has high housing prices that are unaffordable for most of the population. Not to mention, its unemployment rate is higher than many states; it ranks 36th in this category.
High Risk: Colorado
Colorado has a worrisome debt-to-income ratio that has only gotten worse over the past few years. The unemployment rate is one of the worst in the country, and this leaves them vulnerable in any economic downturn.
High Risk: Mississippi
One thing Mississippi has going for it is that the state does not have considerably high housing prices. However, despite low living costs, the unemployment rate is still staggering and it remains the poorest state in the country.
High Risk: South Carolina
South Carolina is the 47th most at-risk state in the nation, largely due to the increase in unemployment rate over the past year. It is one of the highest increases the state has seen. Additionally, the state does not have adequate safety net measures for the unemployed.
Low Risk: New York
The financial reality of New York City is actually much different than the disaster painted in the media. The state remains one of the most recession-proof as its unemployment is actually slowly decreasing. It also has a great history of bouncing back after a recession. Not to mention, it is the wealthiest state based on GDP per capita.
Low Risk: North Dakota
The least at-risk state based on the metrics we’ve discussed is North Dakota. Not only is it predicted to fare well in a 2025 recession, but it also has a history of surviving past recessions, including the COVID dip as well as the Great Recession. Its booming oil industry keeps it running, and the unemployment rate is far lower than most other states.
Low Risk: Nebraska
Nebraska is a considerably low-risk state and has remained so for the past few years. Like many of the other Great Plains states, it has excellent food production and insurance industries. Unemployment remains relatively low and housing is generally affordable for the population.
Conclusion
In general, highly populated states tend to take on the brunt of financial difficulties in a recession. Meanwhile, Great Plains states are the most stable, with a lower cost of living, high GDP per capita, and government safety net coverage.