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Health care drives job growth in the Washington area, as contracting pulls back

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For decades, the health of the Washington area’s job market has rested primarily on hiring in its chief industry: the federal government and the contractors that serve it.

But not in 2012.

As government hiring faltered and contracting spending tightened, the health-care industry has emerged as the chief driver of the region’s job growth.

The shift could be seen in the hiring patterns of some of the region’s largest employers: Major contracting firms Lockheed Martin, Northrop Grumman, General Dynamics and Computer Sciences Corp. shed a combined 5,104 local jobs last year as they girded themselves for tighter government spending. The federal government cut 4,200 local positions.

Meanwhile, some of the biggest names in local health care added jobs on a large scale: Northern Virginia’s Inova Health System added about 1,000 positions in 2012. Children’s National Medical Center in the District expanded its workforce by the equivalent of 349 full-time workers. In nursing roles alone, MedStar Washington Hospital Center added 200 positions in the past 18 months.

The strength in health-care hiring was critical in propelling the region’s overall economic growth and offsetting the pullback by the government and its contractors. In fact, the sector added more jobs than any other in the Washington area, helping to bring the region’s unemployment rate down from 5.5 percent to 5.3 percent.

The health sector has been flourishing nationwide as the massive baby-boom generation ages and spends more on care. Demand is likely to surge even higher as the Affordable Care Act extends health insurance to millions of Americans who did not have it.

It’s a trend that has mixed long-term implications for the local economy: The rise of the health-care industry in this region signals that its job market is becoming more diverse. Although the contracting business probably will continue to be the bedrock of the Washington area’s economy, health care’s recent strength reduces the region’s dependence on that industry.

The new jobs, however, tend to pay less than the contracting positions the region is losing. And because many of these jobs are centered on providing services rather than creating goods, their contribution to the overall economy can be less certain. Concerns about the rising costs of health care have put pressure on the people-heavy industry in the past to cut back, often at the expense of jobs.

Steady growth

The education and health services sector has been growing steadily in the Washington region since 2004 and now employs about the same number of people here as the federal government. It employs more than half as many people as the professional services industry.

The growth shows little sign of slowing. The sector is forecast to increase more than 10 percent by 2017, according to a January projection made by economist Stephen S. Fuller of the Center for Regional Analysis at George Mason University.

The number might be higher if not for a dearth of skilled workers.

“The potential for growth remains stronger than what we will actually be able to realize because of the shortage of workers,” Fuller said.

The growth at Inova last year was largely a result of a major initiative to overhaul its medical records program, a shift that exemplifies how new technologies are creating job opportunities in the health-care field.

Rachelle Santo Domingo was hired by Inova last summer after completing her nursing degree at Old Dominion University. She had two job offers upon graduating, but ultimately accepted a position at Inova working as a computer “super user” in the rec­ords program. The job is part of a fast-growing field known as “nursing informatics,” which aims to bring together clinical knowledge with information technology skills.

She recently began participating in the hospital system’s training program to become an intensive-care nurse, a specialization that would bring her back to bedside work.

“Compared to all the other careers I dabbled in, health care is the one where you can not only move vertically but laterally,” Santo Domingo said.

In addition to the new jobs it created last year, Inova hired about 3,500 workers in anticipation of forthcoming retirements or to backfill vacated positions. The total of 4,501 new hires is more than the company has ever had in a single year.

As Inova looks to attract talent, the hospital system has found it can be especially difficult to find candidates for specialized roles such as operating-room nurses or neonatal intensive-care nurses.

To keep up with demand for these and other positions, the company is taking on more new graduates such as Santo Domingo and devoting more resources to training.

Obstacles to hiring

MedStar Washington Hospital Center is another institution that has been forced to build a talent pipeline from within as heightened demand for health-care workers made experienced ones hard to find.

Dennis Hoban, the senior director of recruitment services, said a lack of “talent mobility” has presented a key obstacle to hiring.

Because of the Washington region’s relatively high housing prices and cost of living, “attempting to hire people from outside the area can be particularly difficult with sticker shock,” he said.

Some smaller companies such as home health-care agencies are also growing their payrolls, a move that will equip them to serve the rising tide of aging adults seeking care. Hughes­ville-based Chesapeake-Potomac Home Health Agency said it has six job openings for clinicians. The small agency employs only 76 people, but it is looking to hire workers to help deal with an increased volume of patients. It recently added evening hours, which creates the need for more nurses and home health aides.

From November 2011 to November 2012, the education and health services sector added 11,300 jobs in the region, compared with 10,400 in professional services and 6,700 in government. The federal government, a subcategory of government, lost 4,200 jobs during the same period, meaning that overall growth came from state- and municipal-level positions. The Labor Department combines education and health services jobs into one category in its employment data, but economists say that health-care jobs account for the majority of recent hires in this group.

Although the health-care sector played a critical role in the region’s job growth in 2012, it’s uncertain whether it will continue to be as central this year.

If the economic recovery gains more traction and if clarity is achieved on the federal budget, economists say, hiring could pick up significantly in the Washington area’s professional services industry. Although the health-care industry is expected to continue to add jobs steadily this year, a resurgence in professional-services hiring could mean that health care is a smaller building block of the region’s job growth, rather than a cornerstone.

Even though a boom in the health-care industry has resulted in more jobs, the ripple effects of that growth aren’t necessarily an accelerant to the economy.

“To the extent that people are spending more on health care, it means they have less left over to spend on other items,” said Anirban Basu, chief executive of Sage Policy Group, an economic consulting firm in Baltimore.

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