AN ARTICLE THURSDAY MISSTATED THE NATURE OF FEDERAL SPENDING TO THE REGION. ALL 1998 FEDERAL SPENDING, NOT JUST GOVERNMENT CONTRACTS, TOTALED $24.03 BILLION IN THE DISTRICT, $17.38 BILLION IN MARYLAND AND $23.23 BILLION IN VIRGINIA. (PUBLISHED 07/17/99)

The Washington region's economic fortunes peaked over the past four years, buoyed by strong growth in personal income, employment, housing and retail sales, according to a report released yesterday by the Metropolitan Washington Council of Governments. But several local economists said they are beginning to see signs of a slowdown.

The region added 209,800 people from 1994 to 1998, with most of them choosing to move into the "inner suburbs" of Montgomery, Prince George's and Fairfax counties and the cities of Fairfax and Falls Church, even as 44,000 people moved out of the District. "The federal [government's] downsizing more than anything else made the suburban growth possible," said Stephen S. Fuller, a professor of public policy at George Mason University.

The four-year addition of 150,000 jobs indicates that most of those who lost jobs with the federal government managed to find work with private employers, mainly in the services sector, which accounts for two of every five jobs in the area. "The technology companies were the key to offsetting the loss of jobs in D.C.," said Mark Zandi, chief economist at RFA Dismal Sciences in West Chester, Pa.

According to the Council of Governments' Cooperative Forecasts, the inner suburbs and "central jurisdictions," which include the District, Arlington County and the city of Alexandria, will remain the region's employment hub into the next century. By the year 2020, 34 percent of all jobs will be in the central jurisdictions and more than half in the inner suburbs.

But regional economists such as Mark P. Vitner of First Union Corp. believe the growth will be pushed farther to the outer limits of the suburbs. "The growth in places like Northern Virginia is so strong that it is actually causing infrastructure problems."

Despite its downsizing, the federal government increased its spending to $64.6 billion in 1998 from $62.3 billion the previous year. What also explains the boom in private-sector growth is that of the estimated $64.6 billion, almost 38 percent (or $24 billion) was in procurement contracts.

Still, District companies gobbled up more in government spending, collecting $24 billion in revenue. Their competitors in Maryland received $17.38 billion in contracts and Virginia brought in $23.23 billion.

More jobs and confidence in the economy prompted people to spend more. Retail sales in the region rose to $44 billion in 1996, $800 million more than 1995's figure. A lot more new houses were bought -- 22,478 in 1998 compared with 19,386 the year before.

Despite more spending, the rate of inflation -- as measured by the consumer price index -- for urban consumers stayed at a low of 1.3 percent in 1998.

"What helped was the global economic crisis, which lowered import costs and the growth in productivity, which kept labor prices down," said Zandi of RFA Dismal Sciences.

Although the report does not touch on it, there are indications that the area's economy is losing steam.

"The report describes the best of the '90s. I think the acceleration is over," said Fuller of George Mason University.

But regional economists believe the District is beginning to show signs of revival, with people and jobs slowly returning.

"I see the federal spending increasing once again and there is a gradual return to the city center," Vitner said.

Cautioned Zandi: "Growth in the next four years is going to be slower than that of the past four years."