The Near-Term Outlook for the Washington Area...

Turner Mid-Atlantic Group2012 Annual Real Estate Market Forecast

The Near-Term Outlook for the

Washington Area Economy

February 2, 2012

Stephen S. Fuller, Ph.D.Dwight Schar Faculty Chair and University Professor

Director, Center for Regional AnalysisGeorge Mason University

10

12

14

16

1975-Q1

1982-Q3

% C

ha

ng

e in

GD

P

Recession Recovery Patterns of GDP

Past Five Recessions

0

2

4

6

8

0 1 2 3 4 5 6 7 8 9 10

1982-Q3

1991-Q1

2001-Q4

2009-Q2

Quarters After Trough

% C

ha

ng

e in

GD

P

Sources: BEA, GMU Center for Regional Analysis,

111.0

116.0

121.0

L.I.

U.S. Coincident and Leading IndicesNov 2006 – Nov 2011

RECESSION >

96.0

101.0

106.0

Nov-06

Feb-07

May-07

Aug-07

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

Aug-11

Nov-11

C.I.

45

50

55

60

65

ISM Manufacturing and Non-Manufacturing Indices

30

35

40

45 Mfg

N-Mfg

-2000

0

2000

4000

Annual Change in Payroll Jobs – USMonth over the Year, Not Seasonally Adjusted

(1000s)

Dec =+ 1.7 M

-8000

-6000

-4000

-2000

Source: BLS, GMU Center for Regional Analysis

0

200

400

600

000s

US Job ChangeMonth-to-Month, Seasonally Adjusted

Dec= 200

-800

-600

-400

-200

0

2007

2008

2009

2010

2011

Source: BLS

U.S. Job Change by SectorDecember 2007 – December 2009

-544

-1,206

-1,563

791

35

Leisure & Hosp.

Retail Trade

Prof. & Bus. Svcs

Educ & Health Svcs

State & Local Govt

(000s) Total - 8,363,000Ranked by Size in 2010

-375

69

-377

-200

-474

-1,795

-570

-2,192

-544

-2500 -2000 -1500 -1000 -500 0 500 1000

Information

Federal Govt.

Transp. & Util.

Other Services

Wlse Trade

Construction

Financial

Manufacturing

Leisure & Hosp.

Source: BLS March 2010 Benchmark, (Seasonally Adjusted), GMU Center for Regional Analysis

U.S. Job Change by SectorDec 2010 – Dec 2011

253

226

521

420

-251

Leisure & Hosp.

Retail Trade

Prof. & Bus. Svcs

Educ & Health Svcs

State & Local Govt

(000s) Total = 1,640Ranked by Size in 2010

-36

-36

72

44

84

46

7

225

253

-600 -400 -200 0 200 400 600

Information

Federal Govt.

Transp. & Util.

Other Services

Wlse Trade

Construction

Financial

Manufacturing

Leisure & Hosp.

Source: BLS March 2010 Benchmark, (Seasonally Adjusted), GMU Center for Regional Analysis

