Washington job market is lagging the rest of the country, economist says

The Washington region continues to struggle as federal spending cuts and a lackluster job market take its toll on the local economy, according to the latest outlook from Stephen Fuller, an economist at George Mason University.

“This dependence [on federal spending], which served the economy so well historically is now an albatross,” Fuller said, during a presentation at Capital One’s McLean headquarters Thursday morning.

Although the Washington area weathered the recession much better than the rest of the country, Fuller says the region has been lagging the nation in recent years as the federal government continues to pull back on spending.

“Everybody is outperforming us except for Detroit,” Fuller said. “We’re at the bottom of the list.”

Between July 2013 and July 2014, the District added 19,800 jobs, resulting in a 0.6 percent growth rate. Dallas, by means of comparison, added about 120,000 jobs, while New York created more than 155,000.

“We’re falling behind,” Fuller said. “The nation is doing better than we are.”

The jobs that are being created here — typically low-wage retail and hospitality positions — are less valuable to the broader economy than white-collar jobs in the federal government and professional and business services, Fuller said.

“Those are our biggest sectors — 35 percent of our economy is in the $100,000-plus [salary] range, and we’re not adding very many of those jobs anymore,” Fuller said.

He added that each hospitality job adds about $43,000 to the region’s gross domestic product — less than half the $92,000 each construction job brings in. (Jobs in federal government and professional and business services tend to bring in $142,000 and $158,000, respectively, he said.)

“If we add up all the private sector jobs that we lost and what their value added was, we’re down $27.2 billion,” Fuller said. “How do you grow an economy when pieces of it have just disappeared?”

Only half of the 96,000 construction jobs lost during the recession have resurfaced, Fuller said.

“We keep building more buildings, which makes us think everything’s good,” Fuller said, adding the new projects are largely luiring tenants away from existing developments, pushing up vacancies. “This musical chairs gives us the sense that we’re just fine.”

Meanwhile, Virginia has added back only 2,000 of the 62,000 manufacturing jobs it lost during the downturn.

“We’re running at half-speed at this point,” Fuller said. “There’s nothing driving growth.”

For the year, Fuller says he expects the region to add about 40,000 jobs. But, he warned, the Washington area must find a way to make up for lost government spending by attracting large private companies with high-paying jobs.

“What’s the next driver?,” Fuller asked. “If it’s not the federal government, who’s going to pick up the slack?”

Abha Bhattarai covers local retail, hospitality and banking for The Washington Post. She has previously written for The New York Times, The Wall Street Journal, Reuters and the St. Petersburg (Fla.) Times.

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