Dr. Steven Fuller of George Mason University’s Center for Regional Analysis provided a gray outlook for low growth in the Washington, D.C. region for the next four years, even though the area’s economy is the strongest in the nation. His remarks came at a luncheon meeting of the Vienna-Tysons Chamber of Commerce at the Tower Club last week.
He said the slower-than-expected 1.8 percent overall economic growth rate is “better than nothing, but not enough to impact jobs.” We’re “muddling along,” he said, noting terms like “headwinds” and “soft spots” are often used in an environment like this one to explain the continuing malaise.
But while he said he was more worried about the psychological impact that terms like “double dip” could have than the actual likelihood of such a development, he did concede that rising energy prices represent the single great threat to the continuing slow recovery.
He also cited the Japanese tsunami, resulting in the current scarcity in parts for Japanese made products, energy and food price rises and uncertainty in the Middle East as among the “headwinds” constraining the national economy’s ability to grow.
As a result, he noted, in polls 80 percent of Americans think the economy is “in trouble,” and declining consumer confidence acts like a self-fulfilling prophecy.
After all, he said, since the great recession hit, the economy lost nine million jobs, and has been able to get only 1.4 million back. The ability of the economy to sluggishly recover despite fewer jobs indicates an ability to introduce efficiencies that lower costs while increasing output. There are many jobs, he said, that will simply never come back.
It will take current trends extending into 2015 before former levels of employment return to the economy, he said. But the rate of growth of leading economic indicators is currently slowing.
It will take 300,000 new jobs per month for 12 months to drop the unemployment rate one percent, and there were only 50,000 new jobs created in May. Another 426,000 filed for unemployment for the first time last week.
But he predicted that the expiration of the Bush tax cuts in a year and a half will result in less disposable income. He added that the “new home building industry is dead in the water,” even though there are 700,000 new household formations annually in the U.S. which is developing a pent-up demand.
For the D.C. region, Foster was more optimistic about prospects, noting that “the rest of the nation isn’t close to us” in terms of economic recovery. He cited the 4.3 percent unemployment rate in Northern Virginia, and a 5.4 percent rate throughout the D.C. region.