Fairfax County is Continuing to Suffer Job Losses

8/10/2019 Fairfax County is Continuing to Suffer Job Losses

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experienced nationwide. (Methodological note: Since March 2014 data is the latest BLS available on

Fairfax County, we have made our comparisons based on that month. All data is from the BLS Current

Economic Series (CES) or Quarterly Census of Employment and Wages (QCEW) unless otherwise stated.)

The results above are much different than Fairfax County had experienced before the Great Recession.

In fact, Fairfax County both led the area and the nation in annual employment growth in most of the

first half of the last decade. In fact, the BLS QCEW preliminary employment figures for each of the first

three months of 2014 show County employment down nearly 10,000 jobs from the year before, a 1.7%

reduction in jobs between March 2013 and March 2014the only tracked Washington area

jurisdiction to show a job loss since the end of the Great Recession.


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A more focused look at covered employment (that covered by unemployment insurance, generally

excluding small and single-person businesses) since January 2012 shows that County employment

peaked in December 2012 and reached its nadir in February 2014 resulting in a loss of nearly 23,000

jobs, many of them seasonal retail jobs over the winter holidays.2 A more representative comparison

may be the January data for each of the years presented here, which shows a smaller but still significant

change in covered employment:

Year Employment

January 2012 580,150

January 2013 585,342

January 2014 575,977

Moreover, as Dr. Fuller points out, the job losses have generally been in the high-value jobs. In

particular, the Professional and Business Services industry employment, mainly employees of

corporations doing business with the US government, comprises more than one-third (37% in 2013) of

Fairfax County jobs and has shown an especially steep decline in the County in the last year.

2The employment figures are influenced by seasonal hiring during the winter holiday period an d the summer

break accorded school teachers, the latter resulting in steep July-August job drops.


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A just-released GMU CRA report on the growth of Gross Regional Product (GRP) in the Washington

metropolitan area since 2001 highlights the impact of the recent downturn in Professional and Business

Services employment on the regions economy. As shown in the graphic below from that report,

growth in the contribution of Professional and Business Services employment (shown in red) tracks

closely with the total growth of the regions economy (shown in yellow) in any specific year. In

contrast, the changes in Total Government employment, most notably the increase in 2009 as a result of

the economic stimulus act, had little impact on the regions growth in any year.
http://cra.gmu.edu/pdfs/studies_reports_presentations/GRP_Sep2014.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/GRP_Sep2014.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/GRP_Sep2014.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/GRP_Sep2014.pdf


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Looking at just Fairfax Countys loss of professional and business services jobs on a monthly basis since

2012 shows the peaking and recent plummeting of Professional and Business Services employment.

That industrys employment peaked in August 2012 and has been declining ever since, including a steep

drop at the end of last year with corporate buyouts. Overall, Professional and Business Services

employment in the County has dropped by nearly 16,000 jobs or 7.8% since peaking in 2012.

Moreover, the losses in this high-value industry account for more than 11,000 of the 12,000-plus net

jobs lost in the County in the last year.

Virginia Employment Commission data highlights the challenges facing Fairfax County employees in the

Professional and Business Services areas: Its September 2014 Economic Profile of the County, p. 17,

shows (see below) that unemployment rates in key professional and business service occupations

Business and Financial Operations, Computer and Mathematical, and Managementare among the top

occupations for insured unemployment in the County and substantially exceed statewide averages for

those occupations.
http://virginialmi.com/report_center/community_profiles/5104000059.pdfhttp://virginialmi.com/report_center/community_profiles/5104000059.pdf


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In contrast to the recent decline in private sector Professional and Business Services employment,

government employmentthe second largest employment in Fairfax Countyhas been remarkably

stable at all levels over the last two years. In fact, there has been a small increase in employment of

3,600 jobs split roughly equally between state employment and local employment (which we believe is

largely tied to added jobs in the Countys public schools).


