Sunday, January 04, 2009

Recession hitting Washington, D.C. hard

Conventional wisdom states that the Washington, D.C. metro area is insulated from the recession because of all the government jobs here. Well, according to this table, the District of Columbia is experiencing a higher than average increase in the unemployment rate.

D.C. November 2007 unemployment: 5.7%
D.C. November 2008 unemployment: 8.0%
D.C. Increase in unemployment: +2.3%

That 2.3% increase in unemployment is the 12th worst in the nation, counting all 50 states plus D.C.

For those who insist on distinguishing between D.C. proper and the broader D.C. metro area, the unemployment rate statistics are for D.C. proper.

26 comments:

  1. I think the reason why "those who insist on distinguishing" do so is because the rates in neighboring areas don't - and haven't - risen the way the rates in this post have. There's no doubt rates have risen across the board but scaring someone in suburban Virginia or Maryland when their unemployment levels haven't ticked up as much is just as ridiculous as all the other "sky is falling" commentary. And in this case it just feeds perception to employers that job seekers can be held hostage regardless of skill set.

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  2. But in Baltimore, all is well. Home assessmetns are UP :

    http://www.baltimoresun.com/news/local/bal-md.assessments30dec30,0,7504671.story

    is Baltimore recession-proof?

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  3. I think the important distinction is the difference at which the unemployment rate is changing for people with college educations versus those with less education working in less skilled jobs. Based on my experience at work the job market is clearly softer for professionals - law firms and consultancies are not hiring at previous rates and raises and bonuses are not what they used to be - but the number you use doesn't draw the distinction. I would be willing to bet it is slightly lower for those with degrees and significantly higher for those without.

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  4. DC proper has a significant number of poor, uneducated "indigenous" people. These people inflate "DC Proper's" unemployment rate even during times of robust growth.

    Hard to say anything is 'normal' about DC when you know a lot about DC.

    Also, this is just a guess, but: If I lost my job and my home in Manassass, and I had nowhere to go... I'd move to DC. The extensive system of social welfare here (I live in DC) will take care of me. VA's system would spit me out.

    In fact, MD and VA's social systems spit people out regularly, and they wind up in DC.

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  5. Anonymous said...
    "I think the reason why "those who insist on distinguishing" do so is because the rates in neighboring areas don't - and haven't - risen the way the rates in this post have. There's no doubt rates have risen across the board but scaring someone in suburban Virginia or Maryland when their unemployment levels haven't ticked up as much is just as ridiculous as all the other 'sky is falling' commentary."

    Actually, it has been the housingheads like Lance (and a number of people posting under the name "Anonymous") who have been consistently saying that housing prices in DC proper won't decline because of all the government jobs in DC. They kept arguing that the suburbs would implode but DC was insulated, i.e. DC proper housing prices won't fall because DC was protected from a recession.

    However, as the unemployment data shows, DC proper is not insulated from a recession after all. Quite the opposite, DC proper is feeling the brunt of the recession.

    From the comments above, it looks like the housingheads are now moving the goalposts, arguing that it is the suburbs that are insulated from recession. Personally, I think that metro area data is better than data based on artificial geographic boundaries. However, I have to go with the data that's available.

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  6. We must stop using the government-figured unemployment rates, because of the "6-month rule". As the unemployed are only those unemployed for less than 6 months, all sorts of effects could distinguish a different rate in different regions - and the sensible definition of "unemployed" (those who want a job and would take a job if offered and may or may not be actively looking) may diverge from the official statistics in a number of ways.

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  7. "consistently saying that housing prices in DC proper won't decline because of all the government jobs in DC"

    I'm inside the federal government. Someone once said to me: "you're the only government person I know who lives in DC."

    And it is true. I'm the only person I know or have met in my time and travels within various Fed Gov organizations who lives in DC and works for the federal government. This 'evidence' is entirely anecdotal, but it is reasonable to say that most Fed Gov employees live in the 'burbs, where the vast majority of housing units are located.

    As previously mentioned, a great many poor people live in DC. DC has one of the highest poverty rates in the country. It is tops in AIDS per capita and at the bottom of school performance, which are symptoms of an impoverished population.

