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Friday, December 01, 2006

3 Million Jobs Added to our area.

No Panic Attack Needed in Metro Area
Number of Jobs Tops 3 Million, Housing Market Continues to Moderate
Prognosis – Favorable Overall

By John McClain and Lisa A. Fowler, Ph. D., Center for Regional Analysis, GMU

The Economy
Through July, the Washington economy continued healthy expansion with strong job growth, and for the first time the total number of payroll jobs in the region topped 3 million. Having led all metropolitan economies for the last several years in job growth, the Washington Metropolitan Area continues to add jobs at a growth rate above the long-term average. Northern Virginia has garnered the lion’s share of the metropolitan area job growth as it continues to benefit from federal procurement to area companies for technology and consulting services related to the war on terrorism and other federal programs.

For the 12-month period from July 2005 to July 2006, the metropolitan area added 73,400 jobs. Northern Virginia continues to outpace both Suburban Maryland and the District of Columbia in job growth. Nearly one-half of jobs added in the last year – 33,900 jobs –were in Northern Virginia. (Note: Northern Virginia in this data set includes an area larger than the NVAR region.) Not only has the job growth been strong, but the quality of jobs that are added continues to be high caliber. Of Northern Virginia’s total job growth during the past year, 21,100 jobs were added in the Professional and Business Services (PBS), the economy’s highest paying sector. The average weekly wage for PBS Sector jobs in the Washington Metropolitan Area was $1,458 in 2005, compared with $1,066 for all jobs.

The July 2005 through July 2006 period is a continuation of the Washington Metropolitan Area’s unsurpassed growth of high-wage, knowledge-sector jobs. The Professional, Scientific and Technical Services sub-sector is the subset of the PBS sector with the most highly skilled and compensated workforce. Since July of 2000, the Washington Metropolitan Area has gained 88,000 jobs in the Professional, Scientific and Technical Services (PSTS) Sector, significantly more than the next metropolitan area. If treated as a metropolitan area, Northern Virginia by itself ranked No. 2 in the volume of PSTS jobs added during the past six years.

A major reason for the region’s stellar economic performance is the level and increases in federal government purchases of services from area firms. In FY 2004 the federal government purchased $51 billion of services from Washington area companies. From FY 2003-2004, federal procurement to Washington area firms increased by $9.3 billion, which amounted to two-thirds of the total federal government procurement increase in the United States. Data for FY 2005, which just recently became available, indicate that procurement spending increases are moderating as the run-up in spending resulting from the war on terrorism and in Iraq plateaus.

The Housing Market
While the area’s job growth continues to outpace the rest of the country, the housing market has changed significantly since late 2005. However, the region’s strong economic fundamentals mean that the housing market will remain relatively healthy compared with other metropolitan areas.

For the first time since the mid-1990s, average home prices in the metropolitan area dropped in July on a month-over-the-year basis. The July 2006 average home price in the Washington Metropolitan Area was 1.4 percent lower than the July 2005 average home price. The number of homes sold has declined from record high levels and the number of days on the market has increased significantly. In July 2006, 7,104 homes sold in the Washington Metropolitan Area and 1,856 homes sold in the NVAR region. One year ago, the numbers of homes sold were 11,110 and 3,058, respectively. For the first seven months of 2005 compared to 2006, the average number days on the market has ranged from 26 to 56 metro-wide, and from 18 to 55 for NVAR’s neighborhoods.

The single-month drop in home prices should not sound alarm bells. For the first seven months of 2006, the average house price has increased from $445,500 to $466,300 in the Washington Metropolitan Area, an increase of 4.7 percent. For the NVAR jurisdictions, the average price for the same period has increased from $528,400 to $544, 400, an increase of 3 percent. The long-term average for annual price increases from 1980 to 2006 has been 7 percent per year, but there have been times when prices did decline slightly. In the early and mid-1990s, prices declined slightly in a couple of years. In the nine-year period from 1989-1998, the price index for all single-family homes increased only 1.3 percent. However from 1998 to 2006, the index has gone up by 172 percent, representing an average compound rate of 13.3 percent per year for the past eight years.

Clearly the rates of price increases experienced in the past several years could not be sustained. The accelerating housing market has made personnel recruitment more difficult for area companies. Many families have chosen to rent rather than buy, or have been forced to locations in the more far-flung suburbs. The moderation in price increases, and perhaps even slight declines in some segments of the market, is just one sign that the region’s economy is coming back into balance. During the next few years, economic growth and housing market activity will eventually settle at more sustainable levels in line with longer-term trends. The Northern Virginia area will continue to be an attractive place for workers and families and demand for housing will not diminish significantly.


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