Michigan among states most vulnerable to economic effects of war in Ukraine

“The odds are much better that even we actually experience a recession in this scenario,” said chief economist Mark Zandi.

Some states would fare better than others, according to analysis of the effects of a military conflict that drags on into next year.

Energy producers such as North Dakota and Alaska stand out in this regard, with a long dispute pushing oil prices to $150 a barrel as Russia cuts Europe’s energy supply. On the other hand, Alabama and Mississippi — the two states most dependent on cars and driving — would suffer disproportionately from an energy shock.

The analysis, by Moody’s Analytics Senior Regional Economist Adam Kamins, shows that a protracted war would harm US states and localities in a variety of ways, some of which are not immediately apparent.

  • Prices for high-end condominiums in New York and South Florida could fall as Russian oligarchs are shut out of those markets.
  • Farmers would see mixed effects. Some would benefit from higher prices for wheat and maize as supplies from Ukraine – Europe’s breadbasket – are tight. They would, however, have to pay for fertilizer, a key export from the region.
  • Livestock producers would end up spending more on feed. Higher barley prices would affect beer makers in and around St. Louis.
  • States most exposed to financial markets, such as New York and Connecticut, are reportedly under pressure as prolonged hostilities after a Russian occupation of Ukraine heighten uncertainty and drive stock prices further down.
  • Washington and South Carolina, the two states that export the most proportionally to Russia and Ukraine, would be penalized. Affected shipments would likely include transportation equipment from Washington and auto parts from South Carolina.

A computer model from Moody’s Analytics suggests that the United States as a whole would be able to avoid a recession, even if military hostilities are prolonged. But Zandi has doubts.

“The models are very good in typical times,” he said. In very stressed and very unusual environments, “the world becomes what I would call non-linear and things go off the rails”.

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