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National, State and Regional Economy
The economic recovery continues. There was good news in March for employment as the Bureau of Labor Statistics reported the number of jobs in the economy grew by 162,000 in March, the first major monthly increase in several years. However, an estimated 48,000 of those positions were temporary census-related hiring that will go away later this year. The ADP National Employment report, which tracks private sector employment, continues to show shrinking private sector employment, a decrease of 23,000 private sector jobs in March. The graph below from the financial blog Calculated Risk shows a comparison of the current employment recession measured against other recessions since World War II. The duration of job losses is second only to the 2001 recession, but the magnitude of job losses is much deeper than any other postwar recession. The United States has lost approximately 6 percent of its jobs over the last two years.
The national unemployment rate remained at 9.7 percent in March for the third straight month, while Virginia’s unemployment rate rose to 7.4 percent. That’s the highest unemployment rate in Virginia since 1983. The City’s unemployment rate rose to 5.4 percent in February, the highest level since 1993.
Except for housing, inflation is accelerating slightly. In March, the Washington-Baltimore Consumer Price Index rose 2.6 percent compared to March 2009. However, the national core inflation rate, which excludes volatile food and energy costs, rose only 1.1 percent, pulled down by housing costs, which decreased by 3.4 percent. Excluding shelter, but including food and energy, the overall CPI increased year-over-year by 3.8 percent.
Alexandria's Economy and Revenues
While the national economy is showing signs of improvement, Alexandria’s economic activity over the last several months was strongly affected by the snowstorms. The graph below shows the year-over-year sales tax comparison. The most recent data point includes the December and February snowstorms and compares with last year’s sales tax numbers, which were boosted by the inauguration. Because of the unusual circumstances of the December through February period, it is as yet difficult to see signs of improvement in the City’s economy.
One potentially positive sign is the number of the City’s new auto registrations. The number of registrations rose by 60 percent from March 2009 to March 2010. Overall, the number of calendar year-to-date registrations rose to 1,719 in 2010, an increase of more than 20 percent compared to last year. That is probably a harbinger of better things to come from the City’s sales tax collections.
In late April, the Bureau of Economic Analysis (BEA) released the City’s personal income numbers for 2008. Despite the recession, which began in late 2007, and subsequent decline in the stock market and other asset values, the City’s total personal income increased by 4.04 percent in 2008. The average per capita income rose by less than a percent to $72,220. (The difference in these two rates was caused by population growth.) The City’s per capita income of $72,220 ranks 12th in the nation for County or County-equivalent government areas.
The graph below is included each year in the budget document and has been updated to reflect the release of Alexandria’s 2008 personal income numbers by the BEA on April 22.
Real estate sales for the three months ending in March rose by 9.3 percent from 2009. The average sales price was $405,524, roughly equal to last year. The year-over-year change in the average sales price has been flat for the last six months or so.
It should be noted that some of the federal government’s unprecedented support for the residential housing market will end during the next several months. This may pull some sales forward into the next several months from later this year. As of March 31, the Federal Reserve stopped purchasing mortgage backed securities, which artificially depressed mortgage interest rates. Interest rates are likely to go up from their current levels of just over 5 percent on the 30-year fixed rate mortgage. Also, the homebuyer’s tax credit is scheduled to be discontinued for home sales after April. The credit has propped up the market, particularly for lower end homes. Finally, it looks as if the number of foreclosures may be increasing once again. In March, the number of residences in foreclosure rose to its highest level since last fall. However, everything is relative, and according to Realtytrac, Alexandria has the lowest rate of foreclosures of any Northern Virginia jurisdiction, except for Arlington County.
The City’s commercial real estate market continues to struggle. According to Grubb & Ellis, the City’s office vacancy rate climbed from 16.3 percent in the 4th quarter of 2009 to 17.6 percent in the 1st quarter of 2010.
The majority of the increase in the office vacancy rate was due to the introduction of newly constructed office space into the Alexandria market. Despite the weakness in the office market, asking rents per square foot of Class A office space were down modestly by around 3.5 percent compared to the first quarter of 2009 and roughly flat compared to the 4th quarter of last year.