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The reasons for the decline in private sector employment in Fairfax County, especially in the high-value

professional and business service sector, are well known:

The continuing, if subsiding, impact of the Great Recession. In general, Fairfax residents,

businesses, and the County government cut spending in the depths of the recession as their

revenues either shrank or were threatened by the sagging national and global economy. As theeconomy recovered nationally, albeit it at a slow rate, it also began to recover here. However,

the recovery locally has been further hampered by . . .

A grossly dysfunctional US Congress. Rather than trying to solve national, much less local,

economic problems, Congress has generally sequestered funds, cut spending in defense and

other program areas that are particularly important to Fairfax County business, and occasionally

just plain shut down the US government, threatening the livelihoods of thousands of County

families and the failure of hundreds, if not thousands, of businesses. The September 2014

Fairfax County Economic Indicators (p. 4) tells the tale of the decline in federal spending locally:

Based on information from the Federal Procurement Data System, infederal fiscal year (FY) 2013 the most recent data available federal

procurement spending in Fairfax County decreased from $26.4 billion to

$23.1 billion, a decline of 12.5 percent from FY 2012. Defense

procurement contract awards in the County dropped 16.2 percent, while

non-defense decreased 4.8 percent. Federal procurement spending grew

16.2 percent per year from FY 2007 through 2010; growth moderated to

5.2 percent in FY 2011 and was flat in FY 2012.
http://www.fairfaxcounty.gov/economic/indicat/2014/09.pdfhttp://www.fairfaxcounty.gov/economic/indicat/2014/09.pdfhttp://www.fairfaxcounty.gov/economic/indicat/2014/09.pdfhttp://www.fairfaxcounty.gov/economic/indicat/2014/09.pdf


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GMU CRA, in fact, documented the impact of just one of these multiple Congressional

peccadillossequestrationon the states economies, jobs, and income. In a March 2013

report entitled Economic Impact of Sequestration Budget Cuts to DOD and Non-DOD Agencies as

Modified by the American Taxpayer Relief Act of 2012, it noted the following impacts for Virginia

(but not on local jurisdictions), the second largest state recipient of federal funding cuts after

California:

o A loss of 154,118 jobs in the state, nearly one-tenth of all job losses nationwide,

o A loss of $15.443 billion in the Gross State Product, second only to California at just

over $16 billion, and also near 10% of total GSP lost nationwide, and

o Total income losses to Virginians of $7.856 billion, again nearly 10% of total national

income losses.

Unfortunately, data from the Federal Procurement Data System covering the last six fiscal years shows a

much worse picture for new federal procurement of all types in all the key jurisdictions around the

region. (See graph below.) In 2009 and 2010, federal procurementgoods and serviceslocally

increased tremendously as a result of the ARRA economic stimulus package that sent billions of federal

dollars into the economy to shorten the Great Recession. Since 2010, federal procurement for work

conducted primarily in Fairfax, Montgomery, Arlington, and the District of Columbia has been cut 99%

from $2.5 billion to a mere $34 million.3 Fairfax County has suffered the leastamong these jurisdictions

although the percentage cut has been 93% and the reduction in new procurement actions totals $324

million. The loss of federal dollars, whether for a straightforward purchase or continuing business and

consulting support, has hurt the entire Washington metropolitan region and other jurisdictions are

facing the same employment problem as Fairfax County.

3The totals for FY2014 may be viewed as preliminary since some Defense military operational spending may not

be reported for up to 90 days for security reason.
http://cra.gmu.edu/pdfs/Sequestration_Update.pdfhttp://cra.gmu.edu/pdfs/Sequestration_Update.pdfhttp://cra.gmu.edu/pdfs/Sequestration_Update.pdfhttp://cra.gmu.edu/pdfs/Sequestration_Update.pdfhttp://cra.gmu.edu/pdfs/Sequestration_Update.pdf


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Source: US Federal Procurement Data SystemNext Generation, Recovery Report(109MBs)

The issue of declining employment in Fairfax County is well known by the County Board as reflected in

this updated FY2016 financial forecast (September 2014) by the Countys Joint Budget Development

