For the Washington economy -- suffering through recession along with the rest of the country for a change -- there is a glimmer of hope in the lights of Christmas.
If consumer spending picks up in the next week, it could be the signal that a real improvement is under way in the local economy, which, like the economy of the whole nation, is counting on consumers to lead it to recovery.
But if shoppers remain cautious, as they have for so much of the year, then hopes of an upturn in the local economy -- and the nation -- may be dashed once again.
The metropolitan area already has been disappointed once this year. In the second quarter, there was a sharp rebound in sales, according to figures compiled by the Commerce Department.
But this good news didn't last. Sales climbed just 2 percent in the July-to-September period, according to preliminary figures. This increase was sharply lower than the 15 percent jump between the first two quarters of the year and was barely enough to offset inflation.
In the nation as a whole, the long-awaited economic recovery has proved elusive this year. President Reagan first expected an upturn in the spring. He then said that consumers would begin to pull business out of its slump after the July 1 income tax cut.
More recently, officials have pinned their hopes for recovery on the declines in interest rates since June. With rates now down considerably from their levels earlier this year and stock prices up, the stage is finally set for an economic revival, they say.
But the play has apparently not yet begun. Latest indications are that the nationwide economy continued to slide last month.
Such up-to-date figures are not yet available for the Washington area. But the troubles of the national economy have spilled over into the local economy to a much greater extent during this recession than they have in the past. With government employment -- the traditional mainstay of the area -- hit recently by budget cutbacks, Washington has lost much of its traditional insulation from national economic cycles.
In the first six months of this year, employment in the metropolitan area was down by more than 15,000 from its level a year earlier, the Metropolitan Council of Governments reported in its Economic Alert. The drop was caused by falling federal, state and local government employment. Jobs in the private sector actually increased, although at a slower pace than before the recession.
The squeeze on government jobs seems to have eased somewhat in the summer, according to preliminary figures. Federal employment edged up from 349,000 in the second quarter of this year to 350,500 in the third quarter, the D.C. Department of Employment Services said. State and local government jobs were up from 185,300 to 189,400. Although total government employment in the region was still 10,400 lower than in the same three months of 1981, this decline was less steep than for the first two quarters of this year.
With private employers increasing their work force as well, overall employment climbed by 15,500 between the second and third quarters of this year. The increase left the total number of jobs in the region during the three months from July to September down only 2,200 from a year earlier.
However, with a growing labor force it is necessary not merely to halt the slide in employment but to add new jobs to fight unemployment. Job creation in the private sector slipped from 42,700 jobs in 1980, to 29,400 the following year and 9,600 in the 12 months to early 1982. Over the latest 12-month period -- from the third quarter of 1981 to the third quarter of 1982 -- jobs in the private sectors were up just 8,200.
Financial pressures on local governments are likely to keep a lid on their jobs expansion for some years to come. A major study of how local government budgets are likely to develop in the next five years projected huge deficits, totaling $605.3 million in aggregate in 1987, for the six major jurisdictions studied: the District of Columbia, Alexandria, Arlington, Montgomery County and Prince George's County.
The study, carried out for the Greater Washington Research Center, said the "large budget gaps . . . are a measure of the fiscal pressures local governments across the nation face in a period of declining federal funds and shrinking growth in local revenues."
The Washington area "has been relatively fortunate in having sustained and strong economic growth and good local government management," the report said. But "the slowdown in the Washington area economy, accompanied by reductions in federal aid, will put local governments in the Washington area under increasing financial pressure" in coming years.
It is true that this area is still better off in many ways than the rest of the nation. Incomes, particularly in the suburban areas surrounding the District, are comfortably above average. And while unemployment is higher than usual, it remains considerably below the 10.8 percent rate now registered for the nation as a whole.
Moreover, while the national rate has shot up in recent months, the jobless rate for the metropolitan area over the third quarter stayed close to the 6 percent level where it has been all year. This is just 0.7 percentage point higher than a year ago. In that same 12-month period, the unemployment rate for the United States climbed by 2.3 percentage points.
Unemployment in the suburban ring around Washington was just 4.6 percent in October. This was higher than a year earlier, but only just. In October 1981, this rate was 4.3 percent. Joblessness is much higher than this in the District itself -- where it averaged 11.5 percent in October after seasonal adjustment. But the good numbers in the suburbs overwhelm the gloomier state of affairs in the District: The metroplitan area as a whole had a jobless rate of 5.8 percent in October. This was down slightly from the third quarter average because of the improving jobs picture in suburban Virginia and Maryland.
These numbers make it clear that while Washington's government and services employment base is not as buoyant as it has been, it remains relatively stable, compared with manufacturing and rural areas elsewhere.
The question for the near term is whether interest rates will come down far enough and incomes rise sufficiently to build on this base.
Construction is one area that stands to gain most from declining rates. It has been hit hard in this area as it has in the rest of the nation during the recession, with employment in the industry 10 percent lower in September 1982 than a year earlier.
But although office and industrial construction remained weak this summer, there were some signs of life in retail construction activity and home building.
Retail construction plans shot up in the summer, according to Census Bureau building permit figures. These show that in July and August, building permits issued for retail construction were worth $19.8 million on average, compared with a monthly average value of $5.89 million in the April to June quarter and $12.15 million in the first three months of the year.
Much of the retailing space being built is for use by small boutiques and stores, including fast food shops and financial institutions such as those in the recently completed International Square development at I and 18th streets NW.
Home builders and real estate agents are keeping their fingers crossed that recent declines in interest rates will spark a revival in the housing market. New residential building permits were running 16 percent below their levels of a year earlier in the April-to-June quarter, before rates started to slide. In July and August, the value of these permits was up slightly from the second quarter and more than 20 percent higher than a year earlier.
Mortgage rates in the Washington region dropped to 16.03 percent in September from an average of 17.1 percent in the second quarter, according to the Metropolitan Washington Council of Governments, which monitors eight key indicators of the economic health of the area. The decline has gathered speed since, with mortgage financing now available in this area at rates below 13 percent. The drop in rates has helped to shore up house prices, which earlier this year were falling for the first time in most people's memories.
If mortgage rates decline any further, house prices will probably start back up again, industry analysts say. It is signals such as this -- of rising demand and increased spending -- that economists are awaiting before announcing a recovery to be on the way.