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

"As the stimulus fades, the growth in the economy will slow," said Mark M. Zandi, chief economist of Economy.com. He calculated that government fiscal and monetary policy contributed a combined 3.4 percent to the nation's economic growth last year but will contribute only 1.7 percent to growth this year.

Economic theory holds that all stimulus helps the economy, leading businesses to expand on their own even after the stimulus goes away. Economists generally think that is happening. But because industries dependent on government stimulus are such a large part of the Washington area economy, the region may benefit less from a private-sector expansion than most places.

Stephen S. Fuller, who studies the region's economy at George Mason University, predicts that government spending will increase at a slower pace this year, and as a result the Washington area economy will grow 4 percent, compared with 4.7 percent nationwide. He predicts a healthy but not extraordinary increase of 50,000 local jobs in 2004.

McLean-based Booz Allen, which has 9,400 employees in the Washington area, is likely to be part of that growth as one of the mainstays of Washington's professional and business services industry, the number two source of local employment behind the government itself. A year ago, the firm planned to hire 2,150 more people in the ensuing 12 months. Instead, it brought on 3,500 to fulfill such projects as advising the Army on its personnel management systems and helping the National Institute of Child Health and Human Development manage its large-scale computer systems. Both projects are part of a wide effort to apply private-sector technology know-how to government problems.

Booz Allen has more work than it can handle, Shrader said. "We have a backlog of business at this point. We're only limited by the time it takes to bring good people through the door."

Shrader is confident that the company will be able to continue its pace of expansion, adding business and staff members at 20 percent a year. But others see harder times on the horizon for the government technology sector. Christopher F. Penny, an analyst who tracks government technology contractors for investment firm Friedman, Billings, Ramsey Group Inc., argues that many modernization projects are now being completed, and that with the huge federal budget deficit there will be less money available for new projects.

Penny expects government spending on information technology to be up 4 percent in the federal fiscal year that begins Oct. 1, having grown an average of 7 to 8 percent in the past several years. He expects no net gain in tech spending in the 2006 budget year.

Fuller expects an 8 percent increase in local federal procurement of all varieties, not just technology, this year, compared with a 15 percent gain in 2002.

If federal spending in the region does slow, one open question is whether the region's private sector is large enough to make up the difference. After a two-year slump, Booz Allen's commercial consulting practice is expanding again. But in the Washington area, only a small portion of Booz Allen employees at any given time are working for private clients, though the firm would not give an exact number. And, Shrader said, the private-sector consulting it does out of Washington is generally for companies elsewhere.

The role of federal spending in the region gets lots of attention, but the nation's monetary policy had no less influence on the local economy in the past year. As the nation lumbered into a recession in 2001, the Fed began slashing interest rates. The flood of cheap money drove down mortgage and auto-loan rates, both of which helped drive Washington area job growth.