Private sector to expand as federal cuts threaten jobs -- Gazette.Net



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While Montgomery County will lose a net 4,000 federal government jobs by 2017, the county will add some 44,000 private-sector jobs by then, according to the Center for Regional Analysis at George Mason University.

Those projections were heard during a recent briefing by economist Stephen Fuller, director of the Northern Virginia center, before Montgomery County Chamber of Commerce leaders.

“That was good to hear,” said Gigi Godwin, the chamber’s president and CEO. “With the federal budget cuts we have seen here in the last few years, we have to do more to grow our private sector.”

The federal budget sequester cuts that started last Friday — and could total as much as $85 billion nationally — could hurt about $5 billion in prime federal contracts owned by Montgomery businesses last fiscal year, according to county estimates. In fiscal 2012, the federal government awarded $10.4 billion in contracts and $168 million in grants to Montgomery companies and organizations.

Many local executives are having to figure out how to “adapt and reposition themselves” in this changed marketplace, Godwin said. One of those is Judy Stephenson, president of Gaithersburg software training company Officepro.

That business, which derives about 80 percent of its revenues from federal contracts, already has seen federal clients either delay making decisions about training or outright cancel planned training, she said.

“It’s having a significant impact on our business,” Stephenson said, estimating that revenues could be down from 10 percent to 20 percent at her business because of the federal cuts. Officepro has had to stop working with some of its contractors and could have to retrain people if the work picks up later, she said.

“It takes more time to find quality people,” Stephenson said. “Instructors are not just standing on every street corner.”

Professional services, construction to grow

The influx of private jobs in Montgomery is expected to be led by the formation of some 21,000 jobs in professional and business services, which include areas such as health information technology, cybersecurity and accounting. Construction is expected to add 11,000 jobs, and health care and private education are expected to add 6,000 more.

In recent months, Montgomery and Frederick counties have about gained back jobs to pre-Great Recession levels. Those counties totaled 575,900 jobs in December, the last available month, according to federal labor figures. That was the highest total in the month of December since 576,800 in 2007, when the Great Recession began.

Among the companies that added jobs in the area in the past year is Holy Cross Hospital, which is building a $202 million, 93-bed medical center in Germantown. About 1,100 construction jobs have been created because of the project, which is slated for completion in 2014, according to Holy Cross.

Digital Receiver Technology, a unit of military giant Boeing, also opened new headquarters in Germantown last year that house about 400 employees.

Frederick is seeing a jobs boost through projects such as the mixed-use Market Square near Wegmans in the city’s northern section. The county issued 699 commercial and industrial construction permits from January through November, 13 percent more than in the same period of 2011.

Montgomery-Frederick’s level of having 99.8 percent of its pre-recession jobs back is better than most areas. Baltimore County and city has 99.5 percent of pre-recession jobs, while the statewide average is 99.1 percent. The national average is 97.6 percent.

Northern Virginia and Washington, D.C., are among the areas that have more jobs than before the recession.

Nothing new

Federal budget cuts are nothing new to contractors. The fiscal cliff was averted with a temporary tax deal close to New Year’s Day. There is the looming threat of a government shutdown, as the law that funds the federal government expires in late March.

Bethesda military and aerospace giant Lockheed Martin Corp., the largest company in revenues based in Maryland, got about 82 percent of its $47.2 billion in revenue last year from the U.S. government. A spokeswoman said executives there are still trying to gauge the sequester’s effect.

Ditto with Bethesda hotelier Marriott International, the second-largest company based in Maryland, which gets a significant portion of its sales from federal government travel.

The National Institutes of Health in Bethesda could see $1.5 billion cut from its $31 billion budget because of the sequester, according to a federal report.

Diane Frasier, director of NIH’s Office of Acquisition and Logistics Management, sent a letter to NIH contractors this week saying certain contracts might not have options exercised, and lower prices could be negotiated. In addition, hospitals and physicians offices are expected to see Medicare reimbursements reduced by 2 percent.

Five regional airports in Maryland, including Frederick Municipal Airport and Hagerstown Regional Airport, are on a national list released by the Federal Aviation Administration that could see their air traffic control towers closed due to sequestration.

Most FAA employees face being furloughed for at least one day per pay period through September, U.S. Transportation Secretary Ray LaHood said in a recent letter. Travelers should expect delays as some airlines change schedules and even cancel flights, he said.

Officials with the Fort Detrick Business Development Office, which helps companies do business with the Frederick military base, have met recently with some contractors concerned over sequestration. Vendors “should not be discouraged” and should continue to submit contract proposals, officials said in a statement.

Sequestration came about because of a 2011 agreement by Congress and the White House to raise the nation’s debt ceiling, with cuts theoretically designed to be severe enough to force a deal to avoid them.

kshay@gazette.net