Bacon's Rebellion

Democracy Thrives in Sunlight

The World’s Easiest-to-Predict Slowdown Is Now, In Fact, Occurring

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by

James A. Bacon
in ,

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Here it is from the Washington Post, so I guess that makes it official: “The Washington region is in the midst of a striking slowdown in its growth rate as it draws far fewer residents from elsewhere in the country than in previous years.”

Although the metropolitan region of 6.7-million continued to grow between July 2012 and July 2013 due to an excess of births over deaths, only 4,500 people moved there from elsewhere in the United States — a marked slowdown. Job growth has slowed as well, and the jobs that have been created have tended to be in low- to moderate-wage sectors. Lucrative federal jobs actually have shrunk in number.

Gee, who could have foreseen the wind-down of the war on terror and the effects of budget sequestration? Actually, everybody foresaw the inevitable but the process of adjusting growth expectations, as measured by population and economic growth forecasts, took a remarkably long time.

Now crank in the general slowdown with a shift in the center of gravity of where the development is occurring — more than forecast in the urban core, less on the metropolitan periphery. Here in Virginia, bond financing for a lot of infrastructure construction hinges on of lot of business and housing development that may not get built.

Keep your seat belts fastened. It could be a bumpy ride.

— JAB

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26 responses to “The World’s Easiest-to-Predict Slowdown Is Now, In Fact, Occurring”

  1. Tysons Engineer Avatar
    Tysons Engineer

    Unemployment in NOVA remains one of the lowest of any in the country, and much of the impacts have already occurred. There is still some DoD impacts on the way, but I think overall this is a healthy pause for NOVA, hopefully some of these wealthy people who worked in govt contracting will find new entrepreneurial outlets (I personally currently work in federal private contracting, and although my niche department is not really affected by sequester, I’ve already started looking into starting a non-gov related small business). Perhaps others will also, if not, its not a big deal, we are talking about a slowing of growth, not a net migration out.

  2. Peter Galuszka Avatar
    Peter Galuszka

    Don’t be so sure if there’s war in Ukraine.

    BTW, I detect a self-satisfied smug grin with this post. Any bad thing to help prove your point. That’s pretty sick!

    1. James A. Bacon Avatar
      James A. Bacon

      Self satisfied? Perhaps. I’ve been beating flaying this message a long time. Grin? No. NoVa is the engine of Virginia’s economy. If NoVa runs out of steam, Virginia runs out of steam.

  3. TMT Avatar
    TMT

    TE, I hope you are correct about the worst being behind us. The Fairfax County Executive, Ed Long, has been saying that job growth at higher salary levels has slowed to a trickle with the vast number of new jobs at very low-paying levels. He (and others) don’t think this is a short-term development.

    The big question is, as you suggest, can federal money be replaced by non-governmental business development. And the answer to that question depends a lot on whether we have the right kind of people here who can develop those businesses. On that latter point, I am a bit skeptical of whether D.C. attracts those types of people. I think more of us are attuned to serving government purchasing needs or dealing with laws and regulations.

    1. Tysons Engineer Avatar
      Tysons Engineer

      Key word, Ed Long is talking about growth, not existing conditions. So in macro terms he isnt saying recession, he’s saying slower economic growth (which considering we have been in boom for about 10 years is really a relative term).

      My generation is starting to make lemonade out of lemons to be honest (anecdotal perhaps). A lot of us have lived here all of our lives, are technologically adept, innovative, and have a lot of money. We have the opportunity to create new businesses (for instance I’m in the birth stage of a tech start up). A lot of us worked for govt contracting because it was a stable job, it helped pay the mortgage, and its where the market was… but after 5 to 10 years for many of us in that atmosphere I am getting a sense that even if the largess had continued that there was going to be a brain drain from that field towards better paying more “entertaining” work. Nothing annoys a software engineer or STEM worker more than wasting their talent dealing with beaurecrats in the corporate/govt dynamic.

      Perhaps I have my rose colored glasses on, but my goal is to have my company up and running in the next 12 months; and I’ve heard similar stories from friends.

