New income and labor force data give a more positive 2017 year-end picture of DC’s economy

Although federal jobs are declining, income is rising, the job structure is more diverse, and unemployment is falling

In March the US Bureau of Economic Analysis (BEA) released its estimate of income in the District of Columbia for the last quarter of calendar year 2017 along with revisions to the prior three quarters of 2017. Also in March, the US Bureau of Labor Statistics (BLS) revised labor force data for the past several years for wage and salary jobs located in DC and employment of DC residents. Taken together, these new data provide a more positive picture of the District’s economy as the year drew to a close.

  • Income growth for DC residents is increasing.
  • Resident employment is rising and unemployment is falling.
  • Other sectors are picking up some of the slack in jobs and income from weakness in the federal sector.

Income in DC. The change in income is particularly striking. From the previous estimate it appeared that DC’s Personal Income growth was continuing to slow down in the 3rd quarter of 2017, falling to a rate of 2.2%. The new data raised the 2017.3 rate to 2.8%, which then jumped to 3.8% in the 4th quarter. Instead of a picture where income growth in the District continued to slow while the US increased at a faster rate, now DC’s Personal Income growth is estimated to be growing much closer to the national average.

graph 1

 

graph 2a     graph 2b    graph 2c

For DC residents, the turnaround is more pronounced for wages and salaries, which grew an estimated 5.5% in the 2017.4 quarter. This growth is consistent with recent collections for the withholding portion of DC’s individual income tax which have been very strong. For in the last quarter of 2017 those collections were up about 10% over the prior year. (It should be noted, however, that taxable DC income includes things like capital gains that are not captured in the income statistics; also, the recently enacted federal tax law complicates year-over-year withholding comparisons because, for example, some bonus payments may have been accelerated into 2017 that might otherwise have been paid in early 2018 so that corporations could reduce their 2017 corporate profits subject to 2017’s higher rates.)

graph 3.PNG

Changes in commuting patterns do not explain the recent upsurge in the wages of DC residents—in other words, DC residents are not capturing a greater share of the income earned in DC. To the contrary, the new data show that the commuter share of income earned in DC appears to have risen even faster than that earned by DC residents. Thus, in the 2017.4 quarter DC resident earnings grow by 4.1% while those earned by all persons working in DC rise 5.2%. This is a change from 2016 when resident earnings, though slowing down, still grew faster than all amounts earned in DC. (Earnings by this measure include proprietors’ income and benefits as well as wages and salaries, and the earnings of DC residents include amounts earned in the suburbs.)

table 1graph 4

 

 

Resident employment is rising and unemployment is falling. The new data show that resident employment increased by 1.5% from 2016.4 to 2017.4, no doubt a contributing factor to rising incomes of DC residents. The recent revision to the labor force data made a modest change to the end of year level of resident employment (a 0.3% increase of 976). The revision made a substantial change, however, to the picture of unemployment in DC. Whereas before it appeared that unemployment had increased by 1,479 from 2016 to 2017, the new data shows that it fell instead by 391. The primary reason for the decrease in unemployment, however, is that the revision reduced the amount of growth in the labor force while making little change in resident employment.

table 2

Picking up the slack. Revisions to the employment data made no material change in the number of jobs in DC at the end of the year (797,667, 200 less than previously estimated), or to the amount and rate of change (a 1% increase of 7,800, 133 more than previously estimated). The new data shows, however, that the federal sector lost 3,433 jobs from 2016, a 1.7% decline. Similarly, although federal wages grew by 3.1% from 2016 to 2017, this rate was little more than half that for the economy as a whole (5.7%). Although still by far the largest sector in the District’s economy, over the past year the federal civilian share of jobs slipped to 24.8% and its share of wages slipped to 30.5%.

table 3    table 4.PNG

table 4table 6

One of the positive elements in the new employment and income data is the extent to which other sectors of the economy seem to have picked up some of the slack resulting from weakness in the federal sector. On the job side, all other sectors of the economy grew 1.9%, faster than the US average of 1.6% for all non federal jobs. Wages of all other sectors of the economy grew 7.0%, faster than the US average of 4.7% for all non-federal wages and salaries.table 7.PNG

The new data show a shift in the composition of employment and wages in a way that, on balance, give a picture at the end of the year of increasing diversity in the industry mix of the District’s economy.

On the employment side:

  • 5,633 jobs were added to year-over-year employment change in four sectors: health, information, professional and technical services, and personal services. Instead of appearing to lose almost 200 jobs from 2016 to 2017, this group gained almost 5,500.
  • 4,900 jobs were cut from the year-over-year changes in jobs in three sectors: business services, food services, and education. (Even with the reductions, food services and education remain among DC’s leading sectors.)

At year end the leading non-federal sectors are summarized in the following table:

table 8

On the income side, the new data show particularly large gains in disbursements from a few sectors:

  • Almost three-quarters of the revised gain in wages in the 2017.3 quarter occurred in five sectors or subsectors: Information, real estate, management, arts and entertainment, and organizations and personal services. These five sectors accounted for only 17% of all DC wages in the last quarter of 2017.
  • Those five areas also accounted for 39% of all wage gains from 2016.4 to 2017.4.

At year-end the leading non-federal sectors for wage and salary disbursements are summarized in the following table:

table 9

About the data: The information is regularly reported information from the US Bureau of Labor Statistics (BLS) and the US Bureau of Economic Analysis (BEA). BLS publishes monthly statistics of wage and salary employment for the US and all states (including DC) and each March revises data from the prior years based on the availability of additional information. This analysis uses the amount for the years 2016 and 2017 as originally issued in December 2017 and the revised data for those years issued in March 2018. BEA issues Personal Income and other income statistics each quarter, often revising information from prior periods. This analysis uses the December 2017 release for 2016 and 2017 (through the 3rd quarter of the year) and the March 2018 release that revises prior data and includes the new estimate for the 4th quarter of 2017. Data used here may be subject to further revision by the agencies.

An earlier version of this blog was contained in the March 2018 District of Columbia Economic and Revenue Trends report.

 

 

 

 

 

 

 

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