There has been considerable wailing and gnashing of teeth over the abrupt halt in economic growth in Northern Virginia due to sequestration-mandated cutbacks in defense spending and other federal government programs. My fellow Bacon’s Rebellion bloggers and I have led the wailing chorus. Indeed, Don Rippert engaged in some ferocious teeth gnashing in a post this morning.
There’s no question that the Northern Virginia economy has under-performed the national economy over the past two years. But there is evidence to suggest that Virginia’s economic engine may be over the hump. That chart above comes from Terry L. Clower, director of the Center for Regional Analysis at George Mason University, who presented it during a business round table sponsored by the Thomas Jefferson Institute two days ago.
After shedding thousands of jobs in 2012, 2013 and 2014, the federal government has stabilized employment, actually adding a few in 2015. After declining for three years straight, federal procurement inched back up in 2014. Perhaps most important, Northern Virginia’s professional & business services occupational category grew by 5% between April 2014 and April 2015. That category is the economic driver of the Northern Virginia economy, and the fact that it is expanding faster than federal employment and federal procurement suggests that maybe, just maybe, Northern Virginia tech sector is diversifying beyond the federal government.
It’s hard to imagine that the federal government, with its severe long-term budget constraints, can resume the spending growth path that propelled the Washington metro economy for so many years. Still, there are signs that Northern Virginia businesses are adapting to the new normal. I’m hopeful that the promising statistics represent more than a dead cat bounce.
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