Uncertainty in Washington is hurting D.C.’s job market, economists say

From The Washington Post:

The Washington metropolitan area added only 38,000 jobs in the one-year period ending in April, according to new government data released Friday, the lowest growth since the automatic federal budget cuts known as sequestration prompted employers to put the brakes on hiring in 2014.

Even so, unemployment in April remained close to pre-recession lows. Unemployment rates in Maryland and the District each ticked up by a 10th of a percentage point to 4.3 percent and 5.9 percent respectively, and Virginia’s rate held steady at 3.8 percent, the Bureau of Labor Statistics reported.

Regional economists said the slowdown in hiring is almost certainly caused by uncertainty related to the budgetary process and the Trump administration’s plans to draw down the federal workforce.

“There’s nothing I can point to that is out of the ordinary other than the change in the political environment,” said Stephen Fuller, a regional economist with George Mason University.

The slowdown comes at a time when the broader national economy continues to gain strength and the stock markets are trading at record levels. But D.C.’s economy is more closely linked to federal policymaking than almost anywhere else in the country, as the region’s biggest industries depend directly or indirectly on taxpayer dollars. And so it is perhaps little surprise that the region’s 1.2 percent employment growth rate lagged the 1.7 percent rate recorded by the nation as a whole.

The lack of hiring could be caused in part by the Trump administration’s efforts to draw down federal employment. The number of federal jobs in the Washington area shrunk by a few thousand in February and March and remained essentially flat in April.

Also not helping, economists said, is the uncertainty around the budget process, as businesses wait to see what happens in Congress before signing off on new hires. The employers that appear to be holding back the most are in industries that are closely linked to consumer confidence, like retail and construction.

“We’ve talked to some businesses who said sales are off, and you can almost trace it out from the city … as you get farther away from Washington things start to pick up a little bit,” said Andy Bauer, an economist with the Richmond Fed.

The employment sector whose financial success depends directly on the federal budgeting process — professional services, which includes federal contractors — added just 12,800 jobs in the past year, a 1.7 percent rise that trailed the region’s 2016 performance.

That’s a big shift from earlier this year. In the first quarter of the year, federal contractors seemed giddy about their prospects, as the president promised a historic defense buildup from atop an aircraft carrier docked off the coast of Virginia.

“The enthusiasm that many of our contractors in the region were feeling in January has now largely evaporated, and it’s now unclear whether any of the president’s budget will actually make it through,” said Terry Clower, director of the George Mason Center for Regional Analysis, an economic policy center

“What I am hearing from local business leaders is frustration that we might actually have another round of sequestration,” or automatic budget cuts, Clower said.

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