Sequester Not Biting District Yet

May 29, 2013

In the months since the automatic federal spending cuts known as the sequester took effect, the Washington area has added 40,000 jobs. Income-tax receipts have surged in Virginia, beating expectations. Few government contractors have laid off workers.

It’s too early to be certain, but initial indications are that the damage from the sequester has been modest and slow to develop.

Labor Department statistics released Wednesday showed that the area’s unemployment rate held steady at a seasonally adjusted 5.3 percent in April, the same as in March. The pace of job growth from January to April was only slightly slower this year than last year. Large government contractors are reporting relatively modest revenue hits and few layoffs due to reduced contracts.

Economists caution that the effects could worsen in the months to come, especially once furloughed federal workers drain their savings accounts and contractors adjust to the reality of less government work ahead. Most forecasting models still calculate that sequestration will shave at least half a percentage point off national gross domestic product growth this year.

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