"The economy of Washington went to pot 18 months ago," said Time Inc. President J. Richard Munro last week. This is one reason why The Washington Star wasn't attracting enough advertising business -- a key factor in Time's decision to close the 128-year-old newspaper on Aug. 7, he said.

But new evidence about the health of Washington's economy, to be made public today, tells a different story.

According to Sales & Marketing Management magazine's annual survey of spendable income in the nation's major urban markets, metropolitan Washington continued to grow in affluence during the recession year of 1980 and continues to rank as No. 1 in terms of real affluence.

With an average household income of $29,648 after taxes, the D.C. area exceeds the average of the other nine top markets by 17 percent and the national average by 34 percent. Houston is second, with average spendable income per household of $27,258, and San Francisco is third at $27,124.

Total after-tax income of metropolitan Washington's 3.07 million residents and 1.13 million households was a record $33.5 billion in 1980, up $3.9 billion or 13.4 percent for the year. The area's consumer price index rose 10.9 percent over the same 12 months -- indicating that on average, area residents kept ahead of inflation.

On a per-capita basis, the area's spendable income of $10,902 was 37 percent above the U.S. average.

To ber sure, figures that lump all income into one fat number that is divided by population and households do not tell an accurate story about the despair of those area residents who are out of work and those whose paychecks have not kept up with the inflationary spiral.

But metropolitan area unemployment is very low compared with the nation as a whole. During May, the latest month for which statistics are available, 75,500 area residents were out of work and looking for a job. That equals 4.6 percent of a work force of 1.64 million compared with the national unemployment rate that month of 7.6 percent.

In the Maryland and Virginia suburbs, employment actually rose by 15,100 jobs in the past 12 months. Counting the entire metropolitan area, industry employment increased by 23,800.

The problem areas are specific in location (the District) and employment sectors (government and the construction industry). In D.C., private industry jobs rose by 7,200 in the past year (6,400 in the services sector alone). But this healthy performance wasn't enough to offset a loss of 8,200 government jobs -- 4,300 federal payroll positions and 3,900 in D.C. government.

In the construction sector, employment in the area is down by about 2,000 jobs from last year to 73,500 in May. All of this reduction has taken place in the suburbs, where housing and commercial building has been slowed by record interest rates that make financing impossible for many builders and buyers.

The jobs outlook also is mixed but most area business leaders are optimistic. Reagan administration budget cuts may trim another 4,400 jobs from the area's federal civilian payroll but there is expected to be an increase in military jobs here.

A major national corporation with large defense contracts is expected to announce shortly -- maybe this week -- its plans to move to Prince George's Country. Business community sources who know about this move say it will start out with a small professional staff but grow rather rapidly into a large employment base.

While the area's population growth since 1970 hasn't maintained the 1960s boom, the area's rate of growth has been the highest among the metropolitan centers outside of the exploding Southwest. Since 1970, Dallas-Fort Worth and yhouston have joined the 10 largest markets and both have had more rapid gains in population and households than the D.C. area.

Retail sales in Washington, a key barometer of economic health, totaled $15.5 billion last year -- up $1.8 billion or 13 1/2 percent from the previous year. On a perhousehold basis, retail sales averaged $13,707 for each one. Food sales topped all other categories, with $3.2 billion of goods moving through checkout counters. That's one-fifth of all retail sales and $2,864 per household. Auto dealers and service volume was next at $2.8 billion, averaging $2,484 a household.

Among other findings developed from the ysales & Marketing Management data by Jane Huffman of The Washington Post's research department:

Metropolitan Washington is third among the top 10 markets in sales per household by drug stores, food stores, department stores and auto dealers. It ranks fourth in furniture-appliances and sixth in restaurants and bars.

Fairfax and Montgomery counties continue to lead in spendable income per household at $35,732 and $32,189 a year, respectively. D.C., with an average household after-tax income of $25,824 was the lowest of area jurisdictions but still 16 percent higher than the U.S. average.

Washington's suburbs have continued to take a larger share of the expanding overall marketplace. In 1970, for example, 31 percent of all area retail sales took place in the District. By 1980, the District's share had declined to 16 percent. Although the Maryland suburbs (Montgomery, Prince George's and Charles conties) continue to lead in population with 43 percent of area residents (vs. 37 percent in Northern Virginia and 20 percent in D.C.), Northern Virginia has taken the lead in spendable income at 41 percent (vs. 40 percent for the Maryland suburbs and 19 percent in D.C.).

The Maryland suburbs of D.C. account for 31 percent of that state's population and households but 38 percent of all spendable income in the state and 36 percent of all retail sales. Virginia residents of the area add up to 21 percent of the Commonwealth's population, 22 percent of households, 33 percent of spendable income and 26 percent of all sales.

Ranked by population, with average after-tax income per household, these are the nation's 10 largest urban centers: 1. New York, 9,078,000 ($23,395); 2. Los Angeles, 7,513,000 ($24,785): 3. Chicago, 7,118,100 ($26,936); 4. Philadelphia, 4,709,800 ($24,738); 5.Detroit, 4,345,000 ($26,822); 6. Boston, 3,658,000 ($24,929); 7. San Francisco, 3,266,900 ($27,124); 8. Washington, 3,071,000 ($29,648); 9. Dallas-Fort Worth, 3,023,000 ($25,701); 10. Houston, 2,977,300 ($27,258).