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Martin Dasko

7 States Most at Risk If the US Enters a Stagflation Era

Dzmitry Dzemidovich / Getty Images/iStockphoto

JPMorgan Chase CEO Jamie Dimon cautioned that it’s possible that the United States could fall into a period of stagflation, as reported by CNN. Stagflation is a situation where an economy experiences a period of high inflation and high unemployment, accompanied with slow economic growth. This combination of negative economic factors is a unique scenario that could hurt every state and individual differently. With uncertainty surrounding tariffs and other policies potentially leading to downward pressure on growth, this situation can’t be ruled out as a risk. 

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We consulted with financial experts to determine which states would be most severely impacted if the U.S. were to enter a stagflation era, based on job trends, inflation data and other relevant factors

States Most at Risk If the US Enters a Stagflation Era

“States where prices are rising and jobs are becoming scarcer are most susceptible to stagflation,” said Carson Simpson, certified financial coach and expert contributor at Casinos Analyzer. These are the seven states that could be most at risk.

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California

Simpson pointed out that California has a high cost of living but a limited number of high-paying jobs. Chris Motola, financial analyst with NationalBusinessCapital.com, said job openings are lagging in California and that the state currently faces an underemployment issue. To make matters worse, According to California’s Employment Development Department, the state’s unemployment rate went up 0.1% to 5.4% in June, tying Nevada for the highest unemployment rate in the country as employers lost 6,100 jobs.

New York

The Fiscal Policy Institute explained that New York could already be in a period of stagflation, citing that while the economy has recovered the jobs lost during the pandemic era, the state lags when it comes to the economic growth that the rest of the country has experienced. The U.S. Bureau of Labor Statistics (BLS) data also pointed out that inflation in New York is stickier than the rest of the nation, staying around 4% for the last year, due to the increased housing costs. The BLS’s CPI data for June showed that overall housing prices increased by 5.1% on an annual basis. 

New Jersey

Motola shared that inflation is higher in the Northeast compared to the rest of the country because shelter costs have still been rising in many of its markets. Simpson pointed out that it becomes increasingly difficult for people to keep up with increasing prices if wages remain the same or even decline. If the entire country were to enter a stagflation era, then those already struggling with elevated housing costs could face dire consequences. 

Florida

Motola explained that job openings are down in Florida, which could get worse if the country goes through stagflation. A state economic forecast from TD Bank outlined that hiring is expected to slow down, but as of April, there were 1.1 jobs available per unemployed worker.  

However, experts are concerned that this state could be at risk if the entire country experiences stagflation because many industries rely on consumer spending through travel. Simpson fears that tourism states may see a decline in tourist numbers if the cost of travel rises, but wages don’t. If hotels and restaurants have to cut staff, then this will hurt spending and the overall economy in Florida more than other states.

Kentucky 

Motola stated that Kentucky is somewhat of an outlier in that the problem there is primarily on the wage side of the equation. With historically low wages, according to CommercialAppeal.com residents of Kentucky would be at risk of further issues with stagflation, as they would struggle to keep up with rising expenses. 

Hawaii 

While Hawaii had 26,000 job openings as of April, the concern is that tourism would drop if consumers started spending less money across the U.S. due to concerns over stagflation. Motola added that the problem is that job openings are also lagging and if tourism also drops, then the entire state could have additional financial concerns.

Alaska

Alex Tsepaev, chief strategy officer at B2PRIME Group, said states with less diversified economies (those dependent on federal spending) would be the first to feel stagflation’s push. “The problem is that stagflation, with its usual interest rate hikes, could significantly slow federal spending. This would unevenly impact states like Alaska, where federal dollars make up a large share of state budgets,” he added.

Analysis from the most recent Alaska Economic Trends found that the state’s GDP rose by only 0.4% annually on average from 2015 to 2025, placing it at the bottom, ahead of only North Dakota. 

How Residents Can Prepare 

The harsh reality of stagflation is that high prices can lead to people spending less, which in turn hurts small businesses and the overall economic health of the state. Residents of the states listed on this list may want to exercise extra caution. Motola stressed that stagflation is notoriously challenging to deal with. “Unlike inflationary environments, stagflation carries higher job loss risks,” he added.

Here’s what residents can do to prepare right now.

Start Saving for the Worst-Case Scenario

Motola shared that building up a rainy day fund in a high-interest savings account may not be a bad short-term strategy. You’ll want to start planning ahead because a period of stagflation could lead to lower consumer spending and job cuts across the board. 

Consider Looking for Work in a More Stable Field

The experts agreed that diversifying your income streams through smart investments or side gigs could also be beneficial. Simpson suggested trying to make a career pivot to a more stable field (healthcare, education or utilities). This could be the ideal time to start thinking about a career change.  

Look Into Moving

You’ll also want to consider the cost of living of where you live and try to see if you can choose less expensive areas or states with lower inflation. Even though moving may not be an option for everyone, it’s worth looking into.

While some states initially have more resources and stronger private sectors to help them weather tough times, it’s worth noting that stagflation could impact the entire country and it always helps to be prepared. 

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This article originally appeared on GOBankingRates.com: 7 States Most at Risk If the US Enters a Stagflation Era

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