    I wouldn't be surprised if the increase in DC's unemployment rate comes from attrition or layoffs from the Home Depot on Rhode Island Ave. NE; which historically has been one of Home Depot's best-performing stores... unless you shop there and have to endure the terrible customer service resulting from the fact that HD must hire 'locals'. (Home Depot is in a world of hurt right now )

    All of this proves nothing, but it is interesting.

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  8. Its not that simple. People move across borders. One of the primary attributes of Washington DC is that its population is transient; it is in flux.

    From the DC Dept of Employment: (link at bottom)

    " From October 2007 to October 2008, the District’s civilian labor force increased by 4,700 as the number of employed residents decreased by 2,100 and the number of unemployed residents increased by 6,900. The District’s October 2008 unemployment rate was 2.0 percent higher than the rate in October 2007."

    "The number of District wage and salary jobs increased by 5,800 in October 2008. The private sector increased by 3,500 jobs while the public sector decreased by 2,300 jobs. In the private sector, educational and health services added 3,100 jobs, other services and professional and business services added 400 jobs each, and trade, transportation and utilities added 200 jobs. Meanwhile, leisure and hospitality lost 400 jobs, and information and natural resources, mining and construction lost 100 jobs each. Manufacturing and financial activities were unchanged over the month. In the public sector, the District Government added 2,300 jobs while the federal government and transportation were unchanged."

    "In the last twelve months, the District gained a total of 10,600 jobs. The private sector added 9,500 jobs and the public sector gained 1,100 jobs. The private sector growth occurred in educational and health services (up by 4,400 jobs), other services (up by 3,100 jobs), professional and business services (up by 1,700 jobs), trade, transportation and utilities (up by 600 jobs), natural resources, mining and construction (up by 300 jobs), and leisure and hospitality (up by 200 jobs). Losses were noted in financial activities (down by 400 jobs), information (down by 300 jobs), and manufacturing (down by 100 jobs). In the public sector, the federal government increased by 1,400 jobs; transportation added 300 jobs; while the District government shed 600 jobs. "

    http://newsroom.dc.gov/show.aspx/agency/does/section/2/release/15515

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  9. The distinction between DC proper and the burbs is an important one. Region wide, DC is one of the few areas that is ADDING jobs instead of losing them (see pages 3 & 4)

    http://www.cra-gmu.org/forecastreports/08forecasts/WashingtonEconomy-HousingMarketDAARDec17.pdf

    The prior posters are right, there are a number of very very poor indegenous people in DC who inflate DC proper's numbers.

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  10. Stop missing the forest for the trees. The important fact is that the unemployment rate in DC proper has increased and by a large amount, not that it isn't typically higher than in the surrounding suburbs.

    This suggests that home prices will continue to fall in the district since the income to afford homes is disappearing. Additionally for you DC haters, the high unemployment leads to socials ills, such as crime, which could further stress home prices in areas most affected by unemployment.

    So outer suburbs home prices fall because of distance from the employment core and DC prices fall because of unemployment and social ills.

    This all leads the same place: Lower prices in DC and in the suburbs.

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  11. If we are having higher unemployment AND are gaining jobs, that means MORE people are moving here in the hopes of finding jobs (yet all are not successful).

    If we have more people and basically a stagnate housing stock, prices arent as likely to fall as hard as they would if we were LOSING jobs.

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  12. Kids, you didn't beleive me when I said that 2008 saw the death of suburban sprawl. Now the MSM is starting to talk about it. I guess you'll beleive when Hannah Montana starts singing about it?

    "Newsweek economics columnist Robert J. Samuelson declared in his December 29, 2008 column that 2008 was "the end of an era." He wrote, "We know 2008, much like 1932 or 1980[?], marks a dividing line for the American economy and society." The economic trends in the commercial real estate market bear out Samuelson's claim. "

    http://greatergreaterwashington.org/post.cgi?id=1550

    Be sure to link to the Newsweek column.

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  13. "GWB barely acknowledged this compound problem. He asserted that America was addicted to oil, but he failed to take the idea a step further and say that our vaunted "way-of-life" could no longer be taken for granted. If anything, he endorsed the popular idea that a suburban lifestyle and WalMart consumerism was a Jesus-driven entitlement, and his circle in governance did everything possible to replace the industrial economy with an economy based on suburban land development and credit card spending -- which was enabled by fantastic experiments in finance that proved to be nothing more than an impenetrable web of swindles."

    James Howard Kunstler. Google it.