Committee (JBDC) which forecasts a $71 million revenue deficit in FY2016 split roughly equally between

increased spending costs and reduced tax revenues from its earlier forecast. The presentation lays out

the numerous ways in which reduced employment (or smaller growth in their view) is hurting revenue

opportunities in property taxes, including:
https://www.fpds.gov/fpdsng_cms/index.php/en/reports.htmlhttps://www.fpds.gov/downloads/top_requests/TAS_Report.xlshttp://www.fairfaxcounty.gov/dmb/jointboards/jbdc-county-fy2016-financial-forecast.pdfhttp://www.fairfaxcounty.gov/dmb/jointboards/jbdc-county-fy2016-financial-forecast.pdfhttp://www.fairfaxcounty.gov/dmb/jointboards/jbdc-county-fy2016-financial-forecast.pdfhttp://www.fairfaxcounty.gov/dmb/jointboards/jbdc-county-fy2016-financial-forecast.pdfhttps://www.fpds.gov/downloads/top_requests/TAS_Report.xlshttps://www.fpds.gov/fpdsng_cms/index.php/en/reports.html


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Reduced demand for home purchases leading to the lowest home ownership rate since 1995

(64.7%) and resulting in a greater inventory of homes for sale (nearly 4,000 homes on the

market, up 47% from a year ago) and weakening prices according to data compiled by Fairfax

County in its October 2014 Economic Indicators Report.

Less demand for commercial office space (including fewer employees, shrinkages in workspace

per worker, and greater use of telework) with reduced federal spending keeping vacancies at

near-record highs (14.4% direct leasing, 16.7% all leasing) and lease rates flat. Area commercial

real estate firms are seeing the vacancies and availability even higher.

o Jones-Lang-LaSalle (JLL) reports that there are 41 large large blocks (greater than

50,000 square feet) available along the Dulles Corridor (23) and in Tysons (18) as of last

month, a minimum of two million square feet. On a slightly broader scale, JLL reports

that Northern Virginia office vacancies were running at 19.7% through the third quarter

and the region has experienced a net loss of leased space (absorption) of more than one

million square feet this year, 860,000 square feet in the latest quarter. JLL believes the

office market has bottomed.

o In its third-quarter office snapshot report, Cassidy-Turley (CT) puts Fairfax Countys

office vacancy rate at 16.3% and total office space availability (including currently

occupied, but available space) at 22.7%. It puts Dulles Corridor vacancies and

availability as follows:

Location Vacant Available

Tysons 17.1% 24.3%

Reston 15.3% 22.1%

Herndon 12.5% 21.3%

In its third-quarter survey report, CT notes that these Dulles Corridor locations together

have nearly 13 million square feet of office space available, roughly half in Tysons with

the balance at the other two locations, over 4 million of which are vacant.
http://www.fairfaxcounty.gov/economic/indicat/2014/10.pdfhttp://www.us.jll.com/united-states/en-us/research/5059/Northern-Virginia-Office-Insight-Q3-2014-JLLhttp://www.us.jll.com/united-states/en-us/research/5059/Northern-Virginia-Office-Insight-Q3-2014-JLLhttp://www.cassidyturley.com/Research/MarketReports/Report.aspx?topic=Northern_Virginia_Office_Market_Snapshot_3rd_Quarter_2014&action=downloadhttp://www.cassidyturley.com/Research/MarketReports/Report.aspx?topic=Northern_Virginia_Office_Market_Snapshot_3rd_Quarter_2014&action=downloadhttp://www.cassidyturley.com/Research/MarketReports/Report.aspx?topic=Northern_Virginia_Survey_of_Office_Space_3rd_Quarter_2014&action=downloadhttp://www.cassidyturley.com/Research/MarketReports/Report.aspx?topic=Northern_Virginia_Survey_of_Office_Space_3rd_Quarter_2014&action=downloadhttp://www.cassidyturley.com/Research/MarketReports/Report.aspx?topic=Northern_Virginia_Office_Market_Snapshot_3rd_Quarter_2014&action=downloadhttp://www.us.jll.com/united-states/en-us/research/5059/Northern-Virginia-Office-Insight-Q3-2014-JLLhttp://www.fairfaxcounty.gov/economic/indicat/2014/10.pdf


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The County committees presentation does not address the continuing decrease in other tax

revenuespersonal property, sales taxes, BPOL, and hotel taxes, among otherswhich

contribute much less all together to the County budget.