      The real question is, can this area retain folks that become entrepreneurs. DC has had some success in tech startups, but as soon as they get to the next stages of actually being employment sources, they either get acquired by a larger tech company in SV/Manhattan or just move to SV/Manhattan. The issue of entrepreneur retention I think is a much bigger problem for this area without govt contracting. The one thing we have in this area that can act as a counterbalance for the things that Manhattan and SV have going for them is an equally educated workforce with a lower COL (yes hard to imagine but there are in fact areas of this country that are more expensive).

      We’ll see! Chinese word for crisis is the same as opportunity and other such philosophical cliche.

      1. James A. Bacon Avatar
        James A. Bacon

        TE, Good luck with your new business enterprise. I agree, I think that the future of Virginia, and NoVa in particular, rests in the ability of a very skilled and knowledgeable NoVa workforce to reinvent itself along entrepreneurial lines. Inevitably, there is a time lag. It takes time for enough businesses to take root and grow enough to make a difference. But other regions have done it, and hopefully NoVa will, too. My concern is that we have built and paid for a number of mega-projects — the Silver Line, HOT lanes — that were conceived during a period of euphoric growth projections. I am scared what will happen if those projections do not materialize and the bonds can’t be paid off.

        1. Tysons Engineer Avatar
          Tysons Engineer

          Valid points, and thanks for the well wishes. The product in development is something I think you will find to be very useful. Will tell you more once I am in a position to be able to do so.

      2. TMT Avatar
        TMT

        TE

        Ed Long – yes and no. There are still very many good paying jobs in this area. But a lot of people lost similar jobs and have not found them. At the same time, we are seeing a significant increase in low-paying jobs. This demographic change will affect both state and local finances for the foreseeable future.

        I agree with your idea that smart people can create good non-government businesses. But smart and successful are not necessarily the same. From my observations in practicing law with large and small businesses for more than 30 years, there is also a mindset that is necessary to be an entrepreneur. Lots of risk taking and living with great uncertainties. I know a number of people in this area with that mindset. But that mindset is not conducive to success in dealing with government. Government employees and agencies are generally not risk takers. They are good stewards of following regulations and moving slowly. I’m just not sure this area has enough of people with the right mindset to replicate areas of the country that have been successful. But time will tell.

        1. Tysons Engineer Avatar
          Tysons Engineer

          Don’t disagree, I think as an industry to be anchored to though, the US government is a pretty darn good one that for the most part is recession proof unlike manufacturing, goods, tech, etc. So, I don’t think our region will be falling apart any time soon. There will probably be a couple of years of stagnant growth without any new industries emerging.

          Big Data is one area that I think translates pretty easily from govt contractor IT to private enterprise (not shockingly). And we are already seeing some rapid growth in Fairfax of big data companies. One was just recently acquired by twitter literally a couple hours ago. I see that trend hopefully continuing and expanding.

          Time will tell, I think I agree with Jim that the biggest concern is bond assumptions and whether they will be true given slower than expected growth. For the most part, because of the significant reliance of Phase 1 on either Federal, State, or toll road funds that the bond issue won’t be as detrimental as Phase 2 which has some greater bond obligations.

          We shall see, I guess on the spectrum of doom/gloom to rosy glasses I’m center rosy (especially considering that it finally seems like consumer confidence is on the rise which could bolster an important retail sector of our local economy that has lagged for a half decade).

  4. Breckinridge Avatar
    Breckinridge

    War in Ukraine won’t bend the curve back to up in Washington. Sadly, it won’t even bend the curve back to up at Fort Bragg or Norfolk Naval Base. The U.S. is in a headlong rush away from its overpowering military supremacy, with people on the right and left both applauding. Putin has figured it out, Assad has known it for a while, and others will follow. I’m not sure we’d care if this was happening inside a NATO member.

    I don’t see the DC area becoming a mecca for manufacturing or tech innovation, or developing into another Las Vegas, so as its primary business (government) shows zero or negative growth I don’t see much replacing it. But don’t overplay the impact. Don’t forget that technology has also added to the reach and intrusiveness of the federal government, and while the number of bodies in federal jobs and contracting jobs may be stable or dropping, the flow of dollars has continued. One day a pro-growth Republican may find a way to the White House, and with real economic growth the government will wax fat again.

