Many federal contractors in Northern Virginia have been paring back, said Gino Antonelli, founder and chief operating officer of Spear, a Vienna-based company that provides information technology services to the government.
“A lot of large organizations are having to cut their overhead,” he said. “It means folks are losing positions. It’s been a progressive annual decline — 2012 was worse than 2011.”
Many people who have lost jobs are support staff — such as maintenance employees — whose work cannot be billed directly to the government, Antonelli said. Often, the cuts have led to less work for subcontractors, he added.
Michael Cassidy, president of the Commonwealth Institute for Fiscal Analysis in Richmond, said federal spending in Virginia has more than doubled since 2000.
“When you see retrenchment going on at the federal level, you’re starting to see how disproportionately it impacts a state like Virginia,” he said.
Erosion of high-paying jobs
Fuller said the economy in Northern Virginia, in particular, is undergoing a structural change. Jobs that pay higher salaries were growing through the recession even as the rest of the nation faltered. But federal spending peaked in 2010. Since then, Fuller said, good-paying jobs have been eroding while there has been growth in lower-paying jobs in the hospitality, retail, health and education sectors. And a growing number of older people have retired, replaced by employees with lower salaries.
Fewer high-paying jobs and more low-paying jobs add up to a lower median household income.
“Our bread-and-butter sectors have been pulled back,” Fuller said. “It isn’t too hard to move that middle point if you just cut the top off.”
Vinod Agarwal, an Old Dominion University economist who analyzes the Hampton Roads economy, said squabbling between Congress and the White House created a climate of uncertainty that prompted businesses and individuals to trim spending in 2012.
“It’s not merely what actually happens,” he said, citing the way the sequestration deadline kept getting delayed and modified. “It’s the uncertainty it creates in the minds of businesses. They can’t hire people, they can’t plan anything, because they don’t know what will happen. People who can’t plan their spending can’t plan their lives. If they’re afraid they’re going to lose their jobs, they don’t spend money.”
The debt-ceiling debate in Washington strikes Agarwal as a similar situation, with a possible government shutdown looming.
“The uncertainty created at the federal level in the last three years has not helped this economy,” he said. “Right now, if you see what’s happening to the fiscal budget for 2014 and the debt-ceiling business, I say, ‘Here we go again.’ ”