Jobs growth in U.S. capital pauses; concern about spending cuts

Reuters News
Posted: Jul 29, 2013 4:08 PM

WASHINGTON (Reuters) - For Washington, D.C., a city largely sheltered from the 2007-2009 recession, the jobs boom may be ending.

A report released by the chief financial officer of the U.S. capital found that the number of jobs located within the District of Columbia, and held by residents and commuters alike, peaked at 736,400 in October 2012 and dropped to 733,800 by May.

The number of residents with a job peaked this past March at 341,229, and then dropped 0.2 percent by May.

The pause in jobs gains is worrisome "because the full effects of federal spending cutbacks mandated by the sequester have not yet materialized," according to the report, which warned that it was too early to say if the trend would last.

Under a budget deal between Congress and President Barack Obama, the federal government must cut, or sequester, $1.2 trillion in spending over 10 years.

While the cuts are determined by a formula, the district does not have a clear idea of how spending reductions from its leading employer will affect its economy. Since the first rounds of cuts began on March 1, residents have worried that both federal employees and contractors will lose their jobs.

Earlier this month, the Labor Department reported that in June there were 733,500 employees on non-farm payrolls in Washington, a drop of 2,800 from June 2012. At the same time, its unemployment rate was 8.5 percent, compared to 9.1 percent in June 2012.

Federal government employment in the district was down 2 percent in May from a year earlier, while the private sector was up 1.4 percent, according to the report. Education and professional services led the private sector, followed by food service.

But wages earned within the District during the quarter that ended in March were 2 percent higher than the same quarter in 2012.

"The last two quarters have been the slowest year-over-year increases in over three years," the report found. "Wages in D.C. have now grown at a slower rate than the U.S. average for nine quarters."

The 2007-2009 recession was mild in Washington due to the federal presence buoying the local economy.

That, in turn, contributed to a jobs and population boom. From April 2009 through October 2012, Washington gained 41,200 jobs, according to the report.

The U.S. Census estimates that from April 1, 2010 to July 1, 2012, the last date for which data is available, the population of the nation's capital grew 5.1 percent to 632,323.

The federal government also has a direct impact on the District's finances, by providing funds for education, healthcare and safety, which constitute more than a fourth of all money the city plans to spend this fiscal year.

According to a separate report from the financial officer, the city has spent $6.161 billion out of a $9.595 billion budget for this fiscal year, which ends September 30, and its rate of spending is somewhat lower than the average over the last three years.

(Reporting By Lisa Lambert; Editing by Paul Simao)