The longest government shutdown in U.S. history served as a reminder this year, if one were needed, of the Washington, D.C., region’s economic dependence on federal payrolls.
Amazon’s arrival in Northern Virginia, with plans to add 400 jobs in 2019 and as many as 25,000 over the next decade or so, is one payoff from a strategy that regional politicians and business executives hope will remedy that dependence.
What’s significant isn’t the number of jobs, according to Jeanette Chapman, who analyzes regional development as deputy director of the Stephen S. Fuller Institute at George Mason University. After all, the D.C. metro area’s $530 billion economy, the fifth largest in the U.S., added an average 50,000 positions a year in each of the past four years and the ones created by Amazon would be a fraction of that.
Rather, the e-commerce giant’s employment opportunities are important because they’re offered by a private-sector employer and will expand the region’s high-value advanced industrial base, which includes firms in sectors from media to security and commercial technology.
Over the past several years, those groups — which include only companies not relying on federal government money — have been slowly expanding, but “they haven’t fully turned the corner yet in terms of being able to stand on their own,” Chapman told the Washington Examiner.
“What that suggests is that the non-federal business that’s here needs a bit of an injection in order to accelerate going forward,” she explained. “What Amazon can serve as is that injection.”
Comparing the region’s economy and wages with national averages over the past 10 years reveals another reason why local officials are eager to diversify. The dependence on government jobs kept both pay and output lower during the decade-long recovery that followed the 2008 financial crisis, data from the Fuller Institute and government agencies shows, even though it spared the region from the worst of the initial downturn.
“During recessions, we tend to be bolstered; we don’t feel the depths of the recessions as much as other places do,” Chapman said. “The price is that we, our economy and our residents, can be held hostage to the national politicking that goes on.”
The 35-day partial shutdown that began in late December, when President Trump refused to sign any funding bill that didn’t include $5.7 billion for a wall along the southern U.S. border, is just one example.
Not only did 800,000 workers go without pay for a month, the closure delayed reviews of corporate mergers and stock offerings, hampered air travel, and shaved about $1.2 billion a week from the U.S. economy.
A decade earlier, the exodus of Defense Department agencies from Arlington County in the mid-2000s, after then-President George W. Bush approved recommendations requiring heightened safety standards at such offices after 9/11, emptied about 4.2 million square feet of leased office space, according to the county’s economic development organization.
“We’ve lost 34,000 government-related jobs since 2001,” Arlington Economic Development Director Victor Hoskins said during a recent forum on Amazon’s plans hosted by the Metropolitan Washington Council of Governments, which connects the district with cities and counties in Maryland and Virginia. “That was devastating.”
By the time Hoskins joined Arlington Economic Development in January 2015, the commercial vacancy rate had reached 21 percent, with about one in five office buildings empty. The “Way Forward” strategy he implemented, which included offering corporate incentives and a national branding strategy, aimed to cut that rate in half by 2021.
Companies lured to the area in the process include consultant firm Grant Thornton and food maker Nestle USA, which spent nearly $40 million to move its corporate headquarters from Glendale, Calif., to the Rosslyn neighborhood in 2017.
Those moves, and Amazon’s, “happened because we had a strategy focused on diversifying our economy,” Hoskins said. “We looked for companies that fit that mold, where our places fit that need.”
Unlike lawmakers in New York City, whose criticism prompted Amazon to scrap plans to locate a complex of the same size as Virginia’s near the border of Queens and Manhattan, people in the Arlington area “understand the economic case for bringing Amazon here,” Christian Dorsey, chairman of the Arlington County Board, told the Washington Examiner.
Amazon’s fostering of new industries, including its original e-commerce platform, will generate economic benefits for Northern Virginia far beyond its initial employment plans and real estate purchases, Hoskins added.
The company also operates a video streaming service and is developing a package shipping business, and founder Jeff Bezos, the world’s richest man, separately owns the Washington Post.
“They are going to help us create our future,” Hoskins said. “There are things that haven’t even happened yet, that haven’t even come to the table that we’re going to see. That’s where the potential is.”
Amazon’s operations will be centered in National Landing, a newly branded neighborhood that also encompasses parts of Pentagon City and Potomac Yard. The company will invest about $2.5 billion to set up its operations there and occupy about 4 million square feet with the option of doubling that over the next dozen years, according to county officials.
It will initially lease offices in existing buildings before constructing its own complex. During the same period, local officials will build additional entrances to the Crystal City and Potomac Yard Metro stations, construct a pedestrian bridge from Crystal City to Reagan National Airport, and invest as much as $150 million into residential projects. Another $75 million will come from the state.
While some of the 25,000 workers may move to Virginia from Seattle, Amazon doesn’t view its plans as a relocation exercise, said Holly Sullivan, the company’s economic development director.
“The primary reason we’re locating here is due to the talent,” she said. “We hope to hire all 25,000 locally.”
Amazon has already dispatched personnel to Northern Virginia, where they’re meeting with local governments and public school and university leaders to lay plans for workforce training.
“It behooves us and other companies to make sure we’re making investments to create that talent pipeline,” Sullivan explained. “There’s a great foundation already here.”