400

450

500

550

600

650

700

Initial Claims for Unemployment4-Week Moving Average

377

200

250

300

350

400377

Source: Bureau of Labor Statistics

8

9

10

11

U.S. Unemployment Rate

Dec

= 8.5

%

GI FCST

4

5

6

7

Source: BLS, Seasonally Adjusted

GI FCST11 – 9.012 – 8.813 – 8.614 – 7.915 – 7.116 – 6.6

80

100

120

140

100

Consumer Confidence

Expectations

0

20

40

60

9/1/07

12/1/07

3/1/08

6/1/08

9/1/08

12/1/08

3/1/09

6/1/09

9/1/09

12/1/09

3/1/10

6/1/10

9/1/10

12/1/10

3/1/11

6/1/11

9/1/11

12/1/11

Source: Conference Board, GMU Center for Regional Analysis

Current Situation

Growth in Total

Consumption Outlays

4.7

2.5 2.72.8

3.3 3.42.9

2.32.0 2.2 2.2 2.0 2.1

2.4

2

3

4

5

6

%

Forecast > > > > >

-0.6

-1.9-3

-2

-1

0

1

Source: Global Insight, GMU Center for Regional Analysis

10

20

30

%

U.S. Economic Performance

-30

-20

-10

0

Residential Fixed

Source: Global Insight

10

20

30

%

U.S. Economic Performance

-30

-20

-10

0Residential Fixed

Non-Res: Structures

Source: Global Insight

10

20

30

Residential Fixed

%

U.S. Economic Performance

-30

-20

-10

0 Residential Fixed

Non-Res: Structures

State & Local

Source: Global Insight

10

20

30

Residential Fixed

%

U.S. Economic Performance

-30

-20

-10

0Residential Fixed

Non-Res: Structures

State & Local

Federal

Source: Global Insight

10

20

30

Residential Fixed

Non-Res: Structures

%

U.S. Economic Performance

-30

-20

-10

0 Non-Res: Structures

State & Local

Federal

Bus. Inv.

Source: Global Insight

10

20

30

GDP

Residential Fixed

%

U.S. Economic Performance

-30

-20

-10

0Residential Fixed

Non-Res: Structures

State & Local

Federal

Bus. Inv.

Source: Global Insight

-2

0

2

4

6

U.S. Gross Domestic ProductQuarterly Change: 2007 – 2014

%Forecast > > > > > >

-10

-8

-6

-4

-2

20

07

-1 2 3 4

20

08

-1 2 3 4

20

09

-1 2 3 4

20

10

-1 2 3 4

20

11

-1 2 3 4

20

12

-1 2 3 4

20

13

-1 2 3 4

20

14

-1 2

The Washington Metropolitan

Area EconomyArea Economy

40

80

120

160

Annual Change in JobsWashington Metro Area1,000s

-80

-40

0

Source: BLS, GMU Center for Regional Analysis

15 Largest Job MarketsJob Change Dec 09 – Dec 10

0

20

40

60

80

100(000s)

Washington + 57,500

-100

-80

-60

-40

-20

0

Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

15 Largest Job MarketsJob Change Dec 2010 – Dec 2011

0

20

40

60

80

100(000s)

Washington + 13,400

-100

-80

-60

-40

-20

0

Source: BLS March 2011 Benchmark, GMU Center for Regional Analysis

Annual Job ChangeWashington MSA

20

40

60

80

000s Annual Data Annual Month over Year

2009 2010 2011

-80

-60

-40

-20

0

20

2002

2004

2006

2008

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Source: BLS March 2011 Benchmark, GMU Center for Regional Analysis

Job Change by SectorDec 2010 – Dec 2011Washington MSA

-3

4

6

-4

8

Retail Trade

State & Local Govt

Educ & Health Svcs

Federal Govt.

Prof. & Bus. Svcs

(000s) Total = 13,400

-1

-1

-2

-2

6

-1

-2

6

-3

-20 -10 0 10 20 30

Transp. & Util.

Wlse Trade

Manufacturing

Information

Financial

Other Services

Construction

Leisure & Hosp.

Retail Trade

Source: BLS March 2011 Benchmark, GMU Center for Regional Analysis

Annual Job ChangeDistrict of Columbia

30

40

50

60

000s Annual Data Annual Month over Year

2009 2010 2011

-40

-30

-20

-10

0

10

20

2002

2004

2006

2008

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Source: BLS March 2011 Benchmark, GMU Center for Regional Analysis

Job Change by SectorNov 2010 – Nov 2011District of Columbia

0

0

3

-3

4

Retail Trade

State & Local Govt

Educ & Health Svcs

Federal Govt.

Prof. & Bus. Svcs

(000s) Total + 7,000

0

0

0

0

1

1

1

1

0

-20 -10 0 10 20 30

Transp. & Util.

Wlse Trade

Manufacturing

Information

Financial

Other Services

Construction

Leisure & Hosp.

Retail Trade

Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

Annual Job ChangeSuburban Maryland

30

40

50

60

000s Annual Data Annual Month over Year

2009 2010 2011

-40

-30

-20

-10

0

10

20

2002

2004

2006

2008

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Source: BLS March 2011 Benchmark, GMU Center for Regional Analysis

Annual Job ChangeNorthern Virginia

30

40

50

60

000s Annual Data Annual Month over Year

2009 2010 2011

-40

-30

-20

-10

0

10

20

2002

2004

2006

2008

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Feb

Apr

Jun

Aug

Oct

Dec

Source: BLS March 2011 Benchmark, GMU Center for Regional Analysis

6

8

10

12

14

10.2 – DC

8.2 – U.S.

