Washington’s Once-Invincible Economy Sputters
Policy + Politics

Washington’s Once-Invincible Economy Sputters

Getty Images/Staff

It was once an article of faith that regardless of how bad the economy and job market became, the Washington, D.C., region would be largely exempt from the worst of it. 

While other cities staggered through the worst of the Great Recession, Washington and the surrounding suburban jurisdictions were cushioned by the hundreds of billions of dollars spent on defense, homeland security and private government contracting.

Related: Defense Cuts Could Burst the D.C. Business Bubble

But those boom times began to fade in recent years as the wars in Afghanistan and Iraq began to wind down, the Obama administration and Congress grappled with the long-term debt and across-the-board spending cuts were imposed as part of sequestration.

Ironically, now that there are unmistakable signs of a broader national recovery, the economic picture in the nation’s capital has grown even bleaker. The combination of continued federal spending cuts mandated under the 2011 Budget Control Act, a “lagging job market, and excess real estate development plague the Washington area,” The Washington Post reported on Sunday.

The region’s once dependable job market “is sputtering,” The Post said, and major legal and lobbying firms are tightening their belts.

Related: With ISIS Threat, Some in GOP Want Defense Cuts Repealed

“This dependence [on federal spending], which has served the economy so well historically, is now an albatross,” Stephen Fuller, an economist at George Mason University’s Center for Regional Analysis, said during a seminar in Northern Virginia last week sponsored by Capital One, according to The Post. “Everybody is outperforming us. We’re at the bottom of the list.”

Charts contained in a “Mid-Year Review and Early Forecast for 2015” presented by Fuller tell the story. For example, an analysis of the 15 largest job markets in the country puts the Washington, D.C., region practically at the bottom.

Between July 2013 and July 2014, Washington added just 19,800 jobs, compared to nearly 160,000 jobs added in New York, 120,000 jobs in Dallas, 118,000 in Houston and nearly 80,000 in Miami. Only one job market performed more poorly than Washington – and that was the economically struggling Detroit metro area.

While the Washington area job market picked up a little steam in some sectors, including education, health services, retail trade and hospitality, those jobs typically pay far less than jobs supported by federal spending. The federal job market suffered the biggest losses in the past year, with the elimination of 8,000 jobs in D.C., Northern Virginia and suburban Maryland.

Related: Budget Bloodletting at DOD Has Just Begun

At the same time, only half of the 96,000 high-paying jobs in the construction industry lost during the recession have been recovered, according to Fuller.

Fuller estimates the region will add about 40,000 jobs overall for the year. But he stressed the importance of Washington-area business and government leaders finding ways to make up for the lost government jobs. That might mean offering economic enticements to large companies operating in new sectors to relocate to the Washington area.   

“What’s the next driver?” Fuller said, as The Post reported. “If it’s not the federal government, who’s going to pick up the slack?”

Top Reads from The Fiscal Times: