The Booz Allen Economy

Booz Allen Hamilton â€" the government contractor whose employee, Edward J. Snowden, acknowledged leaking national security documents â€" is in a way illustrative of Washington’s economic boom in recent years. It’s one of the many private companies in the area that is reliant on taxpayer-financed government contracts, and that has been pinched more recently by the across-the-board spending cuts put in place this year by Congress.

The Washington Post compiles an annual list of biggest local employers (besides the federal government) by number of employees. Last year the top ones were:

Employer	Local Employees
McDonald’s	22,000
MedStar Health	15,773
Marriott International	15,000
Science Applications International Corp (SAIC)	15,000
Northrop Grumman	14,451
Booz Allen Hamilton	13,900
University of Maryland at College Park	13,451
Inova Health System	12,963
Verizon Communications	12,600
Lockheed Martin	11,000

Four of those 10 are major defense, aerospace and cybersecurity contractors (SAIC, Northrop Grumman, Booz Allen and Lockheed Martin). Others receive taxpayer funds for other federal projects, like academic research, and even those that don’t are still benefiting from the increasing spending power of consumers employed through government money. Likewise the smaller employers, like restaurants, gyms, shops, and dry cleaners that serve the growing professional-class work force in the area.

Washington-area employers have become increasingly dependent on government money over the years. That’s partly a longer-term story about the privatization of existing government functions, like national security, in the midst of multiple wars, and partly a shorter-term story about the stimulus package and other recent laws and regulations (like the Affordable Care Act) and proposed laws (like tax reform) that sustain the careers of myriad lobbyists, lawyers and consultants.

As my colleague Trip Gabriel has reported, the Center for Regional Analysis at George Mason University estimates that federal spending drives 37 percent of the Northern Virginia economy, chiefly spending on contractors.

Government money is one reason the Washington economy was relatively insulated from the recession and its aftermath. In 2011 and 2012, in a ranking of the top 50 metro areas, residents of the Washington area expressed the most confidence in the American economy, according to Gallup.

That optimism likely reflects these residents’ job situations. The unemployment rate in the Washington metro area encompassing Northern Virginia and parts of Maryland and West Virginia was just 5 percent in April (not seasonally adjusted), the most recent month for which data is available. Even at its recent business cycle peak, in early 2010, it was just 7 percent. By comparison the country’s jobless rate peaked at a seasonally adjusted rate of 10 percent, and is now 7.6 percent.

The Washington metro area is also one of the richest in the country. Of all major metro areas, it has the second highest concentration of high-income households, just behind San Jose-Sunnyvale-Santa Clara, Calif. The Washington area also dominates a list of counties with the highest median household income.

County	Median household income (American Community Survey 3-year estimate for 2011)
Arlington County, Virginia	$99,533
Douglas County, Colorado	$98,695
Somerset County, New Jersey	$96,145
Morris County, New Jersey	$95,085
Prince William County, Virginia	$94,779
Montgomery County, Maryland	$94,358
Nassau County, New York	$94,341
Stafford County, Virginia	$93,477
Charles County, Maryland	$91,725
Calvert County, Maryland	$91,638
Fairfax city, Virginia	$91,476
Fauquier County, Virginia	$91,303
Putnam County, New York	$89,172
Delaware County, Ohio	$87,379
Santa Clara County, California	$87,148
Williamson County, Tennessee	$85,974
San Mateo County, California	$85,942
Queen Anne’s County, Maryland	$85,032
Suffolk County, New York	$84,889
Marin County, California	$84,855

Of course, there is concern that the glory days are over, as Congress cut $85 billion from military and domestic programs on March 1. These cuts are also the start of $1 trillion in cuts over the next decade, which disproportionately affects the local economy.

And I wouldn’t be surprised if Booz Allen â€" which earned 23 percent of its total revenue in the last fiscal year from intelligence work â€" is particularly worried about the federal spigots being tightened after this new security breach. Booz Allen’s stock price is down today.