Economists don’t expect the budget cuts currently coming into effect to drag the metro area into recession, unless the federal fiscal situation deteriorates considerably. That’s partly because government largess has built a foundation of prosperity in the area. The local housing market, for instance, remained relatively calm even as real estate in other regions melted down during the financial crisis. Washington’s regional unemployment rate is at 5 percent, nearly three percentage points below the national rate.
Even with the cuts now hurting contractors, “we’re going to still look pretty good here, because we have such a strong base,” Fuller said. “We still have $170 billion in federal money in the local economy. It’s not that they’ve taken it all away. It just isn’t growing as much.”
What could really damage the area — what Fuller calls “the end-of-the-world kind of hit” — would be if lawmakers allow $85 billion in “sequester” cuts, split between defense and non-defense programs, to go through in March as planned. Those cuts would reduce federal spending — and procurement — at a much faster clip than the current reductions.