D.C. economy at crossroads as jobs and business growth stall
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The D.C. economy is at "a pivotal moment" with several large obstacles looming, according to a new D.C. Chamber of Commerce report.
Why it matters: While the District has made economic progress since its pandemic downturn, it's now facing a tight job market, high office vacancy and a decline in business interest.
The big picture: The report, released alongside this week's State of the District and Region Conference, comes as D.C. navigates the fallout of DOGE cuts, the federal crackdown and recession fears.
💼 Jobs
D.C. job growth and hiring are being outpaced by the number of residents looking for jobs, says the report.
- Job openings and hiring and quit rates have all fallen in recent years, indicating that "the local labor market has lost momentum."
- The city has lost about 30,000 jobs compared to its prepandemic level.
And District job activity — aka the amount of people performing certain jobs in the city — is still below prepandemic levels in sectors like media, education, law, engineering and science.
- The only industry group to see a significant increase in activity post-pandemic: installation, maintenance and repair.
Meanwhile, the District's unemployment rate was 6% in August, unchanged from July and again leading the country.
🏢 Office
D.C. office occupancy rates are holding steady at about 50% of prepandemic levels — but in office hubs like Georgetown and downtown, annual vacancy rates are 20% or higher, per the report.
- And annual office rents have dropped when adjusted for inflation, "reflecting weak demand and landlord concessions to retain tenants."
- Meanwhile, much of the region's job activity has been pushed out to the 'burbs post-pandemic, the report found.
📋 Business
The city's entrepreneurial pipeline has been taking a hit: The number of net new business establishments created in D.C. dropped 69% between 2021 and 2023, per the report. Business applications are down, too, as of last year.
- "The signal is clear: The appetite to start new businesses in D.C. has diminished," reads the report.
Meanwhile, business confidence is low — 80% of businesses surveyed in April thought D.C.'s economy would weaken over the next six months, up from 45% in January, according to D.C. Policy Center data cited in the report.
Yes, but: The report points to projects such as a new Commanders stadium and Capital One Arena upgrades, as well as the city's push to reimagine empty office space, as examples of investments that will diversify and reinvigorate the local economy.
- And while the job market is slow overall, 72.4% of D.C. residents were in the labor force as of April — the highest since pre-COVID.
Between the lines: The Chamber's report suggests several ways the District can jumpstart its economy, such as moving away from office-dependent sectors, supporting research and innovation at local universities, and revitalizing underutilized spaces in areas like downtown.
What's ahead: Mayor Muriel Bowser said at this week's conference that she would reintroduce parts of her city growth agenda that had been struck down by the D.C. Council earlier this year.
- These could potentially include pro-business moves like tax initiatives and retail grants.
What we're watching: How the deferred resignations — and more possible federal cuts — affect the region.
- "If federal employment in the District continues to shrink through 2025, the local labor market will likely further weaken," says the report.