There appears to be little reason to believe the current Congressional gridlock over federal spending will

change anytime in the foreseeable future. The mid-term elections promise to continue the gridlock inCongress even with a Republican majority in both houses, in part because of the Senates reliance on a

super majority of 60 votes to pass most legislation, making it difficult for Republicans to push through

excessively austere funding bills that could hurt County job growth more. Moreover, the Presidents

veto of truly unpalatable Republican-agenda economic Congressional legislation will be difficult to

override while Democrats continue to hold well over one-third of the seats both Congressional houses.

In short, while Congressional dynamics will be different for at least the next two years, the results will

remain largely the same: Gridlock and dysfunction. In fact, it is unlikely the situation will change

significantly for the balance of this decade and possibly through the middle of the next decade absent

some traumatic national security or the economic event that focuses Congress on national needs rather

than personal and partisan agendas.

On top of the likely Congressional constraints on local economic growth due to continuing gridlock,

many economists anticipate that growth out of the Great Recession will continue to be slower than

historic norms of more than three percent per year. Among those doubtful of achieving historic

economic growth rates is the President of the Richmond Federal Reserve Bank, Jeffery Lacker. In a

speech in Ashville, NC, on October 9, President Lacker told the Ashville Regional Forum (emphasis

added):

To make sense of the most recent information on economic activity, it helps to start

with a look at longer-run trends. We are now in the sixth year of expansion following

the Great Recession, and most observers have been surprised and disappointed by the

slow pace of that expansion. Since the recession ended in June 2009, real GDP our

broadest measure of overall economic ac vity has grown at an average annual rate

of 2.2 percent. In contrast, in the 60 years before the recession, real GDP grew at an

average annual rate of 3.5 percent. That lengthy period of rapid growth gave us a

strong sense that normal growth is at least 3 percent and anything less is a cause for

concern. And after the recession ended, that sense has led many forecasters, myself

included, to predict repeatedly that growth was about to shift to a more robust pace.

That just hasnt happened; weve seen short-lived surges in growth, only to see growth

subside for the following couple of quarters. For example, real GDP surged over the

second half of last year only to falter at the beginning of this year.

This experience has led me to conclude that a sustained increase in growth to

something over 3 percent in the near future is unlikely. Given what we know, after

more than five years of this expansion, it strikes me as more likely that growth will

continue to average somewhere between 2 and 2 percent. Let me explain why.
http://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2014/lacker_speech_20141009.cfmhttp://www.richmondfed.org/press_room/speeches/president_jeff_lacker/2014/lacker_speech_20141009.cfm


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It is useful to start by thinking of the growth in real GDP as the sum of two

components: growth in employment and growth in real GDP per employee, which is

a measure of productivity growth. When you calculate these two components, you

find that both growth rates peaked several decades ago and had slowed considerably

even before the Great Recession began. Since the recession ended in the second

quarter of 2009, both growth rates have been relatively low.

Going forward, is it likely that either employment or productivity will accelerate

significantly? Lets look at employment first. Employment growth from the 1970s

through the 1990s averaged close to 2 percent per year due to high population growth

and rising labor force participation, mainly attributable to women entering the labor

force. But even before the Great Recession, population growth and labor force

participation had started to decline, resulting in lower employment growth. And the

aging of the baby boomer generation means that a larger fraction of the workforce is

older and thus less likely to look for work. So for the next few years, a relatively slow

rate of employment growth would not be surprising.

