D.c.-area econ­omy makes gains af­ter re­ces­sion

The Washington Times Daily - - Business - BY DAVID HOOD

While the na­tional econ­omy strug­gles to at­tain cruis­ing al­ti­tude, the Washington-area econ­omy has taken a small turn for the bet­ter, ac­cord­ing to Ge­orge Ma­son Univer­sity pro­fes­sor and eco­nomic fore­caster John Mcclain.

“What we lost as part of our econ­omy in the re­ces­sion, we have re­cov­ered some­what,” said Mr. Mcclain, speak­ing Thurs­day about the state of the lo­cal mar­ket to the Na­tional Econ­o­mists Club, adding that the re­cov­ery is “go­ing to be much more mod­est” than the re­gion has ex­pe­ri­enced af­ter past down­turns.

Mr. Mcclain, deputy di­rec­tor of the Fair­fax school’s Cen­ter for Re­gional Anal­y­sis, said the Washington area is out­pac­ing the na­tional av­er­age in a num­ber of eco­nomic mea­sures, in­clud­ing em­ploy­ment, gross re­gional prod­uct growth and over­all re­cov­ery from the depths of the 200708 re­ces­sion.

The fore­caster said that the pres­ence of the fed­eral gov­ern­ment has never been more cru­cial to the over­all health of the lo­cal mar­ket than it has been in the re­cent eco­nomic down­turn.

Al­most 40 per­cent of the re­gional econ­omy is gov­ern­ment re­lated, mainly from gov­ern­ment pro­cure­ment, which has been grow­ing about 10 per­cent each year. In the past 10 years, fed­eral pro­cure­ment has amounted to about $562 bil­lion.

Virginia tops the na­tion in to­tal fed­eral pro­cure­ment and trails just five states in to­tal fed­eral spend­ing. Some 900,000 jobs in the state are tied to de­fense spend­ing.

But Mr. Mcclain noted that Washington has about the same num­ber of fed­eral jobs as it had in 1978, with gov­ern­ment job growth ris­ing and fall­ing with each ad­min­is­tra­tion since Pres­i­dent Eisen­hower in the 1950s. Pro­posed spend­ing cuts — both in de­fense and non-de­fense fed­eral pro­grams — could af­fect the lo­cal econ­omy in the com­ing years.

Re­search shows that the sharpest de­cline in re­cent decades came when Pres­i­dent Clin­ton took of­fice, with gov­ern­ment jobs dur­ing his pres­i­dency fall­ing 42 per­cent. Since then, jobs have been on a steady rise, back to the level of the late 1970s, in­su­lat­ing the re­gion from the worst na­tional trends.

“Un­em­ploy­ment rates have not been any­where close to what they en­dured at the na­tional level, our high­est was 6.8 or 6.6 [per­cent] in the met­ro­pol­i­tan area at the worst point,” said Mr. Mcclain. “Now we’re back to 51/ per­cent.”

Es­ti­mates by GMU’S Cen­ter for Re­gional Anal­y­sis project that the au­to­matic spend­ing cuts set to take ef­fect if Congress fails to reach a longterm bud­get deal could ef­fec­tively elim­i­nate all the growth in the Washington area’s econ­omy when the cuts take ef­fect in 2013, with the re­gion los­ing 30,000 fed­eral jobs and many times that in pri­vate-sec­tor jobs.

Mr. Mcclain said that the fu­ture is un­cer­tain and that the to­tal re­cov­ery from the re­ces­sion has come slowly. The hous­ing mar­ket, he said, will prob­a­bly take two years more than ex­pected to re­cover, even though it is likely the bot­tom of the mar­ket has passed.

“Two years ago, we thought by 2012 it would mostly be gone, but a lot of stuff hap­pened,” he said.

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