December 4, 2008 The U.S., Washington & Northern Virginia Economies: Current Performance and Near Term Outlook John McClain, AICP Senior Fellow and Deputy Director, Center for Regional Analysis, School of Public Policy George Mason University

GDP Percent Change (Real Dollars) %

CURRENT CONDITIONS

ISM Manufacturing and Non-Manufacturing Indices Non-Mfg Mfg

Annual Change in Jobs - US THOUSANDS Oct = Source: BLS Establishment Survey

Initial Unemployment Claims 350 Thousands (4-week moving average)

U.S. Unemployment Rate % Source: BLS, Seasonally Adjusted 6.5

Consumer Confidence 100 Present Situation Expectations Source: Conference Board, GMU Center for Regional Analysis

U.S. Gross Domestic Product Quarterly Change: 2006 – 2010 % Source: Global Insight Forecast > > > > > > > > >

The Washington and Northern Virginia Economies

U.S. Washington Area GRP Change 3/ /01 (8)2.5 % 7/90 - 3/91 (8)0.2 % 7/ /82 (16)3.1 % 1/80 - 7/80 (6)2.3 % U.S and Washington Area Recent Recessions

Annual Change in Jobs 1991 – 2007 Washington Metro Source: BLS, GMU Center for Regional Analysis Thousands

Annual Job Change Washington Metro Area Source: BLS, GMU Center for Regional Analysis Annual Change Annual Month-over-the-Year s

15 Largest Job Markets Job Change Oct. 07– Oct. 08 Thousands Washington + 35,700 Ranked by Total Jobs

15 Largest Job Markets Ranked by Unemployment Rate October 2008 % U.S. 6.1 Data not seasonally adjustedSource: BLS, GMU Center for Regional Analysis 4.1

Oct – Oct Job Change By Sector MSA (000s) Total = 35,800 (Ranked by Size of Sector)

Annual Job Change Northern Virginia Source: BLS, GMU Center for Regional Analysis Annual Change Annual Month-over-the-Year s

Billions $ Federal Procurement – Northern Virginia Source: Consolidated Federal Funds Reports, Eagle Eye, Inc., GMU Center for Regional Analysis +27% +16%

The Housing Market

Sales and Total Active Listings Washington MSA, October Each Year Listings Sales 1000s

Units Sold Percent Change By Subregion All Housing Types % NVA MSA DC SMD

Units Sold Percent Change Northern Virginia All Housing Types PW LDN FFX NVA %

Median Housing Sales Price Northern Virginia October Each Year, Source: MRIS, GMU Center for Regional Analysis $ Appreciation = + 4.7%/year for 10 years $181,000 $459,300 $287,500

Foreclosure Activity Virginia Metropolitan Areas July 15 and Oct 15, 2008 Source: RealtyTrac, GMU Center for Regional Analysis

The Outlook

GDP/GRP Washington Metro % U.S.

Employment Change by Sub-state Region (000s) D.C Sub. MD No. VA REGION Average Annual Change = 44,900 Source: BLS, GMU Center for Regional Analysis

Job Change by Sector, (000s) SECTORWashington Metro Area D.C.Suburban MD Northern Virginia Professional, Business Services Government Health, Educ. Svcs Other Services Hospitality All Other TOTAL

Foreclosures Will Take Time to Work Through –Many Sub-primes Will Have Reset by Early 2009 –Alt-As will take much longer –Some Areas Face Danger of Prime Mortgages Going into Foreclosure Because of Falling Prices Fiscal Impacts of Declines in Residential Property Values Will Invoke Large Toll on Government Tax Revenues Federal Policy Effects – How Long For Current Actions to Turn the Current Situation? Increases in Sales A Sign the Tide is Turning? Market Recovery Will be a Mix by Geography – Areas with Good Transportation and Access to Jobs, Recovering Soon, Most Areas Will Take Longer THE OUTLOOK FOR NORTHERN VIRGINIA’s HOUSING MARKET

Underlying Economic Fundamentals are Still OK –Federal Procurement Moderating Trend to Continue & Will Grow But Will Not be the Economic Driver as in the Past –Sectors Related to Housing Market Will Take Some Time to Recover – Will Depend on Housing Market Recovery –Long-term Prosperity/Recovery Will Require Adequate Workforce, Workforce Housing, Improved Mobility / Traffic Congestion Relief –Need Long-Term Economic Strategy To Build on Region’s Strengths & Adjust to Any Shifts in Procurement Policy Federal Policy Effects – How Long For Current Actions to Turn the Current Situation? Recovering Slowly Late 2009 At National Level ?? – Northern Virginia Jobs Will Continue Slow Growth THE OUTLOOK FOR NORTHERN VIRGINIA’s ECONOMY