6 States That Would Be Hardest Hit By a Recession

Analysts have once again sounded alarmed about a possible recession amid mixed economic data and recent stock market volatility. This is nothing new – recession fears are a common refrain this decade, even as the economy keeps pressing forward. The latest warnings are particularly troubling to states that are already dealing with sluggish economies.

The recession talk began this month following a weak July jobs report that sent stock markets reeling. But things have improved since then on more upbeat economic data. As of late last week, Reuters reported that the S&P 500 and Nasdaq recorded seven straight gains sessions.

“What we’re seeing in today’s markets is an extension of the comeback and the calming of earlier recession fears,” Greg Bassuk, CEO of AXS Investments, told Reuters. “The positive economic data is really what’s fueling this rally, giving greater confidence to investors that are recession is likely to be avoided, and that the Fed will begin cutting rates in September.”

Bill Adams, chief economist for Comerica Bank, offered a similar take in an email note shared with GOBankingRates.

“Average hourly earnings outpaced the CPI again in July, and have risen more than the CPI in year-over-year terms since May 2023,” Adams wrote. “As long as wage growth is outpacing inflation, the pressure on low-and moderate-income consumer budgets from high prices will abate, and the risk of recession from vulnerable consumer finances will fall.”

Even so, some economists still warn of a possible recession (again). Should a recession finally emerge, five states would be hit the hardest. Also find out which states whose failing versus thriving in economy.

The U.S. unemployment rate was 4.3% in July, AP reported, which is still pretty low despite a slowdown in hiring and job growth. According to Business Insider, Illinois’ unemployment rate is higher than the national average. Meanwhile, CNBC recently rated Illinois’ economy as tied for ninth worst in the country and gave it a grade of D- because it has the “worst credit rating of any state.”

Like Illinois, Kentucky has a higher than average unemployment rate and a D- grade for its economy, per the CNBC analysis. The Bluegrass State has suffered from a sluggish housing market as well as low job growth and a low rate of new business formations.

Louisiana has a “serious home equity problem,” CNBC reported, citing data from ATTOM. Nearly 11% of Pelican State home loans are underwater, meaning the owner owes more on their mortgage than the home is worth. That’s the highest rate in the country. Unemployment is about average, but there isn’t much job growth. CNBC gives Louisiana’s economy a grade of F, rating it the fourth worst in the country.

New Hampshire has a low unemployment rate compared with the rest of the country, but that’s partly because it suffers from a severe labor shortage. An aging population, high housing prices and an exodus of younger workers have hurt the Granite State. CNBC gives its economy a failing grade.

CNBC reported that Rhode Island continues to deal with pension issues that date back decades. These issues have hurt the state’s debt rating and frustrated many pensioners because they have not seen annual cost of living adjustments to their checks in about a dozen years. CNBC rated Rhode Island’s economy tied for the ninth worst in the country, giving it a grade of D-.