During a shutdown, the federal government stops contributing to key components of the Washington region’s economy, including civilian and military wages and salaries, procurement and grants. Altogether, the federal government accounts for 29.9 percent of the regional economy and pays $2.5 billion each week for work being performed in the region. During the shutdown, a significant portion of this activity will stop. The key question, however, is how much of that lost spending and economic activity will be made up later and how much will be forgone entirely. Even if the majority of the spending is made up post-shutdown, losses in efficiency, distributional impacts, and increased uncertainty will have a modest economic costs, which will increase as the shutdown continues. Without back pay, the economic impact is projected to be significant and a three-week shutdown could cost the region upwards of 0.26 percent of its gross regional product.
After generating substantial job gains in each of the previous three years (2015, 2016, and 2017) and exceeding the long-term annual average by more than 20,000 jobs for each of those years, the region’s job growth is projected to moderate in 2018 and 2019 and then fall below the historic long-term average annual gain in 2020. In the near-term, the job growth projections for 2018 and 2019 remain well above the long-term average for the Washington region; however these gains are not evenly spread throughout the sub-state areas of the region. As the economy begins to moderate in 2019, after peaking in 2018 and with the aging of the business cycle, the sectoral structure of the separate sub-state portions of the region will increasingly shape their own economic futures.
The Washington region’s economy outperformed its beginning-of-the-year forecast in 2017 growing at an estimated 2.1 percent and improving significantly on its 1.1 percent gain in 2016. While still not outperforming the national economy (GDP), the region’s economy has recovered sufficiently to closely mirror the current and projected near-term performance of the U.S. economy.
In spite of the uncertainty introduced into the region’s economic equation by the new Trump Administration with its threats of “draining the swamp” and “shutting the government down might be good for the economy,” and proposing to shift significant budget resources from domestic agencies (and closing more than 30 smaller federal agencies) to the departments of Defense and Homeland Security, the actual negative impacts of the Trump Administration have been difficult to measure beyond the modest loss of federal jobs during the second half of 2017. The new Administration’s positive impacts (indirect) have included accelerated job growth in the region’s business and leisure travel and advocacy clusters and a stronger national economy that has bolstered the regional economy with rising consumer confidence, increased personal income, growth of corporate income and increased foreign trade.
The Stephen S. Fuller Institute has been busy since launching in February 2017. In case you missed any of our most read reports and blogs, our top five are below.
Between 2013 and 2015, the greater Washington region gained 108,000 workers per year from elsewhere in the U.S. During the same period, the region lost 121,200 workers who moved out of the region to other parts of the nation. An analysis of these movers by industry is available on page 35 of Migration in the Washington Region: Trends between 2000 and 2015 and Characteristics of Recent Migrants released in September 2017. This blog post explores what occupations these workers held and is adapted from the Schar School Stat that ran in the Dec. 1, 2017 edition of the Washington Business Journal.