The likelihood of the United States tumbling into a recession by mid-2024 has diminished considerably in recent months, thanks to robust economic and job growth, despite easing inflation. However, certain regions of the country are more susceptible to economic downturns than others, according to Moody’s Analytics.
During the pandemic, the West and South regions experienced significant economic growth, particularly in home prices and inflation. These regions are now considered more vulnerable to a potential economic downturn. Factors contributing to this vulnerability include their already rapid growth, favorable climates, and lower living costs. The pandemic, which began in 2020, intensified these trends by prompting many Americans to work remotely and relocate to less densely populated areas.

Moody’s regional economist, Adam Kamins, highlights the risk associated with rapidly growing regions, suggesting that there is a greater chance of a financial bubble forming in such areas. Conversely, the Midwest and Northeast have experienced more modest growth and are thus less susceptible to a severe economic downturn because they have less distance to fall, as Kamins explains.
While the chances of a recession have decreased nationally to 33% from 50% earlier in the year, due to slowing inflation and a reduced likelihood of the Federal Reserve raising interest rates, certain metropolitan areas remain at risk. These areas include Austin, Texas; Boise, Idaho; Ogden, Utah; and Tampa, Florida, which may have uncomfortably close to 50% odds of a recession, according to Kamins.
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It’s worth noting that other U.S. forecasters have a more pessimistic outlook, with economists estimating a 48% chance of a recession in the next year. This disparity in forecasts suggests that regions with more vulnerabilities may indeed face economic challenges.
However, not all economists agree that the hottest regions are at the greatest risk. S&P Global Market Intelligence projects meager U.S. economic growth of 1.1% over the next year due to aggressive Federal Reserve rate hikes. Karl Kuykendall, a regional economist at S&P Global Market Intelligence, suggests that the West and South, with their vibrant economies, are less likely to experience a significant downturn.
Here’s a breakdown of recession odds for each U.S. region, according to Moody’s:
West:
Recession odds: 35.2%
The West experienced a sharp increase in home values from 2020 to mid-2022, with prices rising by an average of 20.5% per year. However, home prices in places like Boise fell by 21% from mid-2022 to early 2023, contributing to the region’s recession odds.
South:
Recession odds: 34.7%
Similar to the West, the South saw an influx of residents during the pandemic, but home prices remained relatively stable. Moody’s predicts a 7.4% drop in home prices in the next year, along with inflation pressures.
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Midwest:
Recession odds: 32.3%
The Midwest had a more modest rise in home prices and lower inflation at 3.7%. While manufacturing activity has declined due to rising interest rates, the region has less volatility, reducing the risk of a bubble bursting.
Northeast:
Recession odds: 29%
The Northeast, like the Midwest, experienced stagnant population growth and modest home price increases. Despite lower inflation at 3%, higher interest rates pose risks to the financial sector, a significant industry in cities like New York and Boston.
In summary, the overall risk of a recession in the U.S. has decreased, but certain regions, particularly those that experienced rapid growth during the pandemic, remain vulnerable. Economists’ opinions vary, but ongoing factors such as interest rates, home prices, and inflation will play crucial roles in determining each region’s economic stability in the coming year.