WASHINGTON, DC–President Trump's budget proposal is expected to be formally unveiled on Thursday and based on the leaked details it will not be pretty from Washington DC's perspective. Numerous programs are to go under the chopping block, the federal workforce headcount reduced and a hiring freeze put in place.

The result for the DC economy? According to one widely-cited statistic offered by Mark Zandi, chief economist for Moody's Analytics, regional employment would drop by 1.8%, personal income by 3.5%, and lower home prices by 1.9%.

On the other hand, there is also a $54 billion increase in defense spending, which would benefit the local economy.

The worse case scenario for the Washington DC economy is that all of the budget cuts are enacted, Alexander Paul, managing director of Market Research at Newmark Grubb Knight Frank tells GlobeSt.com. “The best case is that all of the additional spending for defense is passed into law.”

More than likely though, he says, neither scenario will come to pass.

“This is just a proposal. I tend not to be too concerned with things at the proposal stage. They usually change, sometimes dramatically, as Congress works on them.”

That said, he added that there is no doubt that there will be cuts to civilian federal agencies for which DC must prepare.

Stats Bode Well

That said, the regional economy's fundamentals bode well for a good 2017. “We are in interesting place right now. Sequestration kept us from growing very much and now our peer cities are ahead of us in the cycle,” Paul said.

“We have a longer runway now than we ordinarily wood, whereas in prior cycles we wouldn't have as much room to improve.”

A report by Newmark Grubb Knight Frank on the area's megatrends notes that Washington's regional economy has continued to expand in early 2017, “even as a controversial presidential administration has taken office and the current economic cycle has reached its eighth consecutive year of growth.”

The report also highlights the consensus of both national and regional economists that that the next significant economic downturn will take place in 2018 or 2019. DC, though, will not feel too much pain per the usual reasons.

However, the Washington metro area tends to be somewhat insulated from national economic cycles due steadying effect of the federal establishment and its educated and diverse regional employment base. This has meant that previous recessions have resulted in fewer local jobs lost and a quicker recovery when compared to other major US metropolitan areas.

Projections of Job Growth

NGKF forecasts job growth greater than the long-term average of 43,700 jobs in its report.

In the five-year period between 2017 and 2021, we expect the region to add an annual average of 45,500 payroll jobs. In consultation with Dr. Stephen Fuller of George Mason University, we expect Northern Virginia to host the greatest share of new jobs in this region.
More new positions in the region are being created in the professional/ business services sector than in any other sector, which will support demand for office space and – given the high wages of such positions – Class A apartments and retail.

Instant Insights /

DC, Don't Panic (Or Get Excited) About Trump's Budget Just Yet

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