Turning to productivity, growth in output per worker averaged slightly above a 3

percent annual rate in the 1950s, fell sharply in the 1970s, rebounded somewhat in the

1990s and has fallen substantially since then. The longer-run productivity outlook is a

subject of active debate. (Lacker explains the debate between no growth tied to

stagnating educational attainment and growing government debt, and substantial

growth as a result of significant technological innovation.)

My own view leans to the more hopeful end of the spectrum. . . Perhaps the more

critical question is whether we are well positioned to do so or whether recent policy

shifts may have dampened the incentive to implement innovations.

For purposes of projecting economic conditions over the next several years, I think the

safest bet is that near-term productivity growth will closely resemble the recent past,

growing at around 1 percent per year. In short, neither the employment component

nor the productivity component suggests that real GDP is likely to accelerate

significantly in the near future. . . .

There is not much reason to believe that either more rapid organic national economic growth or

increased federal spending locally will help bolster Fairfax Countys growth (or the growth of other local

jurisdictions in the Washington area) for several years. The resulting slow growth will mean fewer

opportunities for new employment in Fairfax County and possibly even the further loss of high-value

jobs. A reasonable and prudent expectation for the next several years is that job growth in Fairfax

County will not be much different than its post-recession annual rate of 0.6% per year, most likely less


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than one percent per year, and that the increase will include essentially no increase in high-value jobs

with a continuing slow rotation to lower wage jobs absent an unforeseeable national crisis.4

Fairfax County has begun to recognize this likely reality at least on a very short-term basis. As a result of

reduced economic activity noted at the County level, the Countys Joint Budget Development

Committee (JBDC) last summer revised its forecast of general fund revenue growth (see graphic below),

reducing projected General Fund growth by about one-third from its earlier forecast as part of the

FY2015 budgeting forecast to 2.5% in FY2016. The recent larger than expected job losses and continuing

high office vacancies appear to make even this reduced forecast optimistic.

County homeowners are likely to feel the brunt of this stagnant General Fund revenue situation.

Despite the addition of some new residential and commercial construction to bolster the property tax

base, stagnating or sagging residential property values and continuing huge office market vacancy rates

eroding commercial real estate tax assessments, the County Board will have to rely increasingly on

residential property taxes to meet budget requirements. This is likely to mean that the County will

have to increase property tax rates again to sustain General Fund revenue levels, much less meet ahigher spending level in FY2016. Even in preparing the FY2015 budget, the County was projecting a $10

4This view contrasts modestly with the more optimistic view recently presented by Dr. Fuller to the Fairfax County

Chamber of Commerce on October 23 (p. 18) that between 2014 and 2019, County job growth would average 1.4%

per year and from 2019 to 2014 job growth would be about 1.3% per year. We believe this assessment, like many

of GMUs job and household growth assessments over the decade, is too optimistic especially for this decade.
http://cra.gmu.edu/pdfs/studies_reports_presentations/Fairfax_County_Chamber_102314.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/Fairfax_County_Chamber_102314.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/Fairfax_County_Chamber_102314.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/Fairfax_County_Chamber_102314.pdfhttp://cra.gmu.edu/pdfs/studies_reports_presentations/Fairfax_County_Chamber_102314.pdf


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million revenue shortfall (and possibly as much as $34 million with additional proposed spending) in

General Fund revenues in FY2016 even before reducing its forecast for general fund revenue increases

for the year.

The situation may also put the Board of Supervisors in the awkward election year position of needing to

cut spending on key County programs, such as the public schools and public safety, which have beengenerally immune from budget cuts since the beginning of the last recession. Other highly popular

County programs that have already been heavily cut, including the public library system, the park

system, and social services, may even see steeper cuts than they have so far.

None of this will help members of the Board of Supervisors of either party seeking re-election in

November 2015.

