Why the D.C. area economy feels so lousy, in charts

Washington is largely a one-industry town, with the federal government and the contractors that serve it providing the lion’s share of fuel for the local economy.

You’ve heard, of course, that our dependency on the federal government provided some insulation during the recession as the government continued to spend while the private sector hemorrhaged jobs. Now, five years out from the official end of the recession, being a one-industry town is not much of an asset for the Washington region. Job growth here is stagnant, even as many other metropolitan areas are seeing a much different picture.

Data tell this story better than words. Let’s start with these two charts, which show year-over-year job gains or losses for the region’s 15 largest metropolitan areas. (The data comes from the Labor Department and was compiled by the Center for Regional Analysis at George Mason University).  The graphs below cover the depths of the Great Recession and its immediate aftermath.  You can see that the Washington region held up relatively well during that time, losing fewer jobs than any of its counterparts in May 2008-2009 and gaining the most jobs between May 2009-2010:



As the recovery inched along, though, the D.C. area no longer led the nation in job growth.  As other regions saw their housing markets strengthen and private sector businesses becoming less cautious, job growth improved.  The greater Washington region fell to the middle of the pack, which you can see in three charts below:




Now, let’s examine the most recent data available on metropolitan area job growth.  The Washington region added just 6,000 jobs, and as the chart below illustrates clearly, that gain was paltry compared to what was seen in other major metro areas:


You might point out that New York, for example, is a much larger labor market, and so it makes sense that their job growth might trump Washington’s.  But metro areas such as Houston, Dallas, Miami and Atlanta are close in size to us, and their growth is trouncing ours.

Stephen Fuller, the economist who directs the Center for Regional Analysis at George Mason University,  attributes the chasm to the lack of diversity in the Washington area economy.  At a time when the federal government is tightening its belt, our economy has few other places to turn for job growth.

“We don’t have that market matrix that you find in other places,” Fuller said. “So when the core slows down, it sends ripples through the rest of the economy.”

Another economist, Anirban Basu of Sage Policy Group, said that the local economy’s reliance on government spending will continue to create drag on the labor market.

“For the most part, one would expect that Washington, D.C., will continue to be an under-performer in terms of growth,” Basu said.

Why does our performance relative to other metro areas matter?  Because it could affect our ability to attract and retain new residents if workers see more opportunity elsewhere.

There are some signs that the Washington region is cultivating a more diverse jobs base.  Technology companies at start-up hubs such as 1776 are largely working on consumer-oriented or business-to-business products and services; many contracting firms and consultancies are looking to beef up their commercial divisions.   But even if these efforts are to succeed, it is likely that it will take some time for them to become major job creators for the region.

So, at least for the near term, it’s likely that the Washington area will continue to be something of an economic laggard.

 

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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