If the country experiences a recession in the near future, D.C. would not be immune to its effects, but may be safer than other regions from the trends driving the U.S. economy, experts said.
The idea of a recession taking hold by the end of the year was first floated by former Federal Reserve Chairman Alan Greenspan, who said earlier this week that warning signs, such as the stabilization of U.S. profit margins, were appearing.
On Wednesday, the Dow Jones industrial average dropped almost 550 points, likely hurt by a 9 percent decline in Chinese stocks. The Dow rebounded a bit, finishing 415 points or about 3.3 percent down at closing time.
Delta Associates CEO Greg Leisch said economic problems in China could eventually translate into higher long-term interest rates and mortgage rates in the United States.
Still, D.C.’s metro area is better positioned than others to soldier through an economic downturn, Leisch said. He pointed out that the area’s unemployment rate is about 1.5 percent below the national average.
The region also benefits from the fact that one-third of its economic activity comes from the stable federal government. Even so, the metro area is diversified enough that it is not solely dependent on federal spending. A recession could affect D.C.’s housing market. Fairfax expects to see the assessed value of its properties increase by 1 percent this year, after going up a combined 49 percent the last two years, said Fairfax County Development Authority President Jerry Gordon.
“That’s significant for our local budget, since 60 percent of our general fund comes from real estate taxes,” Gordon said.
But the housing market generally has been pretty stable, Greater Washington Initiative Executive Director TimPriest said. The Greater Washington Initiative serves as the marketing arm of the D.C. Board of Trade. Most instances of decline are isolated to specific counties, Priest said.