Longer term, the recent County jobs trend, if it continues, bodes ill for the sustainability of the Countys

use of much-needed bonds for transportation and other important County infrastructure investments or

lose its high debt service rating. The Countys already strained built infrastructure (roads, schools,

libraries, parks, etc.) would need to continue to support a growing (albeit at a slower rate) County

population and workforce. On the other hand, continue County borrowing could result in a reduction in

the Countys debt service rating that would mean higher bond interest rates and an even larger share of

tax dollars being devoted to debt service on future bond issuances approved by County residents.5 The

latter does not appear imminent because the County has generally managed its debt load well so far,

staying significantly below its own threshold guidance. That said, Moodys has assigned Fairfax Countys

Aaa general obligation (GO) bond rating a negative outlook . Moodys explains its outlook as follows:

The negative outlook reflects recent declines in the county's available reserves to levels

that are below-average when compared to other Aaa-rated entities. In addition, the

county's financial position will remain challenged going forward as managementaddresses upcoming budget gaps after reducing expenditures. While future tax base

growth is expected to help offset these projected budget gaps, further budgetary

pressures are likely to result from additional pension costs as the county increases its

funding to meet the annual required contribution, which was underfunded by $48.3

million in fiscal 2013. Moody's views this underfunding as a budgetary weakness and

any inability to increase funding to meet the Annual Required Contribution (ARC) could

result in additional negative pressure. Furthermore, any additional draws on the

county's reserve levels, both within and outside the General Fund, could also result in

negative credit pressure.

The County disputed Moodys outlook change largely on the grounds that it is prudent, disciplined, and

decisive in times of stress, has sufficient reserves. It blames Moodys decision on its failure to consider

5The County routinely discounts the impact of bond issuances on County taxes. For example, the 2014

Transportation Bond Referendum Information packet states, The bond program is not designed to contribute to

an increase in your tax rate. True, but incomplete. The same brochure notes that about 8.2% of County tax

dollars go to paying off debta low rate of debt service in general, but likely to grow in the absence of significant

growth in high-value jobs and related residential and commercial property values.
https://www.moodys.com/research/Moodys-assigns-Aaa-to-Fairfax-County-VAs-305M-GO-Public--PR_290307https://www.moodys.com/research/Moodys-assigns-Aaa-to-Fairfax-County-VAs-305M-GO-Public--PR_290307http://www.fairfaxcounty.gov/news/2014/aaa-rating-retained-with-negative-outlook-2014.htmhttp://www.fairfaxcounty.gov/bond/2014-bond-referendum-pamphlet.pdfhttp://www.fairfaxcounty.gov/bond/2014-bond-referendum-pamphlet.pdfhttp://www.fairfaxcounty.gov/bond/2014-bond-referendum-pamphlet.pdfhttp://www.fairfaxcounty.gov/bond/2014-bond-referendum-pamphlet.pdfhttp://www.fairfaxcounty.gov/bond/2014-bond-referendum-pamphlet.pdfhttp://www.fairfaxcounty.gov/news/2014/aaa-rating-retained-with-negative-outlook-2014.htmhttps://www.moodys.com/research/Moodys-assigns-Aaa-to-Fairfax-County-VAs-305M-GO-Public--PR_290307https://www.moodys.com/research/Moodys-assigns-Aaa-to-Fairfax-County-VAs-305M-GO-Public--PR_290307


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the totality of the Countys debt management and Moodys linking the Countys rating to that for federal

government debt. While we are not in a position to evaluate the Countys debt management system or

its obligations, we believe the Countys linkage to the prospects for the federal government is warranted

given the Countys obvious reliance on federal spending for strong growth. The continuing stagnation

in Fairfax and other area economies highlights that reliance.

All in all, Fairfax County and its Washington-area neighbors may reasonably expect limited, if any, job

growthmost of it in lowering paying jobsfor several years and possibly longer as a result of

continued limited federal spending locally and slow national economic growth. The Countys slow to

non-existent job growth will likely mean higher property taxes for County residents as well as

stagnation, if not cuts, in major County spending programs. If the slow job and economic growth

continues beyond the end of the decade, which is quite possible, it may well have an adverse effect on

the Countys borrowing level and/or its bond rating as well.

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Fairfax County is Continuing to Suffer Job Losses

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