Update 2000 Update 2000

M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center
Economic Forces That Economic Forces That

Shape Montgomery County Shape Montgomery County
Update 2000 Update 2000
Conclusions
2000 Annual Update

Economic Forces That
Conclusions Shape Montgomery County
• Economy is very healthy. Update 2000
• Current pace of growth is rapid but
manageable.
Introduction
• No evidence of next downturn. Job Growth
• This recovery is broad based and it Federal Impact
appears most County residents have Commercial Space
benefited.
Economic Forces That Role of Economy Study

Shape Montgomery County • Supports Council’s economic indicators,
Update 2000 federal procurement initiatives.
• Collaborative effort with Departments of
Introduction Finance and Economic Development.
Job Growth • Assists in evaluating regulatory initiatives
(e.g., Annual Growth Policy, zoning, etc.)
Federal Impact
• Strengthens planners’ understanding of
Commercial Space market role in planning issues.
2000 Focus Economic Forces That

Shape Montgomery County
i Monitor economic vital signs.
Update 2000
i Labor force profile: statistics from the
1997 Census Update Survey Introduction
i How are current economic trends Job Growth
affecting Montgomery County
residents? Federal Impact
Commercial Space
Adding 15,000 jobs/year High tech jobs up 7.0%

County continues to add tech jobs faster than state and nation.
Continued healthy growth is up from last year’s 12,000
jobs/year rate
Employment level indexed to 1988Q1=100 Montgomery
125 County
20,000
7.0%
15,000 120
14,923
jobs
10,000 added 115
from
5,000 1/98 United States
to 110
1/99 3.0%
0
105
-5,000
100
-10,000 Maryland
95 4.9%
-15,000
90 91 92 93 94 95 96 97 98 99 88 90 92 94 96 98
-20,000
Over-the- year change by quarter 1/90 to 1/99 There are 63,350 high tech jobs in the County.
Source: MD DLLR Source: MD DLLR
1/6 of County jobs high tech Infotech jobs surge

Tech sector growth outpacing non -tech sectors. Last year’s jump continues and strengthens.
15%
Employment level indexed to 1988Q1=100
Aerospace 200
Federal, State Biotech
& LocalGov’t 180
18%
Infotech
Telecom 160 United States
5.3%
140 Maryland
10.5%
120
Montgomery
County
Other Private Sector 100
67%
14.4%
80
88 90 92 94 96 98
The 15% figure does not include high tech There are about 25,400 infotech
Source: RESI analysis of State ES202 data government jobs. Source: RESI analysis of State ES202 data jobs in the County.
Telecom returns to peak Business services strong

Pace picks up after modest growth since 1995. County’s largest sector continues to outpace nation, state.
Employment level indexed to 1988Q1=100 Employment level indexed to 1988Q1=100

150 200 United States
Montgomery 6.2%
County
140 3.5% 180
130 160 Maryland

Maryland 4.3%
120 1.0% 140
Montgomery
United States
County
110 2.1% 120 8.6%
100 100
90 80
88 90 92 94 96 98 88 90 92 94 96 98
There are about 10,500 telecommunications There are 53,398 business services
Source: RESI analysis of State ES202 data jobs in the County. Source: RESI analysis of State ES202 data sector jobs in the County.
Engineering & management

Other top performing sectors E&M Services is County’s 2 n d fastest growing industry.
Engineering & Management Services

Hotels & Lodging Jobs: Third largest County industry.
10%
Contractors Engineers & architects
Accountants Avg. Industry Wage: $53,040
8
Nondepository Institutions Management consultants Avg. County Job Wage: $40,508
Amusement & Recreation Services 6

Job growth 1998 -99 Number of Firms: 2,759
Social Services 4 4.7% Jobs 1998: 30,113

3.7%
Securities & Commodities Brokers Jobs 1999: 31,519
2
Change: 1,406
and 0%
%: 4.7%
County Industry
Trucking/Warehousing & Wholesale Trade
Source: RESI analysis of State ES202 data Source: RESI analysis of State ES202 data
Hotels & lodging Building contractors

