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Local Economy Watch Explained
· · · Talk About · · · The Future of Washington
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Employment Figures · Federal Contracts · Housing Starts
Per Capita Income · Retail Sales
- Employment Figures
- What Is It?
- Labor force data describes the employment status of people residing in the Washington Metropolitan Statistical Area, or MSA, and not necessarily the people who hold jobs in the Washington MSA. The resident labor force could work outside the metropolitan area just as some workers in the MSA are non-residents. This labor force data can be used to describe the employment status of area residents but is not a good measure of the economy's ability to generate jobs.
- How Do I Read This?
- The unemployment rate has a regular seasonal pattern; it is affected by the January post-holiday slowdown in retail sales and construction activity, the spring pickup in construction and in the hospitality industry, and is usually the highest in June because high school and college graduates are entering the work force in greater numbers than can be absorbed in the economy in a single month.
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- Federal Contracts
- What Is It?
- Federal procurement contracting in the Washington MSA totaled $19.4 billion in fiscal year 1995, increasing $1.55 billion from FY 1994. Increases in procurement spending in the Washington area have substantially outpaced gains in federal procurement nationwide, with area firms now capturing 9.6 percent of total federal procurement spending, up from 4.4 percent in 1984. In 1995, firms located in the District received 21 percent of the area's contract awards, firms located in suburban Maryland captured 30 percent of the awards, and Northern Virginia firms received 49 percent. Two-thirds of these federal contracts were for service, 15 percent were for research and development and 18 percent were for products.
- How Do I Read This?
- It is estimated that each $1 billion in federal procurement spending in the Washington area supports 8,300 jobs in the private sector. The slowdown in procurement spending in 1996, because of the budget impasse (the federal budget was signed April 24, 1996), contributed to the slowdown in new job growth this year.
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- Housing Starts
- What Is It?
- Housing starts track the number of single-family homes and apartment units on which construction has actually begun. This is considered a more accurate measure than housing permit applications because it tracks the actual work being done to build new housing in the area.
- How Do I Read This?
- Housing starts are a key measure of the local economy's health. When housing starts increase, it reflects an increase in residential demand. Demand rises when interest rates decrease (affordability rises), consumers have confidence in the economy's long-term outlook, job growth is strong, and favorable economic conditions (job growth, low unemployment) attract new residents to the area. Housing starts are also affected by the weather. The second quarter always has the largest number of starts, in a good year or in a bad year. Housing started in early spring is available for occupancy before the end-of-the-year holidays. Housing begun in the third quarter, always the second-highest volume of starts, is planned for spring delivery in the following year. These are the two most desirable times of the year to move into a new house or apartment.
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- Per Capita Income
- What Is It?
- Per capita income is the most widely used measure of an area's economic status. Higher levels of per capita income are associated with more advanced economies and higher standards of living. Health status, housing quality and general quality of life are functions of per capita income. The per capita income level is determined by how many people in the area are working and how good (well-paid) their jobs are.
- How Do I Read This?
- In the Washington area, the number of working adults is high. This is because the area's women have the highest labor force participation rate in the nation. Additionally, the number of children per household is low in the Washington area; there are fewer dependents or non-workers being supported by the working population. The area also has a favorable job mix that has resulted in an above-average salary structure. The result is that per capita income in the Washington MSA exceeds the national average by approximately one-third.
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- Retail Sales
- What Is It?
- Retail sales trends provide a broad measure of the local economy's health. Sales increase when the incomes of area residents are growing, when consumers are confident regarding their jobs and stability of their future earnings, and when the population of the area is growing because of immigration attracted by the growth of new jobs. Retail sales are divided into two major sub-groups -- durable goods and nondurable goods. Durable goods sales, which include automobiles, appliances and furniture, are sensitive to interest rates since they are often bought using credit.
- How Do I Read This?
- When interest rates rise, durable goods sales decline since these purchases often can be deferred. Nondurable goods sales, such as clothing and food, are less sensitive to interest rates. Retail sales volumes are also affected by consumer confidence. When consumers are uncertain about their jobs and earnings, they cut back on retail purchases and substitute less expensive goods for their normal brands. Because of last year's federal government shutdown, furloughs and budget impasse, Washington consumers were more cautious with their retail spending in 1996. Consequently, the metropolitan area's retail sales are up this year just 3 percent or about the rate of inflation, while nationally retail sales are up almost 6 percent.
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