The 10 States Most in Danger of Entering Stagflation in 2025

New analysis from National Business Capital finds California most at risk, Pacific states leading the way, and households nationwide struggling with bills

HAUPPAUGE, N.Y., Aug. 27, 2025 /PRNewswire/ -- California is the state most in danger of entering stagflation in 2025, according to new research from National Business Capital.  Stagflation, a mix of high inflation, weak job growth, and a slowing economy which hasn't been seen in the U.S. since the 1970s, is showing up most strongly in Pacific states, with the Northeast not far behind.

Researchers at the business lending platform found Pacific states bear the highest stagflationary risk, followed by the Northeast. Blue states are weighed down by higher inflation, while red states while red states are experiencing declining growth.

The study reveals Americans are already feeling the squeeze. More than one in three households across the U.S. say they struggle to pay bills; Kentucky households report a staggering 46%. Blue states dominate the 10 most at-risk list due to high housing and energy costs, while red states face greater financial stress from slower GDP growth, lower productivity, and thinner paychecks.

The full study is available HERE:

Key Findings

• California is the most in danger of stagflation: The Golden State ranked #1 due to high shelter costs, steep utility bills, and high underemployment. Connecticut ranked 2nd, while Kentucky ranked 3rd for weak GDP growth and low salaries.
• Blue states show stronger stagflationary signals overall: Blue states averaged a stagflationary score of 53.4 — 6.5% higher than red states at 50.1. They also had higher inflation in shelter and energy costs and higher underemployment (7.5% vs. 6.8%). Blue states made up 6 of the 10 most at-risk states.
• Red states under heavier financial strain: While inflation runs lower in red states, households there are more stretched. About 38% report difficulty paying bills, compared to 34% in blue states. Red states also had bigger GDP losses in Q1 2025 (-1.14% vs. -0.83%) and slower productivity growth (2% vs. 2.8%).
• Pacific states lead the risk rankings by region: The Pacific region had the highest average stagflation score at 60.6, well above the Northeast (53.1), Midwest (50.5), South (49.2), and Mountain (48.45).
• Household budgets under pressure nationwide: On average, 36.3% of U.S. households say they're struggling to pay monthly bills. Minnesota households reported the least stress (27.4%), while Kentucky reported the most (45.6%).

"Let's be clear: the economy can go in any direction from here," says Joe Camberato, CEO, National Business Capital. "However, this report shows if stagflation hits, the rest of 2025 could look very bleak."

The 10 States Most At Risk Of Stagflation

1.  California Score (out of 100): 69.0 (1st)
2.  Connecticut Score: 64.3 (2nd)
3.  Kentucky Score: 64.1 (3rd)
4.  Alaska Score: 63.5 (4th)
5.  Florida Score: 62.7 (5th)
6.  Oregon Score: 61.8 (6th, tied)
6.  New York Score: 61.8 (6th, tied)
8.  Arizona Score: 61.2 (8th)
9.  New Jersey Score:  60.6 (9th)
10.Illinois Score:  59.8 (10th)

The 10 States Least At Risk Of Stagflation

41. Virginia (Score: 45.1 out of 100):
42. Alabama (43.9, tied)
42. Vermont (43.9, tied)
44. South Carolina (42.2)
45. Minnesota (41.2)
46. North Carolina (40.8)
47. Arkansas (39.8)
48. Utah (37.8)
49. West Virginia (36.3)
50. Montana (35.1)

The 10 metrics, each weighted 10%, are:

• % Change In Personal Expenditures 
• % Change In Personal Income
• Implicit Deflator
• Regional CPI
• % Households Reporting Difficulty Paying Bills
• Credit Card Delinquency Rate
• Change In Real GDP
• U6 Unemployment Rate
• Job Opening Rate
• Change In Labor Productivity

About National Business Capital:
National Business Capital a pioneer of non-bank financing, provides non-asset-backed financing solutions ranging from $250K to $10MM. Since 2007, the company has financed billions of dollars while innovating how business leaders access growth capital. The team's approach to each transaction allows clients to maximize financing options.

For more information on this list and this topic, please contact Sarah Johnson.

CONTACT                                                                                                                              
Sarah Johnson
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SOURCE National Business Capital