Public Finance Downgrades to Outpace Upgrades, Probably for Years

08/13/2020

  • For the first time in 21 weeks, new unemployment claims fell below 1 million, coming in at 963,000 according to data released today by the U.S. Labor Department.

  • Today, the National League of Cities published a report forecasting tax revenues could fall by as much as 13% in FY2021.

  • S&P Global public finance “Negative” outlooks and “CreditWatch Negative” assignments are concentrated in revenue sectors like transportation and higher-ed, for now.

  • We believe public finance downgrades will outpace upgrades in 2020 and could for several years. The number of downgrades is more likely to peak faster this time compared to the wake of the Great Recession, perhaps in 2021 or 2022.

  • Moody’s second quarter of 2020 data already shows downgrades are beginning to outpace upgrades.

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