As D.C. braces for federal drawdown, region gets more disappointing news on jobs

From The Washington Post:

The Washington area experienced far less job growth last year than previously reported, the Bureau of Labor Statistics reported Monday, raising new concerns about the health of the local economy as the region awaits President Trump’s proposal to rein in the size of the federal workforce.

The metropolitan area added just 55,600 jobs last year, instead of the 72,400 posted earlier, the new data shows.

The government routinely refines its numbers, but such a large downward revision is unusual. The new figures describe a year of modest gains for the Washington area — a 1.75 percent employment growth rate that is roughly in line with the rest of the country, rather than figures that once had the region far outperforming the rest of the nation.

The revisions leave the region on less sure footing as a new administration reassesses the shape of the federal bureaucracy.

“One could make the case that the Washington metropolitan area is more vulnerable to policymaking in Washington, D.C., than any other area in the country,” said Anirban Basu, an economist with Baltimore-based Sage Policy Group, “and now the local economy is coming into this period with less momentum than we thought.”

Unemployment rates in the District, Maryland and Virginia changed little between December and January, according to the new data released Monday. Virginia’s unemployment rate ticked down by 0.1 percent, to 4.0 percent, and the District and Maryland’s rates were unchanged at 5.7 percent and 4.2 percent, respectively.

If there was one bright spot, it was the modest growth in the size of the labor force, a measure of how many people are employed or looking for jobs, allaying some economists’ concerns that discouraged job-seekers were giving up.

The lower job growth comes as the region continues to recover from a sharp drop in federal procurement spending caused by the “sequestration” process after 2013.

The slowdown lead some federal contractors such as Booz Allen Hamilton to diversify by building new commercial and international lines of business as margins sputtered in the government contracting space.

While those efforts helped, much of the job creation in 2015 and 2016 occurred in service industries such as retail, health care and restaurants, sectors where pay and job security tends to be lower than that offered by federal employment.

Indeed, an analysis by the Stephen S. Fuller Institute at George Mason University found that the percent of regional gross domestic product that comes directly from federal spending dropped from 39.8 percent in 2010 to about 35 percent last year, and is projected to drop to 27 percent over the next four years.

Still, that the federal government accounts for more than a third of the region’s economic activity mean it remains a key cog in the region’s health, and numerous other industries depend indirectly on those taxpayer dollars, including the service sector. Any push by Trump to reduce the size of the federal workforce could put new strains on the local housing market and lead to less spending in the region’s burgeoning retail, restaurants and hotel scene.

A report published last month by the Fuller Institute said the region “continues to struggle to pivot away from its historic dependence on federal spending,” citing poor growth figures in certain high-net-worth job categories.

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