Lodging added over 1,300 well-
well-paying jobs. Construction pace reflected in increase in contractors.
Jobs:
Jobs: 11th largest County industry. Special trade contractors 5th largest County industry
25%
Headquarters General building contractors 14th largest County industry
10%
Hotel & motel employees Avg. Industry Wage: $70,148
20
Avg. County Wage: $40,508 Avg. Industry Wage: $39,696
18.4% 8 Job growth
Job growth 1998-9 9 Avg. County Wage: $40,508
15
1998-9 9 Number of Firms: 66 7.3%
6
10 Number of Firms: 2,251
Jobs 1998: 7,074
4
Jobs 1999: 8,377 Jobs 1998: 19,420
5 3.7%
Change: 1,303 Jobs 1999: 20,846
3.7% 2
%: 18.4% Change: 1,426
0%
County Industry %: 7.3%
0%
County Industry
Nondepository institutions Amusement & recreation

Jobs grew by almost 25%. A&R Services continues strong growth.
Jobs: 30th largest County industry Jobs: 22nd largest County industry
Mortgage bankers & brokers Producers, musicians, actors, entertainers
Personal credit institutions Bowling centers
25% 25%
Gyms & fitness facilities
24.8%
Avg. Industry Wage: $64,480 Avg. Industry Wage: $15,808
20 Job growth 20
1998-9 9 Avg. County Wage: $40,508 Avg. County Wage: $40,508
Job growth
15 15
Number of Firms: 268 1998-9 9 Number of Firms: 344
10 13.0%
10 Jobs 1998: 4,625
Jobs 1998: 2,765
Jobs 1999: 3,452 Jobs 1999: 5,227
5 5
Change: 687 Change: 602
3.7% 3.7% %: 13.0%
%: 24.8% 0%
0%
County Industry County Industry
Social services Stock brokers

Jobs continue to climb - now past 10,000. The number of securities & commodities brokers has been climbing
sharply for several years.
Jobs: 8th largest County industry Jobs: 36th largest County industry
Job training and family services Security brokers & dealers
Child care Commodity brokers & dealers
10% 25%
Residential care
Avg. Industry Wage: $21,788 Avg. Industry Wage: $126,568
8 20
Avg. County Wage: $40,508 20.0% Avg. County Wage: $40,508
Job growth Job growth
6 15
1998-9 9 Number of Firms: 598 1998-9 9 Number of Firms: 183
5.6%
4 10
Jobs 1998: 9,949 Jobs 1998: 2.379
3.7%
Jobs 1999: 10,504 Jobs 1999: 2,854
2 5
Change: 555 Change: 475
%: 5.6% 3.7%
0% %: 20.0%
County Industry 0%
County Industry
Wholesale trade & related

Growth in Trucking/Warehousing/Wholesale Trade jobs is Economic Forces That
healthy despite decline in wholesale trade - durable goods.
Update 2000
Jobs:
Trucking and warehousing 37th largest County industry
Wholesale trade – nondurable goods 32nd largest County industry
Wholesale trade – durable goods 10th largest County industry
Introduction
10%
Avg. Industry Wage: $51,168
Job Growth
8
Avg. County Wage: $40,508
Job growth
6
Federal Impact
1998-9 9 Number of Firms: 183
4
Jobs 1998: 15,348
Commercial Space
3.7% 3.8%
Jobs 1999: 15,931
2
Change: 583
%: 3.8%
0%
County Industry
Source: RESI analysis of State ES202 data
Federal jobs hold steady

Worth over $9 billion Growth expected in coming decades.
The federal government pumps billions of dollars into the
County’s economy every year Workers
70,000
$3.55 billion
60,000
50,000
$2.6 billion
$2.3 billion 40,000 Leased
30,000 Installation
+ + 20,000
10,000
0
1994 1996 1997 1999 2000 2005 2010 2015
FY98 Procurement FY98 Wages FY98 Direct Payments The number of federal jobs continues progress toward
Source: M-NCPPC analysis of US
recovery of 1994 levels. By 2015, jobs at installations are
government data expected to grow by 33 percent above current levels.
Source: M-NCPPC analysis of US government data
Federal leased space Federal procurement high

