New analysis indicates possible recession coming for DC region

Economists say DMV at risk of recession

For decades, the Washington, D.C., region has been considered recession-proof, thanks in large part to the federal government and government contracting. But recent predictions are raising concerns that the local economy may be heading for a downturn.

WASHINGTON - For decades, the Washington, D.C., region has been considered recession-proof, thanks in large part to the federal government and government contracting. 

But recent predictions are raising concerns that the local economy may be heading for a downturn.

What they're saying:

Economists point to a number of contributing factors in Maryland, Virginia and the D.C. A new analysis by Moody’s, the financial services company, highlights federal workforce layoffs, canceled federal contracts, high inflation and interest rates and a slowing housing market as signs of economic trouble.

Virginia, in particular, has recorded the largest number of job losses in the country. Nationally, unemployment in July stood at 4.2 percent—unchanged from a year earlier but up from April’s low of 3.4 percent. 

Economists note that employment, consumer spending, and manufacturing trends are fueling concerns about the outlook.

"Everywhere I look, it feels like everyone’s pulling back a little bit and just trying to be a little more conservative with their own spending, with their own calculus, save a little more, and that can really impact parts of our community," said Lori Bettinger, president of BancAlliance.

Bettinger noted that discretionary spending is shrinking, which is affecting small businesses. 

"Especially restaurants that are dependent on discretionary spending, I think we’re going to see more of those stories come out over the coming months of how it’s not the easiest time to be in particular small business here in the D.C. area."

Dig deeper:

Dr. Terry Clower, an economist at George Mason University, added that "the economy seems to be slowing, and a lot of that is just people just aren’t spending as much because they’re concerned about the future."

Clower also pointed out that despite the challenges, the region still has long-term strengths. 

"We just don’t know what’s coming at us completely yet, but this region has core capabilities. I’m not saying at all that it’s not going to be tough for a while, but we’re still going to be the national capital region. We’re still going to be where people come to do business with the federal government," he said. "Plus, we have the potential for other emerging sectors of the economy."

He cited data centers, artificial intelligence, quantum computing, and space technologies as industries that could bolster the region’s future.

Local perspective:

Still, many local residents say they are already feeling the strain.

"Our lives are really miserable," one shopper in Greenbelt said. 

"Day by day. You gotta take it day by day," another added.

Others shared struggles with disability benefits, fixed incomes, and rising grocery prices. 

"Pretty soon a person on disability won’t have a place to stay," said one resident. "A lot of people have been laid off from their jobs. I know a lot of those people. I’m retired so I’m on a fixed income, but the prices in the grocery store keep going up."

Other shoppers also expressed concern over the federal workforce, saying, "it is kind of worrying for friends and neighbors and of course the whole federal thing is really a big deal around here. I work at NASA Goddard and a lot of my colleagues are taking an early retirement."

Big picture view:

According to Moody’s, the states currently showing the strongest economies include California and Texas.