The region’s economy took a hit three years ago when the so-called federal sequestration process slowed new contract awards, forcing many of the region’s government contractors to hunker down. But a recent congressional budget deal eased worries and boosted future defense spending, improving confidence in the sector and leading to a resurgence of jobs.
“2015 really closed the gap,” said Andy Bauer, a regional economist with the Richmond Federal Reserve. In 2016, “I think we can expect to see our region grow on pace with the nation, perhaps even slightly better.”
D.C. area unemployment rates fell in November, and are substantially lower than this time last year. Unemployment in Maryland and Virginia dropped 0.4 percent and 0.6 percent respectively, and unemployment in the District dropped more than a percentage point to settle at 6.6 percent. As unemployment has fallen, the overall number of people seeking jobs has been growing steadily in Maryland and D.C. but slowly declining in Virginia.
There’s no doubt that the region is adding jobs again, but some debate whether the growth is tied entirely to the return of federal spending. They see last year’s gain in jobs as a possible early sign that the region is developing new sources of economic growth.
“We’ve seen Virginia continue to do pretty well in professional and business services,” said Terry Clower, an economist at George Mason who studies the regional economy. “But our data has indicated that [regional growth in 2015] has been in spite of no real growth in federal procurement spending.”
An analysis by the George Mason University Center for Regional Analysis found that federal procurement spending changed little between 2014 and 2015.
“That’s just further evidence that job growth in the Washington area is being driven by other forces than federal spending,” said Stephen Fuller, an economist at George Mason University who studies the local economy. “Nobody quite knows precisely by what, except that it’s not federal.”
And the local economy continues to improve. While falling gas prices have hurt some oil-dependent states like Louisiana, cheaper gas is viewed as a positive to the economy here because it puts more money in people’s pockets.
According to an internal analysis by Sage Policy Group, a Baltimore-based economic consultancy, the decline in gasoline prices in 2015 translated into at least $1.6 billion in household savings in the Washington metropolitan area. That’s money that individual consumers can spend elsewhere, at stores, restaurants or elsewhere, boosting the demand for more jobs in those sectors.