Almost half of the states are either in recession or flirting with a downturn, according to a chief economist at Moody’s Analytics.
But Alabama is not one of them.
Axios talked to economist Mark Zandi at Moody’s Analytics. He created an index looking at state-level jobs data, as well as other categories such as modeled industrial production, personal income and housing starts.
It’s something the National Bureau of Economic Research Business Cycle Dating Committee does when it determines if the economy is in a recession.
According to Zandi, Alabama and neighbor Florida are expanding, which Tennessee is “treading water,” and Georgia and Mississippi’s economies are shrinking.
The states in contraction aren’t specific to one region and make up about a third of the nation’s overall GDP.
Zandi says states seeing shrinkage are being affected by a mix of slowing immigration, increasing tariffs and federal job cuts.
Employment was his most important indicator, but one of many. He also looked at credit card delinquency rates, credit scores, port activity and migration.
Economic news for the state has been largely positive of late.
Alabama’s August unemployment rate was 2.9%, down from July 2025’s rate of 3%, and lower than August 2024’s rate of 3.1%. At the same time, average weekly wages increased in August to $1,117.54, its second highest level ever. That’s a yearly increase of $72.63 per week.
Additionally, both the manufacturing sector and the leisure and hospitality sectors in Alabama saw record high wages in August.
Zandi and Axios points out that the economy is not in recession currently, “but it’s pretty darn close.”
The problem is that the states most impacted are the ones more reliant on agriculture and manufacturing, he said, as those sectors are more likely to be impacted by tariff increases.
The immigration crackdown is suppressing growth as well, and states most exposed to federal job cuts could be feeling the pinch.
However, states doing well are ones still seeing population growth, like Texas and Florida.
New York and California, both in the “treading water” category, could decide which way the national economy goes, he said.
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