The Washington Business Journal has an excellent article looking at the local economy. While there are differing opinions, it’s quite a contrast between what is happening locally and what is happening nationally.
July 9, 2010
Washington Business Journal – by Bryant Ruiz Switzky
The first half of the year gave observers of the Washington-area economy many reasons to smile. Unemployment trended downward, housing prices stabilized, and after employment dipped to a five-year low in February, the area gained 44,000 jobs.
The period brought news of major hiring at companies like Booz Allen Hamilton Inc. and Accenture PLC, and local executives were upbeat about the future. In a May CEO survey by the Washington Business Journal and Shugoll Research, 56 percent of respondents said they believed the economy was in recovery, up from 45 percent in December.
But a barrage of national and international bad news in the past couple of months has made the markets and many economists more pessimistic about the entire country’s economic fortunes for the next 12 months.
Since late April, the S&P 500 stock index has lost some 15 percent of its value, federal agencies have released disappointing job and home sales numbers, the debt crisis in Europe has worsened, and the Gulf of Mexico oil spill continues to cause problems.
“All these things have conspired to ratchet down confidence in the near-term economic recovery,” said Anirban Basu, chairman and CEO of Baltimore-based economic research firm Sage Policy Group Inc.
He argues that much of the momentum in the economy appears to have been short-lived and fueled by government spending. As such, the economy is likely to be weaker in the next 12 months than it has been in the first half of this year.
Basu puts the chances for a double-dip recession at about 50 percent.
“Whether or not we officially go back into recession is just a technical point,” he said.
Peter Morici, professor of business and public policy at the University of Maryland’s Robert H. Smith School of Business, also expects the pessimism in the markets to cause the recovery to slow over the next six months, though not as much in Washington as elsewhere.
“There’s no question it will be more difficult than it has been over the past nine months,” he said.
John McClain, an economist with the center, is more optimistic than Basu. “We see the recovery continuing in Washington,” he said.
He points to continued job growth and strong housing prices in the area, though he acknowledges there is always the chance of something happening to make the economy slide back.
In a June report, the Center for Regional Analysis at George Mason University predicted the area’s gross regional product would rise about 3.5 percent in 2010, compared to a contraction of less than 1 percent in 2009.
CEOs in the Southern U.S., which includes the Washington area, also expect the recovery to slow a bit, according to the Vistage CEO Confidence Index for the second quarter. While 48 percent of CEOs said they felt economic conditions had improved from a year ago, just 34 percent expect it to improve over the coming year. But still, 66 percent were optimistic that their own revenues would grow over the next year.
The commercial real estate community had some good news in the second quarter. Tenant demand exceeded new supply for the first time since the end of 2006, according to Jones Lang LaSalle Inc. And all three local jurisdictions — D.C., Maryland and Virginia —posted positive net absorption in the quarter, meaning more space was leased than vacated.
Much of that has come from government demand, but President Barack Obama recently ordered government agencies to reduce their spending, part of the global effort to reduce debt.
Federal spending and procurement account for a third of the local economy, according to the Center for Regional Analysis, and strong government spending has been the elixir that has given the Washington area the lowest unemployment rate in the nation at 6 percent.
Read more: Will Washington’s economic recovery stall? – Washington Business Journal
