Is Virginia heading for a recession? State leaders say not yet
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The Youngkin administration and the Federal Reserve Bank of Richmond are pushing back on a recent analysis saying Virginia is one of 22 states and districts in, or at risk of, a recession.
Why it matters: Virginia isn't immune to a downturn, but local economists and state leaders tell Axios they're not seeing one yet — even as inflation fatigue, layoffs and a government shutdown make the "recession risk" narrative sound believable to many.
The big picture: The analysis from Mark Zandi, chief economist at Moody's Analytics, tied states' economic troubles at the end of August to slowing immigration, increasing tariffs and federal job cuts, reports Axios' Emily Peck.
- Zandi's index, modeled after how the National Bureau of Economic Research determines recessions, also used jobs, income and production data to identify the most at-risk states.
- Virginia being so tightly bound to the federal government makes the federal factor especially relevant, said Sonya Waddell, vice president and economist at the nonpartisan Richmond Fed.
Yes, but: Virginia's economy isn't showing the kind of weakness — like a sustained trend of unemployment claims, widespread layoffs and impact to state revenue — that signals a downturn, Waddell told Axios earlier this month.
- Virginia Secretary of Finance Stephen Cummings called Zandi's assessment "flawed," saying it "undervalues the state's inherent economic resilience."
- For Cummings, that includes $140 billion in development projects promising tens of thousands of jobs and a population boom aiding Virginia's growth.
Zoom in: Both Waddell and Cummings also pointed to how the state is still adding jobs and that, despite the unemployment rate rising to 3.6% this year, it remains lower than the national average.
By the numbers: Figures from Virginia Works released Thursday show nearly 4,400 new unemployment claims in the past week (the majority in manufacturing), but Waddell said the state isn't where it was in 2008 or 2020.
- In early 2020, over 360,000 Virginians filed unemployment claims within the span of three weeks, per the Richmond Fed.
- In 2008, Virginia's unemployment peaked at 5.4% in December. In April 2020, it hit nearly 12%.
Reality check: Both Moody's analysis and the latest unemployment rate data are from August, offering a snapshot before the government shutdown furloughed federal workers and led to mass layoffs.
- The White House last week threatened to fire more than 10,000 federal workers during the shutdown.
- But Waddell told Axios that the shutdown's impact on Virginia might not be clear until a month or two after it ends.
- Even then, it'll be hard to "disentangle" it from other ongoing government impacts, she says.
What we're watching: Across the last 11 recessions, unemployment stayed flat in the year before a downturn, then spiked sharply once it began, per a Richmond Fed report this week.
- Virginia's economy is holding steady for now, but the next few months could be the real test.
Go deeper: How to measure the economy when the government isn't doing it