Study: D.C. economy faces two more tough years

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Local,DC,Maryland,Virginia,Liz Essley

The Washington area's economy will see little improvement in 2013, but when it does start to pick up speed, it will be transformed into a leaner, tougher marketplace that depends less on the federal government and more on the private sector, according to a new analysis.

Congress' inability to strike a more comprehensive deal on the "fiscal cliff" won't be as bad as the massive tax increases and federal spending cuts that would have kicked in on Jan. 1 without the deal. But it'll still take until 2015 for the local economy to rebound, according to new forecasts set to be released today from George Mason University's Center for Regional Analysis.

"[The outlook for] 2013 is much weaker than we expected," said the center's director, Stephen Fuller. "We expected 2013 to be a better year than it's going to be. We underestimated the ability of Congress to come to an agreement on the fiscal cliff. And that's going to hang over us for another few months."

The Washington region will shed 22,000 federal jobs by 2017, Fuller predicts. That's much lower than the 450,000 jobs analysts thought would be lost as a result of federal spending cuts, both in federal jobs and related contracting jobs, but it's still enough to transform the local economy, Fuller said.

"We're going to be OK. It's just going to be a new economy, and it's going to take a while to get used to it," Fuller said.

The economist predicts the Washington region will still have a net gain of 281,070 new jobs by 2017, but most of those will be in the private sector and not related to the government, helping reduce the region's dependence on the federal government. The region will add roughly 55,000 new construction jobs by 2017 -- about 20 percent of new job growth -- as the housing sector rebounds, the regional center predicts.

"[Construction jobs] don't pay as well, and they don't generate as much economic activity," Fuller said. "The federal jobs on average pay far more than $100,000 [in annual salary], and we're not getting those."

Fuller's job projections, however, assumes that Congress will accomplish by March what it failed to address last year. Lawmakers must approve an increase in the national debt ceiling so the government doesn't default on its obligations, and they still have to agree on spending cuts that will help reduce the deficit. They also need to approve a new budget.

Fuller said he's confident lawmakers will be able to work out a deal, given the grave threat a failure poses for the economy.

DC Chamber of Commerce President Barbara Lang is also optimistic.

"I'm hopeful that the executive and legislative branches on the federal level will be able to solve this," she said. "We have got a get a hold on this because the trajectory that we are moving on is not sustainable."

lessley@washingtonexaminer.com

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