Is the District’s sustained boomtown bonanza of the past several years suddenly coming to an end?
Two warnings issued by the D.C. Office of the Chief Financial Officer at the end of July provided preliminary cautions. Not cause for panic, but reminder that a false comfort of local invulnerability to the highs and lows of an ongoing national economic rollercoaster can quickly flat-line.
The monthly Economic and Revenue Trends summary bucked a consistent touting of more people, jobs and income that headlined statistics only four months earlier. Even the bleak title “Is the D.C. Economy Stalling?” veered from recent rosy reportage.
Citing labor and population statistics, indications are that both the number of net new jobs in the District and those employing D.C. residents have reached a plateau and are leveling off following an extended period of strong growth. After more than a year and a half of resident employment expansion totaling 10 percent and a gain of six percent in the past three-and-a-half years, the city has now registered a slight decline in recent months. Wage growth has also slowed. A reversal in job and wage numbers is a leading indicator of nascent economic downturn.
Likewise, although sustained population increases averaging more than 1,000 new residents per month have become the norm in recent years, forecasts for a lessening in this growth rate creates additional worry. Only a week prior to the economic report, the CFO issued a more ominous projection that the city’s rate of population growth will decline to only slightly more than one-third of what it is today over the next four years. A similar finding announced this week by PNC Financial Services Group maintains that high housing costs will likely limit future population gains. This would portend trouble for a local economy reliant on growth for fuel.
While the effects of federal budget sequestration have so far been nearly negligible to the District and regional economies, despite contrary advance warnings of doom, national spending cuts could begin to have a discernable local impact over time. Although private sector job creation has significantly outpaced reductions in government employment to date, this has now ceased to be the case. This uncertain prospect worries the District government’s top economists and results in a note of concern in the newest analysis. Although the local economy is increasingly less reliant on federal largesse, it remains susceptible to even modest impact of a national government downsizing that isn’t going away.
News of potential stagnation due a slowdown dovetailed with a languid late summer mood. After all, the season is the least stressful in the nation’s capital. Both Congress and the D.C. Council are on holiday, similarly sparing citizenry and commerce the varietals of annoyance and aggravation unique from both. For the city’s business community, a brief vacation from the obsessive regulatory scheming and unrelenting revenue extraction by District officials is a respite as welcome as a week on any beach.
An economic slackening will heighten the importance of recommendations to be issued by the D.C. Tax Revision Commission in December. This city commission, chaired by former Mayor Anthony Williams, has been working on identifying ways to revise and improve the local tax environment. A growing consensus is that the extraordinarily inordinate local tax and fee burdens borne by business will be a prime target in proposed regimen repair. The D.C. Council has already begun to set aside funds to accommodate anticipated corrective restructuring of the District’s taxation scheme.
Despite an appearance of wealth derived from a population of increasing median income, more people beget a corresponding increase in relative expenditures. The necessity of local government belt tightening will become a requisite relief required to encourage long-term private sector economic growth.
Whether D.C.’s elected officials are capable of an overdue reversal to a long-profligate tax-and-spend reflex when confronting these pending new realities is the big question.
Mark Lee is a long-time entrepreneur and community business advocate. Follow on Twitter: @MarkLeeDC. Reach him at OurBusinessMatters@gmail.com.