D.C. Region Job Market Has Look Of a Boom

Government Policy, Spending Give Boost

To find enough new workers for all its building projects, Bozzuto Construction Co. had to hire a headhunter. Consulting firm Booz Allen Hamilton Inc. is wooing MBA students with fancy dinners and cocktail parties. Pohanka Automotive Group created a new position just to fill all the other vacant jobs.

After three years of standing still, the Washington region's job market is hopping, adding 60,600 jobs in the year ended in March, on pace with the boom years of 1997 and 1998. "This year everyone is starting to feel good again," said Ralph W. Shrader, chief executive of Booz Allen, which has been on a hiring binge.

What is different this time is the source of the new jobs. Instead of a roaring expansion driven by businesses, 4 out of 5 local jobs being created can be attributed to extremely low interest rates, created by government stimulus, and booming government spending.

The Federal Reserve Board lowered the federal funds rate to 1 percent last June, its lowest level since 1958, a key factor last year in booming sales of houses and autos in the Washington area.

Federal spending in the region rose by 7 percent in 2003, pumping an extra $6.1 billion into the local economy, driving hiring by government contractors while a tax cut put more money in the hands of local consumers.

Business and professional services firms, a sector that is dominated in the Washington area by federal contractors, added 21,400 jobs in the past year.

Retailers added 10,800 jobs, as they benefited from the tax cuts and mortgage refinancing that gave people more money to spend. Construction companies added 8,000 positions, mostly because of the interest-rate induced housing boom. Government added 8,700 jobs.

Together, those sectors account for nearly 49,000 of the new jobs, or 81 percent of the total. Employment was little changed in most local industries not directly influenced by fiscal or monetary stimulus, such as health and education, telecommunications and other information businesses, wholesaling and distribution, and manufacturing.

"The job growth we're seeing in Washington is a function of all the stimulus in the economy," said Charles W. McMillion, president of District-based economic consultancy MBG Information Services.

Reliance on government tax and spending policies and Federal Reserve policy on interest rates can create risks for the Washington area economy. Although many executives say they are confident in the local economy and expect to continue hiring at a steady clip, some caution that if the federal stimulus were to change -- if federal spending slowed, or interest rates rose -- they might have to pull back.