News

Regional Economic Forecast Not Too Rosy, Fuller Explains

In an environment defined by significant uncertainty as President Trump takes office, economic forecasting becomes an especially dicey proposition, but that did not stop Dr. Steven Fuller, the region’s best known prognosticator of trends for the Washington, D.C. metro area, from dishing his thoughts to a large gathering of the Northern Virginia Chamber of Commerce at Falls Church’s Fairview Marriott Wednesday.

Fuller, a tweedy professor at George Mason University and director of a regional economic forecasting institute there now named for him, replicated a posture he’s taken so many times in the last decade and more, which was to dampen the optimism expressed by others, including Virginia Governor Terry McAuliffe, at the conference.

“I am not as optimistic as the government, and am attuned to threats to the economy here,” Fuller said, reminding the 500 in attendance that the D.C. area “is a company town” unduly dependent on the federal government for its economic stability. However, where federal government employment accounted for 32 percent of all the jobs in the region a half-century ago, it now accounts for only 11.5 percent today.

It is how the regional economy has been handling the key “knowledge economy” facets of its private sector growth that causes most of his concern, Fuller said.

While the last two years have seen an explosive growth in jobs in the region (the third highest two-year number in the history of the area), they’ve not been in the right sectors, he cautioned. Fuller defined the eight kinds of private sector industries that reflect the best of what the region has to offer to the wider world, and provided data to show they were particularly stagnant, while less definitive businesses – food, entertainment and other consumer-based ones that only serve the existing population base here – have accounted for all the job growth in recent years.

Fuller defined a cluster of non-government businesses that offer advocacy services, media and information, business and leisure travel, business and financial services, information and communication technology, science and security technology and bio and health technology as core businesses reflecting the considerable talents of the regional “knowledge economy” here.

But this cluster has accounted for only a 1.9 percent growth in jobs, compared to a 4.9 percent increase in jobs in non-cluster businesses and 1.8 percent growth in federal government jobs. That is problematic because jobs in the cluster industries pay an average of $103,000 compared to non-cluster jobs paying half, an average of $51,000.

The failure for these cluster business to grow at even the national average (2.2 percent) is costing the region dearly, he said, accounting for 75,000 fewer jobs than if they grew at the national average. That adds up to a loss of $177.9 billion carried forward to the year 2025.

“That’s a lot less spending power than we need to drive this economy,” he said. “That’s a lot fewer meals, cars, home buys, and other expenditures to augment the growth in this economy,” he noted.

He concluded that “how well the region has pivoted away from federal government dependency is not as rosy as thought.”

It all depends on the kinds of jobs that are created, he noted, and also to what end infrastructure investments are put.

Preceding Fuller at the conference, Dr. Terry Clower, the Northern Virginia chair and professor of public policy at George Mason University, noted that 16 percent of the labor force in the region takes the form of a self-employed contract work mode, and that proportion will rise to 30 percent by 2030.

So while job growth has been solid the last two years, “wages should be growing much faster,” he said, while much of the gains in technology in recent years has been in the form of “labor saving technologies” that “add stress to middle income white collar jobs and low income entry level hospitality jobs alike.”

Economic diversification is required, including infrastructure projects that have the effect of boosting productivity.