[Finance Channel / Comprehensive Report]
According to MarketWatch, Moody’s economist Mark Zandi recently conducted a study showing that 22 U.S. states are currently in recession. If either California or New York’s economy deteriorates further, the entire U.S. economy could sink with them.
The report noted that California’s nominal GDP has reached $4.1 trillion—if it were a country, it would rank as the fourth-largest economy in the world. New York State also ranks as the 11th-largest economy globally. One economist described the two states as “the canaries in the coal mine” for the U.S. economy, since they are the two largest contributors to national GDP.
According to an October 9 report from Fortune.com, New York’s wealth is highly correlated with the S&P 500 index, while California’s economy moves closely with the technology stock indices and the S&P 500.
Scott Anderson, Chief U.S. Economist at BMO Capital Markets, said that the U.S. economy is built on shaky foundations, and that the performance of California and New York will determine the nation’s economic trajectory. He pointed out that California’s unemployment rate is as high as 5.5%, meaning it is essentially in a job recession, having lost a net total of 210,000 jobs so far this year.
Zandi has previously mentioned that America’s economic fate lies in the hands of the wealthy, as they are the only group whose consumption growth exceeds inflation. According to Moody’s latest machine learning–based leading economic indicator, the probability of a U.S. recession within the next 12 months has risen to 48%.
Although the Conference Board does not currently forecast a U.S. recession, it expects GDP growth to slow sharply, from 2.8% in 2024 to 1.6% in 2025.
Meanwhile, Ken Griffin, billionaire investor and founder of Citadel hedge fund, warned that U.S. fiscal and monetary policies have created a “sugar high” effect, masking underlying risks such as inflation and a weakening dollar.
He cautioned that this optimistic sentiment may be artificial, noting that the fiscal and monetary stimulus currently in place resembles measures typically used during a recession, effectively propping up the markets. As a result, the U.S. economy is indeed in a state of euphoria.
