Recession Risks: Which States Are Struggling the Most?

A Tale of Two Economies: States Struggle as Recession Risk Looms

Analysis and Commentary.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

The U.S. economy is a mixed bag this week, with some states facing financial distress while economic indicators point to a potential slowdown. A new report identifies the most financially troubled states, while a separate analysis from UBS suggests the risk of a nationwide recession is at “historically worrying levels.”

States in Distress As Recession Risk Looms

A recent WalletHub report ranked states based on nine key metrics to determine which are the most financially distressed. Per WalletHub, the most distressed cities are Texas, Florida, Louisiana, Nevada, and South Carolina. Even though Texas has one of the world’s largest GDPs, it is ranked No. 1 due to high rates of residents searching for “debt” and “loans,” as well as a significant increase in bankruptcy filings.

My home state of Florida had a high number of financially distressed accounts and a poor credit score ranking. On the other hand, Hawaii, Vermont, Alaska, Oregon, and New Mexico are doing the best.

Has anyone noticed this seems to be divided into red and blue states? Nevada was historically blue, but voted for President Trump this election. I’ve written about Nevada’s recent economic problems, as it leads the nation in foreclosures, and Las Vegas is feeling the pain with less tourism. Sheryl Crow isn’t the only one leaving Las Vegas!

South Florida and Southwest Florida are also feeling the economic pain due to a lack of tourism. No tips on your taxes doesn’t mean much if you aren’t receiving tips to begin with.

How Does 93% Odds Sound?

If odds are 93% in your favor that something will go your way, that’s great news. Imagine, however, when 93% isn’t to your advantage. Well, according to a UBS analysis of “hard data” (objective economic indicators like personal income and employment), the U.S. economy is facing a 93% probability of a recession.

UBS points to a weak labor market where now the number of unemployed Americans has surpassed the number of available jobs for the first time since 2021, which was the financially turbulent times we faced in a post-COVID economy.

But here’s my question, shouldn’t this be the reverse, meaning if now immigrant day laborers have been deported or left the country, aren’t those jobs now available? Of course, I’m being facetious as I usually am because the fact is, as has been proven endless times, Americans don’t want those jobs!

But if the roles can’t be filled, it costs more to have that product produced, which means you pay more. It’s all tied together!

But it doesn’t stop with UBS. Moody’s chief economist Mark Zandi is hinting at a possible recession with a period of “soggy growth.” While it’s a strange weather analogy as the U.S. economy is stuck in the mud, to be clear, this doesn’t mean the economy is healthy. The overall concern is “stagflation,”  a combination of a stagnating economy and rising inflation. The last time the country experienced stagflation, my Saturday morning ritual was watching cartoons.

The Trump Tariff Troubles Continue

Since many on social media still like to argue that tariffs are great for the economy and somehow will make us wealthy again, or that companies should eat the tariffs, the fact is, prices continue to rise. Repeatedly, I have said that we will be nickel-and-dimed to death. Now, even Dollar Tree is increasing its prices. No word yet if they will change their name to $2 Tree.

The economic outlook is further complicated by a recent court ruling that found President Trump overstepped his authority in imposing certain tariffs. The ruling, which is being appealed to the Supreme Court, has left American importers scrambling for potential refunds on billions of dollars in duties they’ve already paid in a potential legal battle.

Your next question should be “When do you get your refund?” I’ll make this quick: don’t hold your breath! Maybe with enough pressure, some retailers provide some sort of rewards program in good faith if ultimately the Supreme Court agrees or refuses to accept the case.

But I do wonder if these corporations will stand up to President Trump and move forward on getting reimbursed for the tariffs. If going based on past incidents, that seems like a big “NO,” but then again, shareholders should make their voices heard if that is the case and make their move to vote out the Board of Directors.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

You can find additional categories by clicking below or by using the search feature at the top of this page:

• Bankruptcy
• Insights & Analysis

Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.