    1. TMT Avatar
      TMT

      I tend to agree. Washington attracts people who are good at government-related tasks. Tidewater attracts military people. The rest of Virginia lives on the backs of the those two areas. Despite all the rhetoric, no Virginia governor – R or D – has had a clue as to how to bring private sector growth to the state.

  5. larryg Avatar
    larryg

    though some may disagree.. technology usually gets incubated in the military – because they have the time and money to wait until it matures whereas private money wants a quicker pay back.

    Drones – autonomous vehicles – air, land and water – outfitted with GPS and communication (sat phone) technology are going to explode.

    the fundamental nature of boots-on-the-ground warfare is going result in great swaths of current functionality – rendered obsolete – almost over night.

    there is huge opportunity in this field but you have to be proficient in a number of related fields.

    boots on the ground and ships in the ocean are going to be rendered zombie technology within the next decade.

    hopefully the US does the transition better.

    the biggest threat to the US right now is these evolving technologies because our schools are not turning out enough competitively educated students.

    we’re still into blame games while the rest of the OECD world is embracing these rapidly changing technologies.

    Wherever in the US there are Navy Labs.. are places where these technologies can be moved into the private sector.

  6. DJRippert Avatar
    DJRippert

    I have been wondering when to spring this on Jim Bacon ….

    I noticed an interesting new logo on top of a building in Chantilly – Amazon Web Services. For those versed in the nuances of technology Amazon Web Services is the cloud business subsidiary of Amazon.Com. That subsidiary doesn’t sell books or Kindles, it sells computing infrastructure capability and, increasingly, software capability to anybody with a credit card. Most of the computing based start-ups in Silicon Valley run on AWS’ computers for example. So do Netflix and many pharma companies.

    So, what is AWS doing in Chantilly? Well, I know a bunch of hackers a couple of building down from the new AWS digs (side note: in next gen computing “hacker” is a term of endearment and respect – not a sign of criminal activity). Being hackers, my friends had already made the acquaintance of the AWS folks at the usual venue for technology meetings – a bar. It seems that AWS has decided that a lot of talented computer geeks who used to while away the days writing security and data analysis software for defense contractors are now available for hire. So, AWS set up shop in NoVa and started hiring.

    For those in the know – AWS is always coy about their plans. They don’t even break out AWS revenue from Amazon.Com revenue in their financial reporting for example. Alas, hackers are less coy. The going rumor is that AWS was looking for 450 people for their NoVa site but have increased their plans to 750.

    Now, in fairness, there is no rumor mill like the tech rumor mill. That AWS logo might just be on top of a new distribution center. Let’s take a little peek at Monster.Com, shall we …

    http://jobs.monster.com/c-amazon-l-chantilly,-va.aspx

    My, my – those don’t look like warehouse jobs at all.

    The funny thing is that no Virginia politician is hopping up and down taking credit for the new AWS facility. My bet is that none of them even know it happened.

    But one thing is for sure – software developers beget more software developers. And the boys and girls at AWS are very, very good software developers even if (as a competitor) I have to say so myself.

    You might want to wipe away those crocodile tears, Jimmy. NoVa ain’t dead yet.

    1. Tysons Engineer Avatar
      Tysons Engineer

      Bingo, and honestly AWS is only the first step to a more diverse economy (btw there was some pomp about their arrival via FCEDA but perhaps others don’t read that report as diligently as I do).

      I’m telling you, big data is looking at the people who have worked for the NSA, FBI, etc and been doing so for years and saying… I want some of that to help us get better data and how to better analyze that data. They’d be stupid to ship all those people out to SV considering people who work govt positions like that are likely well established in this area and relocation fees would outweigh capital costs to set up a shop here for 500+ people.

    2. James A. Bacon Avatar
      James A. Bacon

      That’s great news about Amazon Web Services. I hope it signals more positive developments in NoVa. The region certainly has the wherewithal to reinvent itself.

      1. larryg Avatar
        larryg

        no no no..

        look at this scene from “The Graduate”… and replace the word “plastics” with “drones”.

        😉

        http://youtu.be/PSxihhBzCjk

        1. Tysons Engineer Avatar
          Tysons Engineer

          Drones are neat and futuristic looking, but honestly big data is where future jobs are. Love the reference to the graduate though.

