The federal government remains the driving force in the District's economy, but the D.C. government needs to develop new policies to capitalize on that asset to protect its jobs base, a study made public today by the Greater Washington Research Center recommends.

Economic development efforts in the District should "acknowledge, understand and exploit" what has become a highly specialized economy, suggested the study's author, Stephen S. Fuller, chairman of the department of urban and regional planning at George Washington University.

Fuller described the dominance of the federal government in the District's economy as "distinctive and unique."

"We have a real asset here, and we tend to diminish it," he said.

While advocating active pursuit of growth in traditional employment sectors, Fuller urged city officials to strengthen the natural areas of the District's specialized economy -- one in which high-skilled and high-salaried jobs are concentrated in a few categories. He identified those areas as the federal government, services, tourism and international activities.

Fuller recommended that the District pursue the following steps as means of enhancing growth in those sectors:

Try to retain as many federal jobs "as are consistent with the efficient operation of the federal government."

Consider ways to pursue federal contracting more successfully.

Develop a plan to improve the city's attractiveness and capacity as an international center. Success in that endeavor would also benefit sectors such as retail trade, finance, insurance and real estate (FIRE) and services, according to Fuller.

Foster a better understanding of tourism and promote it more effectively. Tourism, like international activities, Fuller maintains, is an increasingly important part of the District's basic national capital function.

Improve the city's housing and residential environment and attract and retain skilled and knowledgeable workers.

Provide for the flow of persons in the work force who are well-trained, productive and capable of adjusting to changing skill requirements. To that end, Fuller added, adult education and retraining will be as important as entry-level education and training.

Increase labor force participation beyond its currently high levels by providing more flexible hours, day care, transportation services and retraining.

Fuller, whose earlier studies for the research center formed the basis for its State of the Region report in 1984, said his latest research "suggests that there are missed opportunities" in the District and that even though local government has an important role, the private sector "needs to be more aggressive" in producing a broader-based economy.

"I think the private sector has as much to learn as local government relative to understanding the dynamics of the local economy and how to manage for the future," Fuller said during a briefing on the 59-page study, "The District of Columbia's Changing Economy and its Future Growth Opportunities." If anything, Fuller added, the local government may be ahead of the private sector in its understanding of the economy.

The study was prepared under a contract with the D.C. government and requested by City Administrator Thomas Downs.

Officials at the research center said Downs wanted an independent study of how the District's economy has changed in recent years and how economic change in the nation's capital compares to changes in Washington's suburbs and selected central cities.

Employment in the District's economy is becoming more specialized or concentrated in just a few sectors compared with those same categories nationally, even though marginal declines have occurred in the federal government sector locally, Fuller noted.

While employment in Washington's suburbs has become more diversified and balanced, the concentration of growth in federal employment in the District is more than twice that in the national economy, the study shows.

Even though common features can be found in metropolitan economic growth patterns throughout the country, the District and its suburbs continue to differ substantially from those in other areas, Fuller asserted.

Compared with 11 major cities having comparable socioeconomic characteristics, the District has the most specialized economic structure, he concluded.

Above-average concentrations of employment exist in only two sectors: government and services. All other sectors lost employment in the past 10 years.

And while most suburban jurisdictions can count on population growth to help stimulate economic growth, the District must rely almost exclusively on existing employers, including government, to drive its growth, Fuller said.

Thus, the District's greatest economic strength remains in government and government-dependent businesses and services, he added.

In the meantime, the District's relative employment position in the area's economy has shrunk significantly since 1970, notwithstanding the strong federal role in the city.

The study shows that between 1970 and 1985, more than 18 jobs were added in the suburbs for every one that was added to the District's economy.

Meanwhile, the District's share of total federal employment in metropolitan Washington declined by only 2 percentage points between 1970 and 1985. But the District's share of total employment in the area fell by 12 percentage points, according to the GWRC study.

"Below-average performance, as well as over specialization, helps to explain the District economy's relative decline as an employment center within the metropolitan area," Fuller concluded in the study.

The relatively slow growth in the District's employment sectors between 1977 and 1985, compared with the growth in corresponding sectors nationally, cost the District 99,984 jobs, Fuller estimates. In contrast, he added, Washington's suburbs enjoyed rapid growth in all but one major sector: state and local government. Employment sectors in the local suburbs grew even faster than the corresponding categories in the national economy between 1977 and 1985.

Even though significantly higher growth in the area's suburbs produced a huge differential in total personal income in the 1977-1985 period, the District continues to maintain a sizable average-earnings advantage in the federal civilian; state and local government; finance, insurance and real estate and manufacturing sectors, the study shows.

Although federal civilian employment in the District accounted for nearly 30 percent of the total work force in 1985, the total was almost 33 percent six years earlier.

Paralleling this employment decrease, the real value (measured in 1982 dollars) of the District's federal civilian payroll declined slightly, from $6.6 billion in 1979 to $6.4 billion in 1985.

On the other hand, federal purchases of goods and services -- also a significant factor in the District's economy -- totaled $1.95 billion in 1984, compared with $1.3 billion in 1979. Research shows that services account for the largest category (79 percent in 1984) of federal purchases in the District. But, Fuller said during the briefing, the District's share of federal purchases in the area is declining.

"This suggests that District firms aren't competing as well as suburban firms for federal contracts."

Although more than 3,000 D.C. firms do business with the federal government, a mere 141 contractors received two-thirds of the total dollar value of federal contracts for goods and services.

"For unknown ... reasons, businesses in the District are not maintaining their share of federal contracts," Fuller said.

Fuller agreed that relocation of District businesses to the suburbs is a factor, but his research didn't go into that aspect, he said.

Federal purchases in the District "have not helped to stimulate economic diversification," Fuller noted in the study. "Instead, they have reinforced the increasing specialization in the economy's private sector."

With the services sector expected to provide 70 percent of the estimated 100,000 net new jobs to be added to D.C.'s economy by the year 2000, "that certainly isn't contributing to economic diversification," Fuller sai