December 4, 2008 The U.S., Washington & Northern Virginia Economies: Current Performance and Near Term Outlook John McClain, AICP Senior Fellow and Deputy.

December 4, 2008

The U.S., Washington & Northern Virginia Economies:Current Performance and Near Term Outlook

John McClain, AICPSenior Fellow and Deputy Director,

Center for Regional Analysis, School of Public Policy George Mason University

GDP Percent Change(Real Dollars)

%

CURRENT CONDITIONS

ISM Manufacturing and Non-Manufacturing Indices

Non-Mfg

Mfg

Annual Change in Jobs - US

THOUSANDS

Oct =- 1.18

Source: BLS Establishment Survey

Initial Unemployment Claims

350

Thousands (4-week moving average)

U.S. Unemployment Rate

%

Source: BLS, Seasonally Adjusted

6.5

Consumer Confidence

100

Present Situation

Expectations

Source: Conference Board, GMU Center for Regional Analysis

U.S. Gross Domestic ProductQuarterly Change: 2006 – 2010

%

2006 2007 2008 2009 2010 2011

Source: Global Insight

Forecast > > > > > > > > >

The Washington and Northern Virginia Economies

U.S.Washington Area

GRP Change

3/01 - 11/01 (8) 2.5 %

7/90 - 3/91 (8) 0.2 %

7/81 - 11/82 (16) 3.1 %

1/80 - 7/80 (6) 2.3 %

U.S and Washington Area Recent Recessions

Annual Change in Jobs1991 – 2007

Washington Metro

Source: BLS, GMU Center for Regional Analysis

Thousands

Annual Job ChangeWashington Metro Area

10

56

71

63

50

3529 26 26 27

21

128

1825 27

2125 27

2228 27 27

4045

38 36

0

20

40

60

80

100

20

02

20

03

20

04

20

05

20

06

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Source: BLS, GMU Center for Regional Analysis

Annual Change Annual Month-over-the-Year 2007 2008

000s

15 Largest Job MarketsJob Change Oct. 07– Oct. 08

-60-40-20

020406080

100Thousands

Washington + 35,700

Ranked by Total Jobs

15 Largest Job MarketsRanked by Unemployment Rate

October 2008

0123456789

10%

U.S.6.1

Data not seasonally adjustedSource: BLS, GMU Center for Regional Analysis

4.1

Oct. 2007 – Oct. 2008Job Change By Sector MSA

(000s)

0.90.2

-0.7-2.4

-3.28.2

-5.01.4

-0.611.6

9.94.4

11.0

-10 0 10 20 30

Transp & Util

Wlse Trade

Mfg

Information

Financial

Other Svc

Const

Leisure & Hosp

Retail Trade

St & Loc Gov

Educ & Hlth Svc

Federal

Prof & Bus Svc

Total = 35,800(Ranked by Size of Sector)

Annual Job ChangeNorthern Virginia

-8

13

5345

31

20 17 17 20 20 1913 12 14 14 14

8 8 11 13 11 10 9 12 13 13 10

-10

10

30

50

70

20

02

20

03

20

04

20

05

20

06

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No

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Source: BLS, GMU Center for Regional Analysis

Annual Change Annual Month-over-the-Year 2007 2008

000s

Billions $

Federal Procurement – Northern Virginia

Source: Consolidated Federal Funds Reports, Eagle Eye, Inc., GMU Center for Regional Analysis

+27%

+16%

+16%

The Housing Market

Sales and Total Active ListingsWashington MSA, October Each Year

Listings

Sales

1000s

Units Sold Percent ChangeBy Subregion

All Housing Types%

NVA

MSA

DC

SMD

2007 2008

Units Sold Percent ChangeNorthern Virginia

All Housing Types

PW

LDN

FFX

NVA

%

2007 2008

Median Housing Sales PriceNorthern Virginia

October Each Year, 1998 - 2008

Source: MRIS, GMU Center for Regional Analysis

$

Appreciation = + 4.7%/year for 10 years

$181,000

$459,300

$287,500

Foreclosure ActivityVirginia Metropolitan AreasJuly 15 and Oct 15, 2008

Source: RealtyTrac, GMU Center for Regional Analysis

The Outlook

GDP/GRP 2000 - 2011

Washington Metro

%

U.S.

Employment Change bySub-state Region (000s)

2007 2008 2009 2010 2011 2012 2013

D.C.D.C. 7.27.2 6.6 6.6 5.55.5 6.06.0 6.46.4 7.07.0 6.56.5

Sub. MDSub. MD 5.85.8 6.56.5 6.06.0 10.710.7 12.512.5 14.314.3 16.416.4

No. VANo. VA 15.5 12.5 12.2 19.8 23.5 26.8 31.1

REGION 28.528.5 25.625.6 23.723.7 36.536.5 42.442.4 48.148.1 54.054.0

Average Annual Change 1990-2007 = 44,900

Source: BLS, GMU Center for Regional Analysis

Job Change by Sector, 2008-2013(000s)

SECTOR Washington Metro Area

D.C. Suburban MD

Northern Virginia

Professional, Business Services 109.0 18.9 30.4 59.7

Government 41.2 3.8 14.7 22.7Health, Educ. Svcs. 29.7 5.5 10.4 13.8Other Services 25.2 5.6 5.8 13.8Hospitality 18.4 3.7 5.6 9.1All Other 6.8 .5 -.5 6.8 TOTAL 230.3 38.0 66.4 125.9

• Foreclosures Will Take Time to Work Through – Many Sub-primes Will Have Reset by Early 2009– Alt-As will take much longer– Some Areas Face Danger of Prime Mortgages Going into Foreclosure

Because of Falling Prices

• Fiscal Impacts of Declines in Residential Property Values Will Invoke Large Toll on Government Tax Revenues

• Federal Policy Effects – How Long For Current Actions to Turn the Current Situation?

• Increases in Sales A Sign the Tide is Turning?

• Market Recovery Will be a Mix by Geography – Areas with Good Transportation and Access to Jobs, Recovering Soon, Most Areas Will Take Longer

THE OUTLOOK FOR NORTHERN VIRGINIA’s HOUSING MARKET

• Underlying Economic Fundamentals are Still OK– Federal Procurement Moderating Trend to Continue & Will Grow But

Will Not be the Economic Driver as in the Past – Sectors Related to Housing Market Will Take Some Time to Recover

– Will Depend on Housing Market Recovery– Long-term Prosperity/Recovery Will Require Adequate Workforce,

Workforce Housing, Improved Mobility / Traffic Congestion Relief– Need Long-Term Economic Strategy To Build on Region’s Strengths

& Adjust to Any Shifts in Procurement Policy

• Federal Policy Effects – How Long For Current Actions to Turn the Current Situation?

• Recovering Slowly Late 2009 At National Level ?? – Northern Virginia Jobs Will Continue Slow Growth

THE OUTLOOK FOR NORTHERN VIRGINIA’s ECONOMY

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