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"

DC's new transportation plan: Green elitism?

Yesterday's Washington Post had an interesting article about the DC Department of Transportation's long range transportation plan.  Unfortunately, like a lot of green initiatives, it is fairly elitist.   

First, let's start with what the plan proposes.  There are new features like water taxis and streetcars as well as improvements to the existing metro and bus system.  Bikers will also get a boost with more paved road reserved for bikes lanes.  There's even a plan to charge commuters a toll to drive into the city. The goal is to make DC greener by forcinggetting people out of their cars.

So, why is this plan elitist?  Three interconnected reasons.  The first is that the plan doesn't take into account the changing distribution of the region's working class and poor populations.  DC's Poor and working class population used to live (primarily) in inner city areas.  They often faced disinvestment and high crime, but there was one benefit to their location--proximity to public transportation.  As DC has gentrified, many of these people have been pushed into the suburbs, or even exurbs.

Second, public transportation becomes less available and efficient the further you move from the city.  There are fewer bus lines and wait times between buses can be more than half an hour.  Likewise, metro stations tend to be located further apart in the suburbs, and the hub and spoke nature of DC's system means that it is often difficult to move from one suburb to another without routing through the city first.  These difficulties are compounded for poor and working class people who also have to find a way to get to their nearest metro stop.  Most can't afford to live within walking distance of a station because rents/home prices tend to be higher near them.  This means that car dependency is not just a choice (as it is often presented) but an unavoidable fact of life for many people at the bottom half of the income spectrum.

Third, if you charge people to drive into DC, you are essentially instituting a regressive tax.  That is, the people who cannot afford to live in the city or near a suburban metro stop will be the ones who have to pay it.  Some will pay it because they have no choice.  But, others, especially those at the bottom of the scale may simply avoid the city altogether--not because they want to but because they can't afford the cost or time it would take to enter it via public transit.     

There's nothing wrong with making it easier to move around DC without a car, but unless and until public transportation in the entire DMV is improved, the city should stick with carrots and leave the sticks behind.  Otherwise, DC's green will come with a side of exclusion. 

Some Love for the Purple Line

The Purple Line is one step closer to becoming reality after Wednesday's announcement that the Federal Transit Administration had included the Purple Line on a list of 7 projects slated for "new starts" grants. 

Although the state has been lining up private money for the project, few people believe private money will materialize without federal backing.  In that regard, Wednesday's news can be viewed as an insurance policy of sorts--private money is now more likely and with it so is the purple line.     

Here's the most recent map of the proposed route. 

Of late the coverage about the purple line has focused on its opponents (e.g. the Town of Chevy Chase).  As with any big public works project, though, the goal is to benefit far more people than you disadvantage.  So, what are the benefits of a Purple Line?  Here are two that come to (my) mind:  

1.  The purple line will update the metro system's hub and spoke design.  A hub and spoke network is basically designed to move people from suburb to city (and vice versa).  People that want to go from suburb to suburb don't tend to get much benefit from a hub and spoke system because the spokes only connect through the hub.  If I want to take the metro to go from Silver Spring to Bethesda, for example, I have to go through DC and then back out again.  The distance by road is about 5 miles.  By train it's around 15 miles.  The purple line will provide people going between Maryland's DMV suburbs with another, faster public transportation option.  

2.  Transit beckons development.  Urban planners love something called 'smart growth,' which in the DMV usually translates into building at higher density around transit points.  And, since the fashion these days is the 'mixed use development,' the transit stations along the purple line could see a boost in housing and retail options.  This trend won't have a huge affect in a place like Bethesda, which is already well developed, but stops on the eastern half of the line, where development has been anemic, could really benefit.   

There are, of course, potential downsides.  And, it is worth considering those not normally considered in the papers (i.e. let's stop worrying about those poor wretches with the best legal representation money can buythe Town of Chevy Chase for a minute and think about who else might see less love than pain from the purple line)

1.  The working class Hispanic population.  Let me start with some context.  Most of the transit stops along the proposed purple line are in areas geographers and urban studies types call 'first suburbs.'  The Brookings Institution defines first suburbs with two criteria--they were built before 1950 and are located in counties adjacent to the main city.  In DC this usually means suburbs inside (or touching the beltway).  First suburbs are a study in contradiction.  Some of their neighborhoods are quite posh (Bethesda).  But, some have experienced significant disinvestment (Langley Park).  This is especially true as you move east along the proposed purple line.  This wealth gradient means that housing in MoCo's eastern suburbs and PG county's western suburbs has become an affordable oasis in a metro area where housing prices are ridiculous (see my earlier post on this topic here).  Big stretches of University Boulevard, for example, now have large immigrant populations from Central America.  The area around 'Tick Tock' Liquor store is a veritable little El Salvador.  There are also some amazing Asian and African places tucked in between the pupersaries and Peruvian chicken places.  The boom of immigrants to these areas has made them culturally vibrant places.  Developers coming into these neighborhoods may appreciate this 'diversity' as a selling point, but they probably won't build new houses or apartments for the working class Hispanics already living in the area.  Instead, they'll do what developers in DC have done--aim for the luxury market.  And, that will mean gentrification and displacement. 

How much do you need to make to buy a home in the DC Metro Area?

The Washington Post had an interesting article yesterday about how much it costs to live in major metropolitan areas in the US.  The WaPo article is here.  The study the article was drawing on is here. 

The study, by HSH.com calculated how much salary it would take to afford "the base cost of owning" a median priced home in 25 metro areas in the US (see the link above for a more detailed description of HSH's methdology).

The DC metro area's median home price $368,000.  To afford a house at that price you need to make at least $62,809.63.  DC came in at 6th on the list.  

The top three salary thresholds were all in California--San Francisco at $115,510.06, San Diego at $81,570.40, and Los Angeles at $72,126.90.  

The lowest salary threshold was for Cleveland at $19,435.17.  Nearby Baltimore came in at $41,155.40.  

I have to confess that I was surprised that the DC metro area wasn't higher on the list.  I also thought the median house price was low.  The figures are correct, but it turns out my experience living in the District (during a time of rapid gentrification) and recently moving to South Four Corners in Silver Spring colored my assumption about home prices.  

My old zip code in DC (20016) had a median sales price in 2013--$955,263--that was well over the metro area's median house price.  And, all but one of MoCo's 10 inside the beltway zip codes had median sales prices above it as well (four had prices more than twice as a large).  An interactive graphic with median home prices for 2013 by zip code can be found here.   

In short, if you buy a house in Montgomery county at the median metro value, you are probably going to be doing so outside the beltway. 

Zip Code	Median Sales Price 2013
20812	$624,750
20814	$790,000
20815	$946,000
20816	$880,500
20817	$838,750
20818	$751,500
20901	$410,000
20910	$519,500
20903	$302,500
20912	$440,000