5.5 – SMD

Unemployment Rate

0

2

4

65.5 – SMD5.4 – MSA4.2 - NVA

Source: BLS, Not Seasonally Adjusted

The Changing Role of the

Federal Government

in the Washington Areain the Washington Area

2010 Structure of the

Greater Washington EconomyNon-LocalBusiness12.0 %

Total

Federal

Other Federal10.7 %

Fed Wages & Salaries 10.0%

Local ServingActivities34.8%

Federal

39.8%Procurement

19.1%

Source: GMU Center for Regional Analysis

100

120

140

160

180

FEDERAL SPENDING – WASHINGTON MSATOTAL & PROCUREMENT$ Billions

0

20

40

60

80

100

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Source: Census Consolidated Federal Funds Report

50

60

70

80

90

Federal ProcurementWashington Metro Area

$ Billions

TOTAL = $862 Billion

0

10

20

30

40

50

Source: Census Consolidated Federal Funds Report

300

350

400

Federal EmploymentWashington Metro Area

000sEisenhower

Kennedy –Johnson

Nixon -Ford

Carter Reagan Bush 1 Clinton Bush 2

+ 80

+ 36+ 18 - 6 + 4

- 42 + 22

Obama

+30

150

200

250

300

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

- 22

Source: BLS, GMU Center for Regional Analysis

Federal GovernmentWashington MSA

15

20

25

30

000s Annual Data Annual Month over Year

2008 2009 2010 2011

-20

-15

-10

-5

0

5

10

2002

2004

2006

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis Tot Nov 2010 = 378,000

Near-Term Economic Outlook for the Washington Metropolitan Areathe Washington Metropolitan Area

Growth Projections for Federal Spending and GRP: 2011- 2015

(in billions of 2010 dollars, annual % change)

Year Federal $s WMSA GRP

2010 $169.0 $425.02011 2.0% 2.6%2011 2.0% 2.6%2012 1.0% 2.7%2013 0.0% 2.9%2014 1.0% 3.3%2015 1.5% 3.2%2015 $178.5 $491.2Change 5.6% 15.6%

Source: GMU Center for Regional Analysis

Economic Outlook (GRP) – 2015Washington Area and Sub-state Portions

(Annual % Change)

3

4

5

6

7

%

DC

SMMSANV

-2

-1

0

1

2

3DC

Source: GMU Center for Regional Analysis

Employment Change by

Sub-state Region (000s)

2008 2009 2010 2011 2012 2013 2014 2015

D.C.D.C. 10.1 10.1 --2.22.2 9.59.5 3.63.6 4.74.7 5.85.8 7.97.9 7.97.9

Sub. MDSub. MD --3.33.3 --25.125.1 --5.95.9 2.42.4 5.35.3 9.99.9 11.811.8 13.213.2Sub. MDSub. MD --3.33.3 --25.125.1 --5.95.9 2.42.4 5.35.3 9.99.9 11.811.8 13.213.2

No. VANo. VA 6.1 -23.0 8.7 14.5 13.6 13.9 16.2 20.2

REGION 12.912.9 --50.350.3 11.311.3 20.520.5 23.623.6 29.629.6 35.935.9 41.341.3

Average Annual Change 1990-2010 = 36,000

Source: BLS, GMU Center for Regional Analysis, 2009-2015 based on 2010 Benchmark data from BLS, Revised 1/9/2012

2015 Structure of the

Greater Washington EconomyNon-LocalBusiness14.0 %

Total

Federal

Other Federal9.5 %

Fed Wages & Salaries 9.4 %

Local ServingActivities34.2%

Federal

36.3%Procurement

17.4%

Source: GMU Center for Regional Analysis

2

4

6

8

%

GDP/GRP 2000 - 2015

Washington

-4

-2

0

2

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: Global Insight, GMU Center for Regional Analysis

U.S.

cra.gmu.edu