Some U.S. markets are more exposed than others to the potential impacts of federal government budget cuts, according to a Chandan Economics analysis.
Not surprisingly, the nation's capital, including Washington, D.C., as well as Arlington and Alexandria, Virginia, stands to be the most affected by federal government job cuts that could cut into residential and office demand. Federal government employees make up 15.2% of the workforce in the D.C. metro area, and housing inventory there already has climbed substantially during the first half of this year. Altos data indicate that housing inventory is up 44.8% year over year, compared with the nationwide average of 32.5%, according to the report.
Although it is potentially the most exposed market to budget cuts, D.C. enjoys an advantageous geographic position in the nation’s Northeast Corridor, home to several growing industries, which could insulate it from the impacts markets beyond the nation’s capital may experience, said Chandan.
Recommended For You
Anchorage, Alaska, for example, ranks just behind Washington in terms of the federal share of employment at 13.2%. With a lack of private employment alternatives for the local workforce, the market faces an elevated risk of demand deterioration in the local property market amid potential government downsizing.
Several other smaller markets are in a similar position to Anchorage, with federal employees making up a significant portion of their local employee base. Honolulu is home to 7.5% of federal employees, while Albequrwue has 7.4% of the nation’s federal employees, Charleston-North Charlston, South Carolina, is home to 6.9% and Oklahoma City has 6.8% of federal employees. Colorado Springs is home to 6.7% of federal employees and Ogden-Clearfield, Utah has 6.6% of the federal workforce.
“While pro-growth elements of the Budget Reconciliation package, poised to enact steep federal budget cuts, could eventually spur private investment in these regions, such investments may take several years to materialize, with local unemployment pressures creating household income constraints in the short term,” said Chandan.
Meanwhile, Baltimore, with 9.8% of the federal workforce, and Virginia Beach, with 7.6% of the federal workforce, both rank in the top five markets in terms of federal jobs as a share of local employment, likely due to their proximity to the nation's capital.
“This proximity can be beneficial if private companies quickly fill the vacuum left behind by federal job cuts in the region, but it could exacerbate local headwinds to property demand if private investments fail to materialize sufficiently,” said Chandan.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