  7. larryg Avatar
    larryg

    there’s another interesting thing:

    ” The federal government, through the operation of government-owned research facilities, research grants to universities and procurement contracts with private industry, funds almost 50% of the national R&D effort. Because of this enormous funding, the federal government has the most United States patent rights. It is estimated that the government has title to over 30,000 patents and annually files several thousand new applications. The government also has rights to nonexclusive, irrevocable, royalty-free licenses in thousands of patents. In addition, the government has a myriad of other patent rights. Examples include march-in rights, rights to require the owner to license others, rights to require licensing of background patents, rights to approve assignments, rights to limit terms of license agreements and reversionary ownership rights.”

    looks like we could get rid of our deficit and debt and jump start entrepreneurship in one fell swoop!

    just imagine how much money the US would have if it had charged royalties for the GPS system instead of giving it away!

    think of all the business spin-offs that have come from GPS… probably billions.. hundreds of billions of dollars…

    Intel gets money for every single processor in a computer. Microsoft gets money for every single windows operating system. Think about how many dash GPS, phone GPS, drones, ship navigation, commercial airline navigation, etc that relies on a technology developed by the government.

    do we call it an “investment” if we don’t collect so we can calculate ROI?

    1. Tysons Engineer Avatar
      Tysons Engineer

      I mean, the internet and DARPA. Nuff said. There was a story a couple months ago that the internet has created over 50 trillion dollars in economic growth globally that would not have otherwise happened. Globalization as a whole would be in the dark ages still if it werent for the internet, and DARPA basically gave it to the world as a free gift.

      Yea it is kind of insane that a country that create the idea of the internet hasnt seen a direct funding cent from it. Just another example of how yes the government did indeed build that, or atleast at a minimum help build that. I still find it shocking when some republicans think they can actually run a country without a government helping propel and incubate new businesses. Countries without government R&D look like 3rd world hovels, not Randian utopias. There are some things conservatives get right, but the Coburns of the world who rail about .0001% of the budget which actually goes towards novel creation and innovation really set this country’s economy back.

      1. larryg Avatar
        larryg

        re: the internet/arpanet – the right wing will dispute that the govt did it but they have no answer for GPS other than the private sector COULD have done it if the govt had stayed out of the way.. ditto NOAA satellites, etc..

        but the point here is (besides people woefully underestimating the impact of autonomous vehicles ) is that the Washington DC area is a hotbed of Government R&D work.. thousands of scientists working on cutting edge technology, some of it so advanced, that the ordinary person is oblivious to it’s future impacts. The curious thing is that many of these scientists apparently prefer to be government employees rather than entrepreneurs but that could change in a downsize scenario.

      2. larryg Avatar
        larryg

        when I say drone – it may be misleading so let me be more clear.

        it’s an autonomous vehicle that has an onboard GPS and a communications link via satellite so that it can be operated remotely also but also can be given updated flight plans… or missions.

        these vehicles are going to plow fields, do crop dusting, fly power lines and pipeline rights of ways looking for damage.. will go in after a disaster to survey damage.. be used for police work.. be used to monitor traffic or accidents, be used to “patrol” airports and other facilities, be used to keep track of felons with GPS bracelets.. guide boats into harbors.. forest fires, lost hikers or kids…elderly… drug deliveries to remote locations, etc, etc, the list is endless and yet to be fully developed.

        the military is now creating “swarms” of ultra-small drone critters that communicate with each other.. to coordinate their missions… that can fly behind enemy lines and loiter and transmit images of their movements…

        the day will come when you are speeding and a drone will drop down – get your plate and transmit a video image of you and your car to a waiting trooper…

        license plate readers on the ground will “see” a plate of a car they are looking for and transit the location of that car to a drone who will then be dispatched to follow it.. and transmit it’s path…

        these things are going to revolutionize the world – and in some ways that we may not like.. that we will have to develop new law for.

        there are going to be thousands of jobs – for people who have honest-to-pete STEM educations…

  8. TMT Avatar
    TMT

    Another opportunity would be to develop disruptive technology solutions to replace government functions. When I started in telecom law, 30 plus years ago, there was still a few rural exchanges with manual exchanges, including Grand River, Iowa. Calls were set up leg by leg, so that a circuit had to be set up from coast to coast only to find the called party’s line was busy. Party line service was rampant in rural areas. Research by Bell Labs created disruptive technology that drove massive costs from the industry. (Incidentally, state and federal staff opposed recovery of Bell Labs costs from ratepayers.)

