For those who are still worried about growth, we have a message for you: there’s nothing to worry about.
That’s right, there is little to no growth in Montgomery County at the moment. That fact is loud and clear from the County Council’s Management and Fiscal Policy Committee’s briefing document on the local economy. Here are a few of the low-lights.
1. Employment
Comparing the first eleven months in 2007 and 2008, Montgomery County’s employment base grew by less than 420 jobs (up 0.08%). The county’s job count was down from a year ago in 10 of the last 16 months, with November 2008 turning out the worst performance in many years. As for unemployment, the county’s rate was 3.7% in November 2008, up from 2.5% from November 2007.
2. Home Sales
Home sales fell 20.5% in 2006, 23.4% in 2007 and 20.6% in 2008. Sales are now at their lowest level in at least 10 years.
3. Home Prices
Home prices fell 7.9% in 2008 and are now lower than in 2005.
4. Residential Property Assessments
For the first time since 1994, the state found that one of the three rotating groups of assessments actually lost value. That is going to hit the county’s budget soon enough.
5. Residential Construction
The number of annual new units built has fallen from nearly 7,500 in 2001 to around 2,200 in 2008. The value of new construction is at its lowest level since 1999.
All of the above explains the county’s calamitous budget deficit, which will have to be closed by eliminating raises for public employees and reducing school and police services.
We finally have a zero-growth economy. Let’s enjoy it while it lasts, everybody!
Friday, February 13, 2009
Growth? What Growth?
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6 comments:
Adam, outside of the last two quarters, there has definitely been "growth" and what we may be seeing is perhaps more than just a local reflection of the national trends. Maryland in general and MoCo in particular are special cases in that MoCo is close to "Recession-Proof" due to the massive percentage of the workforce that is Federal and they keep their jobs as a rule, "rainy day" or not, as do the contractors and hangers-on.
Looking at your first graph, I find it hard to believe that smart and talented person such as yourself doesn't know how to put an envelop on such a graph. Average a curve from peak to peak and from trough to trough and then average a median-curve between the peak-following curve and the trough following-curve. Notice that the median-curve is always above the "no change" line except perhaps around summer of 2001.
And of course, you and I notice that this doesn't reflect the total number of jobs, but the growth (or shrinkage) in the number of jobs. Thus, from May-2002 to Nov-2002 almost 45,000 jobs were added. That's significant growth.
Now look at the period of Nov-2004 to May-2007, nothing but growth, from Mar-2005 to Jan-2007 at least 5,000 jobs a month are added. From Nov-2005 to May-2006 at least 10,000 jobs a month were added. That's at least 50,000 jobs, neatly balancing out the total of jobs lost over the entire time-frame of that graph.
I must, thus, take issue with your characterization of the local economy as a 'zero-growth' economy. It is a slow growth economy in the residential construction sector, and as home valuations fall, that isn't the opposite of "growth". It is, in fact, the collapse of an extremely inflationary bubble. Thus at least in the home-valuation discussion, technically there wasn't actual growth, but rather there was inflation.
None of this, incidentally, is the result of any policy set here in Montgomery, or even in Maryland for that matter. It's resultant to global economic crisis and financial sector meltdown.
I agree that in the early part of the decade, there was growth. But at this moment employment is down, unemployment is up, home sales are WAY down, and residential construction is only about one-third of its last peak. By those measures, as of the end of 2008, Montgomery County was experiencing either no growth or actual contraction.
Tom is right on all accounts.
Adam's subject line, though, reflects somewhat that the talk during the 2006 county elections was almost exclusively on "growth" vs. "no" or "slow" growth (depending on whom you ask.) But the focus of that discussion was almost entirely on build-out and in-fill of housing, office buildings, and the demands on infrastructure to keep up with the anticipated increase in residents and employees in certain areas of the county.
Now, that discussion has been put "on hold" (or at least diminished) due to forces way beyond MoCo and Maryland due to the global economic situation.
Thanks, Rocky!
Adam, this is pretty much a matter of how we translate math to words, semantics.
If, in the housing new homes construction sector, we saw no new housing starts, that would be no growth. On the other hand, there is a definite slowdown in pace
In the property-values sector, there is definite decline, but that may be thought to be a normalization, a bubble deflating.
In terms of employment, it's difficult to tell from which employment-sector the job losses are drawn. One reasonably presumes that these are from segments related to Realty, Finance, or other sectors associated with the housing-bubble and the financial-system meltdown.
In any case, don't blame MoCo or Maryland politics for a global problem. The only way that local or State politics could have effected those numbers in the last two quarters would have been through regulatory activity making if more difficult to originate the so-called "liar loans", though it is unclear how many of our housing/financial problems are rooted in that. We also can't tell from the figures in exactly which sector the job losses have occurred.
I think the biggest element to all of this is jobs, jobs, jobs.
Tom's point is well taken - in that the federal government is the economic engine of the DC area, but a key point to note is that most people who live, shop and spend money in Moco don’t work for the feds. The jobs chart does indicate that Moco did very well, but it also indicates a downward trend. Unemployment is on the rise nationwide and Moco may not be immune from that hit as well.
The trend lets us see where we are today and where we may end up tomorrow. Thus impacting budget planning for the future as well. The impact of the current no-growth/contraction on local governments is real and here to stay.
I agree with Adam’s takeaway point, that the current economic downturn is going to have a direct impact on the CURRENT county budget. The council will have to make hard decisions in prioritizing – which was the takeaway from the read.
Who knows…..we may find out what kind of “progressives” they are.
It’s called a bubble-bust cycle. This is considered normal and even necessary.
Anybody pol who thought this bubble was for real and relied on the revenues it generated needs to take some remedial economics classes at his/her local Maryland institution of higher learning.
I would recommend a good introduction to labor economics for starters.
People like me would gladly trade another 10% - 20% of hyperinflated home equity for the same quality of life our neighborhoods had before they were full of loud, overcrowded flophouses crammed full of hostile strangers.
Guess which households were more likely to foreclose in many cases? The ones with small nuclear families. Why? Because people didn’t want to have a bunch of transient strangers moving into their basements, spare bedrooms, etc. when they had moms and kids around.
If this is “workforce housing,” why couldn’t MoCo have just had the developers put up a lot of MPDU high-rise apartments and condos along with the luxury ones?
Thank you, Montgomery County! MoCo pols reward slumlords and punish rising middle-class families! How many people do we all know who left the county or the state because of this chronic leadership vacuum and the declining quality of life in MoCo? I know of plenty.
You pols and your developer buddies profited off of the bubble and the depressed wages that produced it and now you’re crying bitter tears about it. Are you living with the fallout the way we are? Did your neighborhood degenerate into a crime-infested hellhole?
I could care less about the whining of the political / government classes on these points.
This is just nauseating.
Every day is federal bailout day in Maryland. Federal (and international) cash infusions have distorted our local economies and turned formerly rising middle-class neighborhoods into third-world hellholes. Meanwhile local leaders are most interested in appeasing the west county elites, the east county elites, and the massive (and growing) underclass that serves both masters.
Why, there’s your growth, Mr. Pagnucco. The underclass has been growing for a long time now. And it will continue to grow as long as the current clowns keep their seats in office.
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