Region's Unemployment Rate Falls
Economists Caution That Joblessness May Worsen Next Year

By V. Dion Haynes
Washington Post Staff Writer
Thursday, June 4, 2009

Despite a drop in metropolitan Washington's jobless rate, regional economists told business leaders yesterday that they expect unemployment to worsen next year before subsiding in 2011 with the creation of tens of thousands of new jobs.

Government data released yesterday show that the unemployment rate dropped from 5.9 percent in March to 5.6 percent in April, the second consecutive month it has decreased. But analysts said they expect it to rise about 1.5 percentage points before recovery kicks in.

Because the number of employed people in the labor force is not rising, regional economist Stephen S. Fuller said April's decline is not an indication of recovery but suggests that more unemployed people are not being counted because they have become discouraged and either stopped looking for work or exhausted their jobless claims.

From April 2008 to April 2009, the region lost 30,300 jobs, including 13,000 in retail and 7,000 in leisure and hospitality, wiping out gains in the federal government, procurement, and health and education sectors.

"We will be in recovery, but unemployment still will be going up," Fuller said at the annual meeting of the Greater Washington Initiative, a marketing organization that works to persuade companies to relocate to the region. "We'll probably hit somewhere around 7 percent [unemployment]. We'll have to be prepared for it."

Comparatively, metropolitan Washington is faring much better than most of the nation. The national unemployment rate is 8.6 percent. And 13 of 372 metropolitan areas recorded rates above 15 percent, including El Centro, Calif., which had the highest rate at 26.9 percent.

The federal government and contracting sectors, which represent 33 percent of the region's economy, have protected Washington from the full brunt of the recession and should speed its recovery, Fuller and other analysts said.

Federal spending in the region has risen steadily from $30 billion in 1985 to about $120 billion in 2007. Economists said they expect stimulus dollars as well as hiring associated with overseeing all the new programs aimed at reviving the economy to result in a net gain in employment.

"The stimulus will start taking effect in Washington, and professional and business services will be the leading sector going forward [with an acceleration in hiring], completely reversing job losses in 2011," James Diffley, a group managing director at IHS Global Insight, said in an interview after the meeting. He said he thinks Washington will be the first large metropolitan region to experience employment gains.

Sen. Mark Warner (D-Va.) urged business leaders to consider alternative energy for job creation.

"There is no part of the country that has put a stake in the ground and said, 'We're going to be the next-generation energy creator capital of the world,' " he said.

Fuller, director of the Center for Regional Analysis at George Mason University, said he thinks the region's unemployment rate will begin creeping up during the summer and will reach 6 percent by fall. He projects the rate will reach 7 percent by July or August 2010.

"In 2011, we'll probably have 42,000 new jobs," he said, adding that he expects the rate to decrease slowly. "It will be another four or five years before we see 4 percent unemployment again."

Still, some will lose out. Joining the ranks of the unemployed in the past year have been real estate agents, lawyers, bankers, local government workers, restaurant workers and hotel clerks. Some of those jobs may not be coming back.

"The new jobs will require new skills," Fuller said. "Some workers will retrain and get new work . . . Many workers will give up."

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