Washington is at risk of a recession as hiring stalls

Washington state is among 22 states, representing one-third of U.S. GDP, identified by Moody's Analytics chief economist Mark Zandi as being in or near recession, driven by national factors such as tariffs and slowing immigration. The state experienced a loss of 13,600 jobs in August and a year-over-year decline of 5,400 jobs, with its underemployment rate at 8.7% exceeding the national average of 7.8%. Paul Turek of the state Employment Security Department notes a 'no-hire, no-fire' situation as employers remain cautious amid political uncertainty and weak business investment, particularly in tech and aerospace, though future growth may hinge on private investment in data centers and advanced manufacturing for the AI boom.

Analysis

Washington state is among 22 states, comprising one-third of U.S. GDP, identified by Moody's Analytics chief economist Mark Zandi as being in or near recession. This assessment is supported by an August job loss of 13,600 and a year-over-year decline of 5,400 jobs, with the state's underemployment rate at 8.7% exceeding the national 7.8%.

The slowdown is driven by national factors including tariffs, slowing immigration, and federal job cuts, fostering a "no-hire, no-fire" environment. State economist Paul Turek notes employer caution due to political uncertainty and weak business investment, impacting hiring across sectors.

Sectoral weakness is evident in tech, information services, aerospace, and manufacturing layoffs, partially mitigated by healthcare and education hiring. While future growth may depend on private investment in AI-related data centers and advanced manufacturing, national private-sector data indicating September job losses highlights ongoing economic uncertainty.

Key Decisions for Investors

• Investors should assess portfolio exposure to states facing recessionary pressures, particularly those with declining employment and elevated underemployment.
• Consider re-evaluating growth-sensitive sectors like technology and manufacturing, which are experiencing layoffs, while potentially favoring more resilient sectors such as healthcare and education.
• Monitor national economic data and policy developments closely, given the current uncertainty and the potential for future growth drivers like AI infrastructure investment.