Washington area lags other regions in pace of economic recovery

December 2, 2012

The region’s unemployment rate is creeping down and the economy is slowly growing, but a new study shows the Washington metropolitan area is lagging its counterparts around the country in its pace of economic recovery.

The Washington area’s economic performance ranked 56th out of 76 in a study released Friday by the Brookings Institution, a nonprofit research organization.

The region’s relatively low position on the list reflects the complex dynamics of its economy. Its gross domestic product per capita of $71,536 is among the highest in the nation, but that measure has declined since last year. And while the metropolitan area’s 5.3 percent unemployment rate is well below the national rate of 7.9 percent, jobs are not being added as quickly here as they are in other areas in the United States.

The Washington area’s GDP per capita, a figure that is often used to approximate standard of living, fell by 0.3 percent between 2011 and 2012, according to the study.

The fact that this figure was already quite high might help explain why it didn’t see significant growth in 2012.

“You have a higher starting per capita GDP, it’s going to be harder to improve on that,” said James Bohnaker, associate economist with Moody’s Analytics.

Another reason for the decline in this metric, experts said, is that population growth is outpacing GDP growth in the Washington region.

“People have been moving here during the early stages of the recovery because Washington has been a good place to be able to find work,” said Stephen S. Fuller, director of the Center for Regional Analysis at George Mason University.

Between 2009 and 2010, the Washington region experienced higher domestic migration than at any time since 1988. Many of the people who have relocated here in recent years have been entry-level workers, a fact which Fuller said can weigh on incomes.

“The jobs we’ve been generating aren’t paying as much as the jobs that are being vacated,” Fuller said.

‘Counter cyclical’ economy

The rhythms of the Washington area job market are sometimes different than those experienced in the rest of the country, in large part because the region is so dependent on the ebb and flow of the federal government.

“The federal government is counter cyclical in the recovery,” Fuller said.

The government often ramps up its spending and hiring in times of economic trouble, while the private sector typically grows more cautious. When a recovery takes hold, it can crimp the need for the government to add jobs. Indeed, as a slow recovery has chugged along this year, the federal government has shed jobs in the Washington area. That sector has lost 4,600 jobs here between October 2011 and October 2012.

“The federal government is really the main weight on the economy,” Bohnaker said.

Still, Emilia Istrate, one of the authors of the Brookings study, said two key distinctions make the Washington region well-equipped to weather its slowdown in growth.

It is one of the nation’s most highly educated areas, with 53 percent of adults holding a college degree, compared to 36 percent nationally.

And the professional services sector, long the backbone of the regional economy, is one that the study shows is conducive to long-term growth.

Istrate said that when researchers looked at the period from 2000 to 2010, metropolitan areas that have a higher standard of living are ones in which professional services is a dominant industry.

“These industries are great for a metro [area], but at the same time they need fuel. And the fuel are highly-skilled people,” Istrate said.

The area that ranked the highest on the economic performance list was Houston, where the pace of job growth was triple the pace of growth in the Washington area. San Jose and Salt Lake City held the second and third spots. Albuquerque had the lowest ranking.

213

D.C.’s rank among 300 worldwide metro regions in a Brookings Institution study of trends in per capita GDP and employment.

56

D.C.’s rank among the 76 U.S. metro regions on the list.

-0.3%

Change in the region’s per capita GDP from 2011 to 2012.

1.1%

Change in the region’s employment from 2011 to 2012.

Sarah Halzack is The Washington Post's national retail reporter. She has previously covered the local job market and the business of talent and hiring. She has also served as a Web producer for business and economic news.
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