Proposed deep budget cuts from the Trump Administration and Republicans in Congress could push the D.C. area into a recession, especially if those reductions are enacted.
Terry Clower, director of George Mason University’s Center for Regional Analysis, told WTOP the region is not in a recession yet, but what happens in the next several months will determine how severe the economic downturn is and how long it will last. The center Clower leads tracks economic activity in the D.C. region
“If the actions that have been taken so far by the Trump administration and DOGE are actually implemented as they have been done, it is undoubted that we will have a recession in the D.C. area,” Clower said.
“Already we have substantial office vacancy in the region, even coming into all of this so and that has implication, of course, for tax revenues for locality so at a time when they may need to be offering higher levels of services to their constituents, because of the economic disruption, they’re going to have less revenue to do it with.”
Clower said it’s not just thousands of federal workers potentially losing their jobs, but contractors and others that do business with the federal government as they face cutbacks.
“Then you have the general business uncertainty associated with the tariffs and all the other things they are doing,” he said. “It’s a lot of things happening at one time.”
In April, D.C.’s coveted triple-A bond rating was downgraded by Moody’s to Aa1. In its report, the rating agency cited the Trump administration’s “substantial cuts to the federal workforce” and the city’s declining commercial real estate market.
The downgrade makes it more expensive for the nation’s capital to borrow money, potentially costing taxpayers millions per year.
While unemployment remains relatively low, several areas have seen unemployment tick upward.
Prince George’s County, Maryland, saw its unemployment rate increase from 3.5% in March, compared with 2.2% last March. Maryland’s statewide unemployment rate held steady in March at 3%, according to the Labor Department.
D.C.’s unemployment rate increased to 5.6% in March from 5.4% in February.
Unemployment in Fairfax County, Virginia, increased to 3.2% in March, compared with 2.2% in December.
Virginia’s unemployment rate increased in March by one-tenth of a point to 3.2% from 3.1% in February. However, these latest figures do not reflect the recent budget cuts and federal job reductions.
Clower said the area does have some significant advantages. It has a highly educated workforce, and regional leaders are pushing to diversify the economy, making it less reliant on government spending.
“This region is going to have some really tough times in the next several months as these proposed cuts and potential agency relocations are put into place, having said that we have the basic infrastructure, whether you think about telecommunications data centers, and we have talented individuals living in this region that should allow us to compete,” he said.
“We should be able to effectively compete for the sectors the economy that are going to grow over the next 20 or 30 years, what we’re going to have to do is maybe change the way we approach economic development, to adapt from one that focuses on government contractors who have to locate here because of being close to federal government, to more private sector businesses that can locate anywhere in the country.”
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