As the federal government tightens its budgets, the local economy will likely be forced to reshuffle its building blocks if it is to mount a more robust recovery, according to an annual forecast presented Thursday by Stephen S. Fuller, the economist who directs the Center for Regional Analysis at George Mason University.
For years, the region has depended heavily on the federal government and its contractors to propel its economic growth and boost its labor market. During the recession, it was the relative strength of these sectors that kept the Washington area insulated from the slump experienced elsewhere in the nation.
But going forward, Fuller predicts, the private sector will become a more important economic engine.
“It isn’t going back to where we were. We have created a foundation on which to move forward, and it doesn’t look anything like ’07,” Fuller said.
Between November 2012 and November 2013, the region lost 9,500 federal government positions. During the same period, the professional services sector, which includes contractors, shed 200 positions.
“Our biggest sector with the biggest average wage went down,” Fuller said.
Meanwhile, the region saw stronger job growth in categories that tend to be relatively low-paying. For example, the leisure and hospitality sector was the region’s biggest job creator, adding 16,200 positions in the one-year period ending in November. And even within sectors such as health services, Fuller notes that the bulk of job growth has been in positions such as home health aides, not doctors and surgeons.
Fuller said the Washington area has added four times as many low-wage jobs as it lost during the recession, while it has recovered only about 40 percent of the mid-wage jobs lost in that time period. It’s a development that fuels the region’s widening income gap. An increase in professional jobs in private industry, Fuller said, could help change the equation.
Overall, Fuller expects that the labor market this year will be stronger than it was in 2013. He predicts the region will add 60,200 jobs, a sharp increase over the 24,100 positions it added in the one-year period ending in November.
He is especially bullish about the construction sector, which shed 48,000 local jobs between August 2008 and August 2010 after the burst of the housing bubble. So far, the industry has recovered only about 14,000 of those positions. Fuller predicts there will be heightened demand for single-family home construction in 2014, which could lead to significant job creation in this sector. Over the next five years, he expects the construction industry will account for more than 50,000 new area jobs.
Fuller noted a dynamic that could pose a challenge to local employers and recruiters in the coming years: Of the 660,000 job vacancies that Fuller expects over the next five years, he says some 55 percent of them will not be new positions. Instead, they will be existing positions being vacated by a wave of retiring baby boomers or by workers migrating away from the Washington area.
“We’re going to move on a different path. And the question is: Are we going to have enough people to do the work?” Fuller said.
Capital Business is The Post’s weekly publication focusing on the region’s business community.