Health & Human Services leases more space than all other
FY99 federal procurement is at its second highest level.
agencies combined
4
billions of dollars
3.5
3
Other Health &
10% Human 2.5
Services 2
66%
Nuclear 1.5
Regulatory
Commission 1
6% 0.5
Commerce 0
18%
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
HHS & Commerce account for 84 percent of the FY99’s $3.44 billion procurement is just below
County’s federal leased space, 5.6 million sq. ft. Source: M-NCPPC analysis of Federal last year’s all time high of $3.55 billion.
Source: General Services Administration out of a total of 6.6 million sq. ft. Procurement Data Center data
Index of procurement shows lag

In the 1990s, Montgomery County and the MSA had comparable
growth in federal procurement, but County has lagged in 1998 -99. Economic Forces That
Update 2000
2.5
1.5
Introduction
Job Growth
1
0.5
0
Federal Impact
90 91 92 93 94 95 96 97 98 99
Commercial Space
Montgomery
Montgomery MSA
MSA
Compound growth rate: Montgomery=6.0% Washington MSA=7.4%
Class A office rents up in all markets

The real estate market cycle Commercial market expands
Montgomery County’s previous cycle was 17 years long
Expansion: Oversupply $40

$40
Vacancy Low & Falling Vacancy Low but Rising 1997 2000
Rents rise past feasible levels Rents begin to Fall
Construction proceeds $30
$30
We are here
$20
$20
R
Recovery: Recession:
Vacancy High, but Falling Construction Continues
e
Rents Rise Slowly Rents Fall $10

$10
Vacancies hit Maximum
n
$0
$0
t
B-CC N. Beth Rockv. N. Gaith. Sil. Sp. Rte. 29

Time Rockv.
Source: CoStar
Class B & C office rents also up

Commercial market expands Commercial approvals climb
Steady increase in approval activity sends total above
4 million s.f.
$30
$30 10,000
1997 2000 Non-office space
8,000 Office space
$20
$20
6,000
4,000
$10
$10
2,000
0
$0
$0
Class B Class C 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: CoStar Source: M-NCPPC
Office growth to continue

4.5 million sq. ft. of new office buildings in 2000 -2002 Economic Forces That
5,000,000
Quarterly Labor Force Profile
4,000,000 Cumulative
3,000,000
2,000,000
1,000,000
0
1Q- 2Q- 3Q- 4Q- 1Q- 2Q- 3Q- 4Q- 1Q- 2Q- >2
00 00 00 00 01 01 01 01 02 02 Q-
02
Source: CoStar
Jobs/labor gap continues

Economic Forces That Labor force gains will likely fall short of job gains in the County
Cou nty
Labor Force Profile 180,000
160,000
Jobs
140,000
Jobs/labor gap continues
Labor Force
120,000 Population
100,000
Mature workers increase 80,000

60,000
40,000
Gap mitigated by 20,000
immigrants
0
1980-90 1990- 2000- 2010-
2000 2010 2020
Source: M-NCPPC
Mature workers increase Mature workers increase

United States to lose population age 30-
30 -44 Almost all of the increase in the County’s labor force in the
next 5 years will be in the group aged 40+.
In millions 350,000
70
300,000 2000 2005
60
250,000
50
2000 200,000
40
2005 150,000
30
2010 100,000
20
50,000
10
0
0
15 to 24 yrs 25 to 39 yrs 40 yrs +
0-4 '5-19 20-29 30-44 45-59 60-79 80+
Age
Source: US Bureau of the Census Source: M-NCPPC
Gap mitigated by immigrants Gap mitigated by immigrants

High levels of foreign immigration to continue. On average, immigrants are younger than the resident population
9,550 15,000
8,200
7,100 7,150 6,800
6,500
10,000
5,000
0
15 to 24 yrs 25 to 39 yrs 40 yrs +
FY91 FY92 FY93 FY94 FY95 FY96
Legal immigration to Montgomery County by New legal immigrants to Montgomery

