What does a declining GDP look like?

This weekend the Washington Post reported that the GDP for the Washington DC metro area declined by .8% between 2012 and 2013.  The average change for the country's 381 metro areas was +1.6%, although some places saw gains of as much as 10% (Mt. Vernon-Anacortes metro area in Washington State and Greeley Colorado).  

The DC metro area performance puts us is in the bottom 6th of the 381 metro areas in the US.  In more graphic terms it means our change in GDP was on par with the change in Atlantic City, Birmingham Al, and Springfield Illinois.  That's right, DC didn't even outperform the town Donald Trump just left.   

So, what's behind the change?   

The government shut down played a big role.  It lasted for just over 2 weeks.  The Sequester, which created broad cuts across government was probably just as important, and unlike the shutdown isn't a one time thing.

What does a declining GDP 'look' like?

Let me start with a personal anecdote.  My husband is a government contractor.  During the shutdown his company allowed him to use vacation and sick leave to cover the lost days.  After the first week it also told employees they could borrow from their 2014 vacation allotment.  My husband was lucky in that he still had a fe vacation days when the shutdown began in October.  But, given its duration, he ate through it and all but a few days of his sick leave (he wanted to keep some in pocket for emergencies).  He then had to borrow about a week of his 2014 vacation time.  A lot of his colleagues didn't have any vacation left so they chose to forgo paychecks (presumably to avoid the prospect of facing a 2014 without any time away from work).

Although Congress reinstated the pay of civil servants, companies with government contracts were left to negotiate for back pay.  My husband's company is still going through that process.  What did that mean for our spending?  He didn't buy gas for two weeks--no need to if he wasn't going to work.  We also didn't go out to eat at all during the shutdown, and this year we also spent less on vacation (and overall) because we still don't know if my husband will be in the 'hole,' and owe vacation time/pay to his employer.

Now, a more graphic view.  On the way to my son's daycare every morning I pass an informal day labor site wedged between a 7-Eleven and a small dress shop.  I've been driving by this location all summer, and every morning around 8:15 there are about a dozen men waiting there.  I can make that count because the site is at an intersection where I'm often waylaid by a persistent red light.  The sad part is that during all of those brief pauses I've never see anyone looking for workers there.  I'm sure people looking for workers come here, but the fact that I've never actually seen someone at a peak hour for a day labor site is troubling.

Government workers (civil servants and contractors) cut back their spending, so contractors do as well.  The people who would usually work for them are then forced to wait for a job at a 7-Eleven, hoping they'll find a job, at least for the day.   
   

This is how a shrinking economy unravels at the edges.  A drop in GDP tends to 'show up' (to be visible) at the bottom of the job market first, but with data like these, it won't stay there.

Next post--how to square a declining GDP with tales of a booming DC.     


* The Washington Post report was based on a study just published by the Bureau of Economic Analysis.  
** The Census name for the DC metro area is "Washington-Arlington-Alexandria, DC-VA-MD-WV"