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New York (CNN) Moody’s Analytics warns of devastating impact on U.S. jobs if the U.S. defaults for a long time as Washington leaders fail to make progress on debt ceiling deal .
Treasury Secretary Janet Yellen predicts that the U.S. could run out of cash and special measures to pay bills as early as early June if Congress doesn’t take action.
Most states will be “heavily hit” by debt ceiling violations, according to forecasts released Wednesday by Moody’s, but the economic pain will vary by state. It would disproportionately hit states with many jobs that depend on US funding. This includes Washington, DC, as well as states near or dependent on federal agencies such as national laboratories and military bases such as Alaska, Hawaii, and New Mexico.
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In Florida, Ohio and Pennsylvania, several months of debt ceiling violations are also likely to result in the loss of hundreds of thousands of jobs each, the economic research group found.
Analysis shows other widespread damage. Unemployment rates will soar to near double digits in the District of Columbia (8.9%), California (8.7%) and Ohio (9.5%). Michigan’s unemployment rate will reach 10.8% from today’s 4.1%.
Other states that will feel a significant impact are states dependent on federal spending and aerospace, such as Virginia, Connecticut, Kansas and Washington.
Moody’s said states that rely on tourism such as Arizona, Florida and Nevada, and states that rely on auto manufacturing such as Michigan and South Carolina, will eventually experience “sharp” job losses. .
Moody’s estimates that some large states could lose hundreds of thousands of jobs each if debt ceiling violations persist. California he could lose 841,600. Texas he could lose 561,700. The report predicts Florida will lose 474,700, New York 398,300, and Ohio, Pennsylvania, and Georgia each more than 200,000.
“Real Threat”
In its report, Moody’s raised the probability of a debt ceiling breach to 10% from the previous 5%.
“What was once unimaginable now looks like a real threat,” wrote Mark Zandy, chief economist at Moody’s Analytics, in a report.
Violation is not the same as default.
In an email to CNN, Zandi explained that a breach occurs when the Treasury fails to pay its creditors on time.
A default will only occur if the Treasury fails to pay its debts on time, Zandi said.
In the report, Zandi said that in the event of a breach, “even prolonged standoffs are no longer likely to be zero,” but “are much more likely to be short-lived than long-term.” ‘ he wrote.
The new warning from Moody’s comes a day after Tuesday’s meeting between President Joe Biden and congressional leaders ended without any progress on the debt ceiling deal.
Zandi said financial markets were starting to show signs of concern, but for the most part, investors “looked largely unperturbed” by the estimates. Deadline June 1st.
“The longer it takes financial markets to react, the more likely market turmoil will be. Lawmakers will need to come to an agreement on what it takes to generate political will. ”
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