A 2023 recession would still hurt Washington
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Conventional wisdom says that Washington is recession resilient thanks to Uncle Sam. Federal spending and jobs helped us stave off the worst during the Great Recession.
What I’m hearing: But relying on the federal government isn’t what it used to be, local economists who are concerned about a 2023 slowdown tell Axios.
- For one, federal workers staying remote means the District is “no longer as protected” from a recession as it was in the past, says Yesim Taylor, head of the D.C. Policy Center.
And with the hollowing out of downtown and business travel still down, the region depends on the feds today nearly as much it did in 2010 — when about 40% of the local economy relied on the federal government, according to Terry Clower, who leads George Mason University's Center for Regional Analysis.
- That’s a BFD, because business leaders have spent the past decade twisting to find new engines of growth.
The big picture: The region has grown economically in recent years, but not as fast as the nation. Big names like Amazon with its new HQ2, the life sciences corridor, and new data centers mask bigger problems.
- For example, the tech sphere here has a persistent labor shortage, meaning companies can’t find the talent they need to put down roots and grow as much as possible. Clower says computer programming and cybersecurity jobs can be a “mixed bag," especially with a backlog of security clearances making it even harder to find employees.
- Even with Capital One Tower going up in Tysons, the region’s financial services industry has lagged behind the rest of the nation, according to Jacob Sesker, a local economist at Harpswell Strategies.
- All that is coupled with the fact that there is a high cost of living and regional leaders who don’t collaborate enough to attract big employers.
What to watch: The Cherry Blossom Festival in late March to mid-April. That event — fully back for the first time since the pandemic began — will indicate whether tourism is returning to Washington.
- Sesker says he'll be watching hotel bookings, inbound flights, and transit usage to see “whether the summer is going to be a good summer for retail [and] restaurant hospitality employment.”
The bottom line: 2023 was supposed to be the first “normal” year since the pandemic, but a global recession — still predicted by most economists, even as inflation slows — is putting a damper on outlooks.
- With no industry poised to drive substantial growth in the region, “maybe the best we can hope for in 2023 is steady as she goes,” Sesker adds.
💬 Spotted by me last Friday: Former mayor Adrian Fenty, back in D.C. lunching at Zaytinya.
Town Talker is a weekly column on local politics and power. Drop me a line about the talk of the town: [email protected]