Source: M-NCPPC analysis of US Federal fiscal year. Source: M-NCPPC analysis of US County by age, fiscal years 1992 -1996
Immigration and Naturalization Immigration and Naturalization
Service data. Service data.
Gap mitigated by immigrants

The occupations of the County’s foreign born labor force are
similar to the native born labor force.
Economic Forces That

Professional
Executive/Managerial
Services Measuring Economic

Administrative/clerical
Sales
Well-Being
Well-
Skilled Labor
Foreign Born
Technician
Native Born
Labor
0 10 20 30 40
Source: M-NCPPC 1997 Census Update Survey
Economic Forces That Economic Forces That

Shape Montgomery County Shape Montgomery County
Measuring Economic Measuring Well-
Well-Being
Well-
Well-Being Job-
Job-related
How are current trends
affecting the economic Income-
Income-related
well-
well-being of County Expenditure-
Expenditure-related
residents?
Economy-
Economy-related
Jobless rate declines Fewer unemployment claims

Latest figure of 1.5% is new record low for decade.
Total claims at Wheaton office now less than half of 1992 peak.
E
4.5%
High: 3.9%
June 1992 6,000 5,375 claims
T
4.0% in January 1992
3.5% 5,000
A
3.0% 4,000
R
3,000
2.5%
2,470
Low: 2,000 claims
2.0% 1.5% in
Dec. January
1999 1,000 2000
88 90 92 94 96 98 0
88 90 92 94 96 98
There were 7,012 unemployed persons in the
Source: MD DLLR Montgomery County labor force in December 1999 Source:Wheaton office DLLR
Real income growth

Economic Forces That Real incomes have been growing since 1994, but growth
has been slowing.
Measuring Well-
Well-Being 6.0%
4.0%
Job-
Job-related 2.0%
0.0%
Income-
Income-related -2.0%
-4.0%
Expenditure-
Expenditure-related -6.0%
1980-1981
1982-1983
1984-1985
1986-1987
1988-1989
1990-1991
1992-1993
1994-1995
1996-1997
1998-1999
Economy-
Economy-related
Source: Bureau of Labor Statistics; M-NCPPC.
Most households earn $40-

$40-100K
But 20 percent are struggling.
Wages & household income
Household incomes higher than wages suggest.
BOTTOM MIDDLE TOP
25%
20% 60% 20% 35%
20% Distribution of wages of Montgomery County jobs
30%
Distribution of incomes of Montgomery County households
25%
15% 20%
15%
10% 10%
5%
5% 0%
K
+
0K
0K
0K
0K
0K
0K
0K
0K
0%
K
0
0
1
-2
-3
-4
-5
-6
-7
-8
-9
9
<
10
20
30
40
50
60
70
80
under 20 to 40 to 60 to 80 to 100 to 120 to 140 to 160 to 180 to 200 +

20 40 60 80 100 120 140 160 180 200
Income in 1,000s of dollars Source: RESI and M-NCPPC. Estimates of 1997 wages and incomes.
Wages & household income Economic Forces That

While 77% of jobs pay $50K or less, just 30% of household
incomes are $50K or less. Shape Montgomery County
100% Measuring Well-

Well-Being
Wages
80%
Job-
Job-related
60%
40% Incomes Income-

Income-related
20%
Expenditure-
Expenditure-related
0%
Under $50,000 $50,000 or more Economy-

Economy-related
Source: RESI and M-NCPPC. Estimates of 1997 wages and incomes.
Housing affordability improved Vacancy rates declining

But higher interest rates and demand will reverse trend. Improved economy makes finding an apartment a challenge.
2 1994 1999
Affordability index for existing Montgomery
County homes 5% 4.5%
1.5 3.8%
4% 3.4%
3.2%
2.8%
3%
1
0.97 1.8%
2%
0.5
1%
0%
0
High-Rise Mid-Rise Garden
88 90 92 94 96 98
The higher the score, the more affordable the
housing is. A score of 1 means the monthly cost
Source: M-NCPPC of buying a home equals 30% of gross income. Source: Office of Landlord-Tenant Affairs
Basic costs rise above $30K Economic Forces That