    Why can’t this happen to routine governmental ministerial functions?

    1. larryg Avatar
      larryg

      TMT – I was reading this history:

      History of Rural Telecommunications
      http://www.ntca.org/about-ntca/history-of-rural-telecommunications.html

      it purports a significant government role in rural telephonics..

      no?

      1. TMT Avatar
        TMT

        Larry, Yes and No. In 1913, AT&T caved to federal government pressure and agreed to interconnect with non-Bell companies to provide seamless long distance services. Later, the US Supreme Court held that some of the costs for operating local exchanges must be recovered from interstate services. This lead the Bell System and the Independents to create the Separations Manual that governed cost allocation between inter- and intrastate jurisdictions.

        In a monopoly world, the Bell System was entitled to all interstate long distance revenues. It, in turn, paid the Independents for their costs for originating and terminating long distance calls. As efficiencies grew, long distance became more profitable. AT&T’s earnings became excessive. Rather than cut rates, the Separations Manual was revised to shift more costs to intrastate and provide huge subsidies to local service. So while the feds were involved, most of the decision-making came from AT&T. It controlled the process. It worked well in a monopoly environment. Also, the REA began lending money to rural telcos to expand their services. The rural companies were sitting on gold mines. Cash cows.

        But when MCI and GTE Sprint were able to enter the market for long distance services, the rules needed to be changed. In sum, the subsidies were capped; MCI and Sprint were required to pay some subsidies; the Bell Operating Companies were divested; and tariffed access charges replaced the AT&T settlement agreements; access charges were phased down in price; and local rates increased. In the latter years, the government played a much bigger role in telephony. The REA and its successors continued to lend money. Now we are up to the early 1990s, but I need to go to a meeting, so you will need to wait to hear the rest.

        1. DJRippert Avatar
          DJRippert

          I happen to have an educational video that explains the post 1990s US telecom industry ….

          http://videosift.com/video/Colbert-regarding-the-new-ATT

          1. larryg Avatar
            larryg

            info from the link:

            ” The 1930s brought about the New Deal and the establishment of the “alphabet agencies,” including the Federal Communications Commission (FCC), which was created by the Communications Act of 1934. The act also made the concept of universal service the law of the land. This cornerstone of telecommunications policy called for “making available, so far as possible, to all the people of the United States a rapid, efficient, nationwide and worldwide wire and radio communication service with adequate facilities at reasonable charges…”

            The goal of universal service was — and remains today — to ensure that all Americans, regardless of where they live, receive quality telephone service at reasonable rates. Congress reaffirmed the nation’s commitment to the policy and social value of universal service in passing the landmark Telecommunications Act of 1996.

            By World War II, it was clear that rural telephone systems had reached an impasse. The farmer systems continued to deteriorate. Rates were low, and capital was inadequate to upgrade the networks. As a result, fewer farmers had telephones in 1940 than had them in 1920.
            In late 1944, a bill was introduced in the U.S. Senate to establish a Rural Telephone Administration modeled after the already successful Rural Electrification Administration (REA). Action finally came in 1949 on bills to amend the Rural Electrification Act, making long-term, low interest loans available to rural telephone systems. The availability of low-interest loans sparked a new era of growth for rural telephony, which continues today. More importantly, the availability of high-quality telephone service at reasonable rates improved the quality of life for millions of rural Americans.”

            If you look at the narrative – and you think about the railroads, the farm-to-market roads, and then the Interstate Highway System and our national network of government-enabled pipelines and electric power line corridors –

            you’re looking at a Government inspired national commerce infrastructure…. not a stand-alone free-market evolution.

            the anti-trust efforts of the government were driven initially by the reality of one really powerful company taking over an entire industry… and we do still worry about it – witness the Comcast-NBC deal.

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