DC Does Poorly in the Region’s Competition for Private Employers

Check the headlines and you can be forgiven for thinking DC’s core economic indicators are trending more favorably than its suburbs. Whether it is housing prices, population growth or where the latest hip restaurants are opening, the competition “wins” are generally on the DC side of the ledger.

But the city’s trendiness doesn’t seem to be winning it big breaks when it comes to landing or keeping major private-sector employers. This morning the Federal City Council hosted DC Policy Center’s Yesim Sayin Taylor for a breakfast meeting where she laid out—with carefully curated data—how DC’s regional competitiveness story should be told.

In the competition for the sheer number of firms, employers and jobs in the region, Fairfax County comes in first, followed by Montgomery County and then the District. Fairfax also has a sizable and increasing edge on startup activity.

The most stunning statistic, however, is the extent to which Fairfax wins and the District loses in the intra-regional competition for large employers. Between 2000 and 2014, for every establishment with five or more employees that moved into DC, 1.2 moved out. For every 100 employees who moved in with the incoming establishments, 177 moved out with the exiting establishments. Practically everywhere else, except for the Arlington, saw big net in-migration of establishments and workers over that time. The most popular places for employers to move are farther out along the Orange line near Tysons.

Part of DC’s problem is geographic and zoning constraints. Almost all of DC’s private-sector employment is concentrated in a few square miles downtown, and that geographic concentration has remained virtually unchanged over the last 25 years. Out in the suburbs, employment centers have been shifting and expanding along major transportation corridors.

This should give pause to DC leadership. If the city’s private-sector employment is trapped in one or two neighborhoods (and with sky-high rents), then business-led economic growth—and tax revenue—could reach a ceiling. All that extra opportunity will be squeezed out into Tysons, where there is lots of room to build up and out.

Today one out of four DC residents commutes to jobs outside of the city. One day all those Millennials who moved downtown may one day decide a more urban Tysons—where their jobs are actually located—may make a more suitable home as well.