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The 10 States Most Vulnerable to Stagflation by 2025

Recent research conducted by National Business Capital has unearthed disturbing trends in the U.S. economy, revealing the ten states that face the highest risk of stagflation in 2025. Stagflation is characterized by a combination of high inflation, sluggish economic growth, and stagnating job growth; an economic dilemma not witnessed in the U.S. since the 1970s.

Key Findings

The stark reality is that, as of now, California has been identified as the most at-risk state, burdened significantly by soaring housing prices, hefty utility bills, and underemployment rates. The Pacific region is reported to carry the highest risk, followed closely by states in the Northeast. This trend is exacerbated by rising costs and declining GDP growth in many areas, leaving households nationwide to cope with financial strains.

Understanding Economic Stresses

The research makes it clear that American households are already feeling the pinch of economic pressures. A staggering 36% of families across the U.S. report having difficulties meeting their monthly obligations, with Kentucky households hit the hardest—46% struggling to make ends meet. The report anticipates that if stagflation takes hold, 2025 could become a disheartening year for the economy.

Breakdown by State

The top ten states most susceptible to this economic condition include:
1. California: Stagflation score of 69.0 due to significant housing and utility costs.
2. Connecticut: A close second with a score of 64.3, facing challenges similar to California.
3. Kentucky: Ranked third with a score of 64.1, grappling with low GDP growth and salaries.
4. Alaska: Score of 63.5 due to unique economic challenges.
5. Florida: Score of 62.7 with its own set of inflationary pressures.
6. Oregon: Tied in score (61.8) with New York, facing financial stress.
8. Arizona: Score of 61.2, reflecting concerns about income growth.
9. New Jersey: Scoring 60.6, the state continues to deal with alarming costs of living.
10. Illinois: Rounding out the list with a score of 59.8.

Differences Between Blue and Red States

Intriguingly, the data reveals that blue states dominate the risk list, averaging a stagflation score of 53.4 compared to 50.1 for red states. Blue states face steeper inflation rates, particularly in housing and energy sectors, alongside rising underemployment levels. Conversely, red states, while slightly better off regarding inflation, suffer from heavier financial burdens with 38% of their households struggling to pay bills. This indicates a worrying trend where red states also show slower GDP contractions and productivity growth.

Regional Analysis

When examining regional trends, the Pacific states again performed poorly, with an average stagflation score of 60.6. This was followed by the Northeast with a score of 53.1. The Midwest, South, and Mountain regions ranked lower, suggesting that the Pacific states require immediate economic attention.

The Way Forward

Joe Camberato, CEO of National Business Capital, emphasized the unpredictable direction of the economy moving forward: "This report shows if stagflation hits, the rest of 2025 could look very bleak." The findings serve as a wake-up call for policymakers and community leaders, urging them to take proactive steps to stabilize their economies.

In conclusion, the potential onset of stagflation seems to loom more ominously in a select group of states, most notably in California and other Pacific regions. However, all states, regardless of their ranking, need to be vigilant and responsive to the economic pressures that lie ahead.