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  14. I live and work in DC and agree with the several commenters who note that any increase in the city-wide unemployment rate is driven by a discrete but large african-american (and salvadoran to a lesser extent) population that lives in poverty. The persons losing their jobs do not own property and are unlikely to even pay market rent. Much of DC's population receives government subsidies for housing in one form or another. As a result, increased unemployment has little impact on the private housing market.

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  15. But DC is recession proof, real estate always goes up, and there is no bubble.

    Glad we cleared that up. Kidding aside, I know some people who are still in denial. They are now saying that the bid rebound is just around the corner.

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  16. "I live and work in DC and agree with the several commenters who note that any increase in the city-wide unemployment rate is driven by a discrete but large african-american (and salvadoran to a lesser extent) population that lives in poverty."

    What a f@&c!ed up comment!

    African Americans and Salvadorans don't create unemployment, they are the first to suffer the consequences of it.

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  17. I'm the Anonymous who made the "f@&c!ed up comment" above. You are right, "driven" was a poor word choice. That said, effing relax. I meant changes in the DC-wide unemployment rate mainly reflect unemployment among a particular population that is not a major factor in the private housing market. Of course unemployment is not the fault of the poor, and yes, it is unfortunate that the effects of a recession disproportionately burden the poor, but all that is for another blog. Jeebus.

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  18. A sincere question: DC is still very mixed in some, if not most, areas. If the poor in these areas loose their job, might they not loose their house? Even if the paid it off a long time ago, can they afford the property taxes? Haven’t taxes based on the home’s value increased dramatically in areas where gentrification has occurred?

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  19. "Haven’t taxes based on the home’s value increased dramatically in areas where gentrification has occurred?"

    Yes, taxable assessments have increased dramatically where gentrification has occurred.

    The city protects its residents from being taxed right out of their homes with specific rules regarding property taxes. Details are available at www.dc.gov

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  20. DC caps residential real property tax rates at 10% annually. This cap is lifted when the property is sold to a new owner.

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  21. "However, as the unemployment data shows, DC proper is not insulated from a recession after all. Quite the opposite, DC proper is feeling the brunt of the recession."

    James, lets be honest. There is a lot you don't know about DC. For starters; You don't know about the people who choose to live in DC - because you would never willingly associate with those people.

    However, please keep latching on to incongruent statistics and writing about them as if you're an expert on urbanism. It is entertaining.

    (I'm really looking forward to the Potomac River bridges between VA and DC being shut down, I'm sure you are too!)

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  22. "Barbara B. Lang, executive director of the D.C. Chamber of Commerce and former chairman of a workforce development group, said the city's unemployment rate typically is double that of the region because the District has a large proportion of residents who are unprepared for the job market. Many, she said, can only qualify for entry-level jobs at small businesses, which have been hit harder in the slowing economy."

    HMMM - sounds to me like the "unprepared" will be hardest hit, a recipe for speeding up the gentrification process taking place for the last 15 years...

    http://www.washingtonpost.com/wp-dyn/content/article/2009/01/06/AR2009010602935.html?sid=ST2009010700125&s_pos=list

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  23. MMM - sounds to me like the "unprepared" will be hardest hit, a recipe for speeding up the gentrification process taking place for the last 15 years...


    Yup. This is akin to DC-doomsayers who pointed to rumors of recent DC population losses as a *bad* thing. When in fact it was caused by large poor families moving out, and wealthy DINKs and single-child families moving in.

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  24. More from the above Post article:

    "Accompanying new employees will be "plenty of churn, which will be a boon to the real estate market," said Anirban Basu, chairman and chief executive of Sage Policy Group, a Baltimore economic and policy consulting firm. "

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  25. I'm not disagreeing completely with Anirban Basu, but his pieces on WYPR were never quite bearish enough to reflect the reality of the current economic situation. In fact, sometimes his Morning Economic Report has nothing to due with the economy at all. But when he does venture back on subject, his reluctance to say anything bad about the housing market might be due to the fact that his clients include: Pulte Homes, Toll Brothers, Home Builders Association of Delaware, Wells Real Estate Funds, Trammell Crow, ect.

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  26. "I'm the Anonymous who made the "f@&c!ed up comment" above. You are right, "driven" was a poor word choice. That said, effing relax."

    Relaxing now. Thanks.

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