US President Donald Trump has received yet another stark warning regarding recession, this time from Mark Zandi. The chief economist at Moody’s Analytics claims that states making up nearly one-third of the United States’ GDP could either be in recession or at “high risk” of it.
“States experiencing recessions are spread across the country,” Financial Times quoted Zandi as saying. The expert said states included in this list were from the Midwest as well as the Rust Belt regions.
“California, Texas and New York, which together account for close to a third of US GDP, are holding their own, and their stability is crucial for the national economy to avoid a downturn,” Zandi added.
What are the markers of recession?
One of the highly popular ways to determine recession is back-to-back negative economic growth in two quarters.
As per the National Bureau of Economic Research (NBER), this includes a major decline in economic activity which remains spread across the country’s economy and goes on to last for over a few months.
To determine the performance of several regions in the US, the geographical distribution of industries plays a significant role.
Which sectors are in recession?
Calculations by Mark Zandi suggest that specific sectors that are currently in recession include agriculture, manufacturing and construction. Altogether, these are impacting rural and industrial states in the US. A big reason behind the downfall of these goods-producing sectors is the recently announced tariffs by the Trump administration and the retaliatory measures from the country’s trade partners, Financial Times reported.
In the wake of massive cuts announced by the Trump administration, the federal government sector is witnessing a downturn, pushing Washington DC into a slowdown, the report added.
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Zandi said sectors like financial services, retail and hospitality are “treading water,” while the ones that continue to expand include healthcare, technology and real estate.
The annualised GDP of the US increased in the second quarter after witnessing a contraction in the first. This means, the US has avoided a recession, going by the basic definition.
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