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White Paper: Where U.S. Jobs are – and Aren’t
The US economy awakened from the recession enough to prompt the Federal Reserve Board to raise interest rates several times in 2004. Job creation, a hallmark of a strong economy, still is spotty, however – anemic in many parts of the country and hot in a few locations. Business Week warned in its Oct. 25, 2004, edition that “ structural shifts across several key sectors make the robust job growth of the 1990s unlikely to return anytime soon.” Two widely cited structural shifts are the need to hire fewer new employees because of the productivity advances brought on by technology, and the trend to outsource manufacturing and lower-level technology jobs to locations overseas.
The impact of these forces on job growth can be seen in figures published by the US Bureau of Labor Statistics. The US added 1.5 million jobs between November 2003 and November 2004, a 1.18 per cent increase, according to the BLS numbers. Seventeen states posted job growth under 1 per cent in that period. California and Georgia created jobs at a 1.02 per cent and 1.01 per cent rate, respectively. Two states (Michigan and Ohio) posted job losses, the BLS reported.
Hawaii, Idaho, Nevada and Utah posted the largest percentage gains in jobs – more than 3 per cent in all four states – but they started from relatively small bases. Arizona, Florida, Oregon, Washington and Wisconsin are more populous states that posted job creation increases between 2 per cent and 3 per cent.
What accounted for the increases in those states? In most cases, technology job increases accounted for major components of the increases. The increase in defense and homeland security-related jobs, particularly professional services jobs, accounted for much of the growth in the northern Virginia suburbs of Washington, DC, which added almost 3 per cent more jobs between October 2003 and October 2004, according to the BLS.
Federal agencies are purchasing services from Washington-area businesses at an all time high in terms of number of contracts and dollar volume, according to Stephen Fuller, Director of the Centre for Regional Analysis at Fairfax, Virginia-based George Mason University. In August 2004 he released a comprehensive study outlining federal government spending in fiscal 2003. Federal spending in the Washington area that year increased to $42.4 billion from $36.3 billion, an increase of 17 per cent. That reflects the increase in defence and homeland security spending since September 11, 2001, and it is the largest one-year increase in government spending for one region since the defense buildup of the Reagan era in the mid-1980s, Fuller reported.
Job creation isn’t evenly spread around the Washington area, however. Northern Virginia leads in procurement and the resultant job creation. Companies there captured 52.6 per cent of the $42 billon in procurement activity and accounted for 76 per cent of the Washington area increase between fiscal years 2002 and 2003. Companies in Fairfax County alone posted $9.4 billion in federal contracts that year, a 32 per cent increase.
Fuller also noted a structural shift in federal spending. He said 15 per cent of federal procurement spending takes place in the Washington area, up from 4 per cent during the 1980s. He also believes the percentage of government funds spent in the region will continue to increase. His analysis shows that the types of professional services that Washington-area contractors provide will continue to be in high demand.
That could create opportunities for companies to do business with federal contractors as well as the government. The increase in government spending during fiscal 2003 directly supported 294,000 private sector jobs, and it indirectly supported more than 600,000 additional jobs in service and retail sectors thanks to a spin-off effect.
“These are the kind of high-paying, knowledge-based jobs that any state, any country would welcome,” said Virginia Gov. Mark Warner at a press conference announcing that management consultant Booz Allen Hamilton, accounting firm PricewaterhouseCoopers and IT integrators Science Applications International Corp. and SRA International would create 11,000 jobs in the Commonwealth with average annual salaries of $76,000 over five years. About 9,300 of the jobs would be created in Fairfax County, minutes away from Washington.
The bottom line? Led by places such as Fairfax County, the Washington area will continue to set the pace in the US. “It is hard to find another economy in the world that matches what is happening here; looking through history it is difficult to find other economies like this,” said Stephen Fuller of George Mason University.
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