What will Negative Net-Migraiton look like in the DMV?

Today's Washington Post has a provocative article about new census data showing that population growth in the region is slowing down.  Most of the slow down is attributed to out-migration rather than birth dynamics.  Basically, more people are moving out of the region than are moving into it.  Population growth hasn't ceased in large part because birth rates are making up the shortfall. 

There is, of course, variation within the region.   Net migration (number of people moving to a place minus the number of people leaving it) is still positive in parts of the region.    DC still has positive net migration.  So, too, do Loudoun, Prince Georges, Montgomery, and Prince William Counties.  However, the city of Alexandria, and Arlington and Fairfax Counties now have negative net migration.

The Post attributes the shift in large part to "sequestration," which led to cuts in government budgets across the board.  Although many municipal leaders hoped the cuts would be restored, most haven't been.  And, Virginia localities, where beltway bandits set up shop, took the biggest hit.

The hand-wringing has already commenced.  Unlike other parts of the country, the DMV has experienced a largely uninterrupted growth spurt, nearly 20 years by some estimates.  Even the recession didn't really slow things down here.  In fact, people who lost jobs in other parts of the country often found work in DC--as was the case with one of the out-migrants profiled in the story.

So, what are the consequences of negative net-migration?  As with most shifts, there will be winners and losers.

Likely winners? 
* The region's commuters might see a small, but measurable improvement on commuter routes.
* So, too, might metro riders.  Metro ridership is already down.  Factors posited to explain the drop include rising prices, poor reliability, packed trains, more telework, and a reduction in the transportation subsidy for federal workers.  Ridership might decrease even more if negative net-migration continues to be a trend.  In fact, most migrants to the area have been public transportation-loving millennials.  If they opt to go elsewhere, then the trains might not be as packed.   
* First time home-buyers might benefit as well.  Inventory has been low since the 2008 recession.  Indeed, many homeowners put off selling their homes, choosing to wait until housing prices rebounded to their bubble (or near bubble) levels.  However, people who lose their jobs, or can't find ones to begin with (see: sequestration) are often willing to take a little less money when they sell. 
* The DMV's middle and lower-income residents.  They aren't complete winners (see below), but a slow down might make things a wee bit more affordable for people without top dollar incomes.  For the last ten years or so most development has been targeted to the luxury market.  If those people aren't coming here, developers of newly built apartments and condos might lower their prices.  Fewer people and somewhat lower prices also eases the displacement pressure the city's low income residents face. 

Likely losers? 
* Municipal Tax Coffers.  Fewer people means fewer people to tax.  And, fewer tax receipts means either tax hikes, or cuts in service.  It's hard to predict where tax hikes or cuts would be focused.  Most likely, though, there will be more cuts than taxes.  And, as a general rule, cuts usually hurt the poor more than the wealthy.
* Home Sellers.  People trying to sell their homes in the DMV have been incredibly lucky when compared with the country as a whole.  The DMV's housing values didn't fall as much as those in many other parts of the country, and they rebounded more quickly as well.  As a result, it's been a sellers market for much of the last 5 years (purchasers at the height of the bubble excepted).  With fewer people churning into the city, it will be harder to sell houses, and probably take more time as well.
* The DMV's Hipster Street Cred.  After years of being described as 'dowdy,' crime-ridden, wonky, arrogant, and type A, the DMV finally started appearing in all those urban top 10 lists.  You know, those lists of the 'Top 10 place to be a hipster,' or the 'Top 10 places to drink craft beer.'  That could change if the millennials decide to head elsewhere.  What's a hipster wonk to do? I guess they can always go back to yakking about policy over decidedly unhip (gasp) pitchers of beer.   

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"