Unemployment Levels in Area Highest Since the Mid-1990s, Economists Say

By David Nakamura and V. Dion Haynes
Washington Post Staff Writers
Saturday, December 20, 2008

The percentage of people who are unemployed in the District, Maryland and Virginia rose to the highest levels in more than 10 years, exceeding the jobless rate of the last recession, in 2001, experts said yesterday.

Data from the Bureau of Labor released yesterday showed that the District's rate reached 8 percent in November, up from 7.3 percent a month earlier. Maryland's rate increased from 4.9 percent in October to 5.3 percent last month, and Virginia's rose from 4.4 percent to 4.8 percent.

The problem could get worse. D.C. Chief Financial Officer Natwar M. Gandhi projected yesterday that the city's unemployment rate could soar to almost 10 percent by 2010, the highest level in almost three decades.

During the past few months, the mid-Atlantic region has lost thousands of jobs in sectors including construction and retail. Last month, according to analysts, hundreds of workers were laid off from factories in the area, including a Goodyear plant in Danville, Va., and GM and Chrysler plants in Delaware, which employ Maryland residents.

The last time the figures were so poor for the District, Maryland and Virginia was in the mid-1990s, said Scott Hoyt, senior director of Moody's Economy.com.

The data are "confirming that this recession is more severe than the one we saw at the beginning of the decade," Hoyt said.

The Washington area has been "insulated by ties to the federal government," he said. "That can only go so far."

The Washington region was among only four large metropolitan areas where job growth exceeded losses, analysts said. But they predicted that the situation will be reversed next year.

"Virginia still has just a little bit of job growth," said William F. Mezger, chief economist with the Virginia Employment Commission. "It will probably go negative when we go into the new year."

In the District, the bad news came in a city budget briefing by Gandhi, who confirmed a Washington Post report that the city faces a $127 million budget gap this year.

The shortfall, which represents 2.5 percent of the city's $5.3 billion budget in local funds, was caused largely because of declines in the commercial property market related to the credit crisis on Wall Street.

Gandhi also said unemployment would reach 9.8 percent in 2010, the highest percentage since the early 1980s. Robert Ebel, the District's chief economist, said the unemployment rate hovered between 10 and 11 percent in 1982 and 1983. In the 1990s, the highest it reached was 8.8 percent, Ebel said.

D.C. Mayor Adrian M. Fenty (D) declined to address Gandhi's unemployment projections. Of the budget gap, the mayor said: "Our budget will be balanced. . . . Relative to other jurisdictions, the District of Columbia's fiscal standpoint is still very strong."

Maryland officials are wrestling with a $1.9 billion shortfall out of a $14 billion budget, and Virginia's gap has grown to $3 billion in its two-year, $77 billion budget.

The District's budget problems come a month after city leaders closed a $131 million budget gap. But Gandhi called the problem "manageable." The D.C. Council created a $47 million reserve last month, freezing spending on affordable housing, health care and transportation.

Gandhi said he thinks the rest of the shortfall could be made up through a budget surplus from fiscal 2008, which ended Sept. 30. The surplus resulted from government agencies not spending all of their budget. The exact amount of the surplus will not be known until Feb. 1, after an annual financial review by outside auditors is completed, he said.

The revenue problems are projected to worsen in 2010. Gandhi said the city will collect $455 million less in 2010 than he had expected in May. Fenty and his aides are developing the 2010 budget.

Robert Pohlman, executive director of the Coalition for Nonprofit Housing and Economic Development, said he is concerned that the shortfall will lead to cuts in programs that help the poor.

"We hope that there's an adequate public process that allows D.C. residents to express their concerns" before cuts are made, Pohlman said.

The District's commercial property market has been one of the strongest in the country, but the good times ended when credit dried up in the wake of the Wall Street meltdown, Gandhi said. The city will collect $61 million less in business taxes than expected and $44 million less in deed taxes because properties are not changing hands as quickly as projected, he said.

D.C. Council member Jack Evans (D-Ward 2) said city leaders will have to make tough choices as they put together the 2010 budget and must rein in spending for social services, public safety and even schools, which have drawn Fenty's strongest focus as mayor.

"Schools cannot be the sacred cow they've been in the past," Evans said. "They had huge increases even in the last two years. I'm a big supporter of them. But having gone through this in the 1990s, where we discontinued services like trimming trees and trash collection, that's the wrong way to go."

Staff writer Darryl Fears contributed to this report.