The Economic Engine of Maryland, Part Three

In Part Two, we examined Montgomery County’s role in the Maryland’s economy. The county accounts for one-fifth of the state’s employment, one-fourth of its personal income and one-third of its business profit. Those factors make the health of the county’s economy a key component of the health of the state’s economy. But Montgomery County is not invulnerable. It has a direct competitor right across the Potomac: Fairfax County, Virginia.

In many ways, Montgomery and Fairfax are twins. Both have close to a million people. Both have large private sectors fueled by substantial federal government spending. Both have populations that are increasingly diversifying. Both have quality schools. And both are economic engines for their states.

But Fairfax has been outcompeting Montgomery from an economic perspective for a long time. According to the Bureau of Economic Analysis, here are how the two counties stack up on seven economic indicators for the most recent 25-year period available (1971-2006):


Fairfax’s per capita personal income has grown 24% faster than Montgomery’s over the last 25 years. Fairfax’s population, total personal income and dividends, interest and rent income have grown nearly 50% faster than Montgomery’s. Fairfax’s employment, wages and salaries and proprietor income have grown roughly 2.5 times as fast as Montgomery’s. In 1971, Montgomery led on every one of these seven measures over Fairfax. In 2006, Fairfax led on six of seven.

But the story is not quite that simple. Over the most recent five-year period, Montgomery has competed much better with Fairfax. Here are our benchmarks between 2001 and 2006:


During this period, Montgomery beat Fairfax on four growth measures (population, personal income, dividends, interest and rent and proprietor income), trailed on two (employment and wages and salaries) and virtually tied on one (per capita personal income). This data does not prove that Montgomery has turned the corner. But it does show that Montgomery is still capable of competing with Fairfax in generating economic opportunity for its residents. And that provides hope for both Montgomery and the state it supports.

In Part Four, we’ll look at one aspect of how Montgomery and Fairfax match up: their comparative tax rates.