Millions of jobs at risk due to debt ceiling breaches: Who will bear the brunt first?

The U.S. is nearing a potential default on its debt, which could have devastating economic consequences. In fact, even a short debt ceiling breach of only a week could result in the loss of 1.5 million jobs, according to a March report by Moody’s Analytics. A prolonged violation of around two months would be even worse, with an estimated 8 million jobs lost and the unemployment rate reaching 7.8%.

Experts warn that failure to raise the debt ceiling would cause financial markets to spiral into chaos, raising interest rates and creating even more economic turmoil. And while all workers will feel the effects of a downturn, some will be hit harder than others.

Michelle Holder, a labor economist at John Jay College of Criminal Justice, predicts that construction and manufacturing jobs will be hit first if a debt default occurs. These sectors are most sensitive to shrinking consumer demand and will struggle as people spend less money on big-ticket items like homes and cars.

Black and Hispanic workers, younger and less educated workers, and men will be most affected by job losses in a debt default recession, according to Holder. Moreover, certain states will be hit harder than others, with those most sensitive to a sharp downturn in business, such as Arizona, Florida, South Carolina, and Michigan, facing significant challenges.

Overall, a U.S. debt default would have widespread and long-lasting consequences, affecting not only job losses but also financial markets, interest rates, and economic activity.

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