Income needed for four person household to met minimum standard
of need in Montgomery County above $33,000 in 1997. Shape Montgomery County
$35,000 Measuring Well-
Well-Being
$30,000
$25,000 Job-
Job-related
$20,000
$15,000 Income-
Income-related
$10,000
$5,000 Expenditure-
Expenditure-related
$0
1988 1991 1994 1997 Economy-

Economy-related
Source: Dept. of Health and Human Services; M-NCPPC.
Unemployment Rate Crime rate – all types

The property crime rate decline began in 1997.
Used as a proxy for economic performance.
5,000
unemployment rate
4 4,500
3.5
4,000
3
2.5 3,500
2
3,000
1.5
1 2,500
0.5
2,000
0
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
8
8
8
9
9
9
1
Annual average. Source: DLLR Source: Maryland State Police Central Records, Uniform Crime Reports.
Temporary cash assistance Jobs

The number of temporary cash assistance cases is roughly
Used as a proxy for economic performance.
correlated to the unemployment rate.
14,000 500,000
unemployment rate
12,000
10,000 450,000
8,000
400,000
6,000
4,000 350,000
2,000
0 300,000
8
7
8
9
9
9
1
1
Source: Maryland Dept. of Human Resources. Source: Maryland Dept. of Human Resources.
Vehicle Miles of Travel Motor vehicle registrations

Use of the County’s roadways increases as economic The number of vehicles registered in Montgomery County is
conditions improve. correlated to economic conditions.
7,000 650,000
6,000
600,000
5,000
4,000 550,000
3,000 500,000
2,000
450,000
1,000
0 400,000
8
7
8
9
9
9
1
Source: Maryland Dept. of Motor Vehicles. In millions. Source: Maryland Dept. of Motor Vehicles

Update 2000 Update 2000

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M-NCPPC Research & Technology Center M-NCPPC Research & Technology Center

Economic Forces That Economic Forces That

2000 Annual Update

Economic Forces That Role of Economy Study

2000 Focus Economic Forces That

Adding 15,000 jobs/year High tech jobs up 7.0%

1/6 of County jobs high tech Infotech jobs surge

Telecom returns to peak Business services strong

Employment level indexed to 1988Q1=100 Employment level indexed to 1988Q1=100

130 160 Maryland

Engineering & management

Engineering & Management Services

Amusement & Recreation Services 6

Social Services 4 4.7% Jobs 1998: 30,113

Hotels & lodging Building contractors

Nondepository institutions Amusement & recreation

Social services Stock brokers

Wholesale trade & related

Avg. Industry Wage: $51,168

Federal jobs hold steady

Federal leased space Federal procurement high

Index of procurement shows lag

Compound growth rate: Montgomery=6.0% Washington MSA=7.4%

Class A office rents up in all markets

Expansion: Oversupply $40

Rents Rise Slowly Rents Fall $10

B-CC N. Beth Rockv. N. Gaith. Sil. Sp. Rte. 29

Class B & C office rents also up

Source: CoStar Source: M-NCPPC

Office growth to continue

Jobs/labor gap continues

Mature workers increase 80,000

Mature workers increase Mature workers increase

Gap mitigated by immigrants Gap mitigated by immigrants

Legal immigration to Montgomery County by New legal immigrants to Montgomery

Gap mitigated by immigrants

Economic Forces That

Services Measuring Economic

Economic Forces That Economic Forces That

Jobless rate declines Fewer unemployment claims

4.0% in January 1992

Real income growth

Most households earn $40-

under 20 to 40 to 60 to 80 to 100 to 120 to 140 to 160 to 180 to 200 +

Wages & household income Economic Forces That

100% Measuring Well-

40% Incomes Income-

Under $50,000 $50,000 or more Economy-

Housing affordability improved Vacancy rates declining

Basic costs rise above $30K Economic Forces That

1988 1991 1994 1997 Economy-

Unemployment Rate Crime rate – all types

Temporary cash assistance Jobs

Vehicle Miles of Travel Motor vehicle registrations

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