Sorry, you need to enable JavaScript to visit this website.

ora-cfo

ORA CFO
DC.Gov Home
 

A lost decade? How the District fared in the 1990s, the last major downsizing of the federal workforce

Thursday, May 1, 2025 - 9:15am

Part 1: Employment and population

What happened to District employment?

The District is facing a significant downsizing of the federal workforce, which is its largest source of employment, accounting for about a quarter of all jobs in the District. This is much like what occurred over 30 years ago during the Clinton administration's "National Partnership for Reinventing Government" initiative, launched in 1993 under the leadership of Vice President Al Gore. The goal was to "make government work better and cost less," resulting in notable downsizing, restructuring of agencies, and a focus on improving efficiency.

Table 1 and line chart showing US federal employment trends from 1990 to 2000. The table shows that US federal employment (excluding the Postal Service) fell from 2,315.9 thousand in January 1993 to 1,857.7 thousand in November 2000 — a loss of 458,200 jobs, or -19.8%. The line chart illustrates the full trajectory: employment peaked near 2.6 million in 1990–1991, then declined steeply and steadily through the decade. A 'Reinventing Government' annotation marks the policy shift around 1993–1994. Gray shading indicates recession periods. Source: US Bureau of Labor Statistics.

Between 1993 and the end of 2000, federal employment, excluding the postal service and defense, fell by nearly 460,000 jobs, or about 20% (Table 1 and Chart 1).  In 1993, non-postal, non-defense federal employment was just over 2 percent of total U.S. employment, but it was about one-third of District employment (Table 2). This means that falling federal employment over the period, as we will show, had a disproportionate impact on the District’s economy. In a series of blog posts, I will explore the impact of federal downsizing on the District in the 1990s, specifically examining the impact on employment and population, income and wages, and local District revenue during that period. In this first post in the series, I focus on employment and population.

Table 2 showing federal employment share in 1990 for the US versus DC, in thousands. The US had 2,307.6 federal workers out of a total workforce of 109,790.0, representing a 2.1% share. DC had 234.2 federal workers out of a total workforce of 678.6, representing a 34.5% share. Source: US Bureau of Labor Statistics.

From its peak of 234,000 in January 1993, federal jobs in the District decreased by 52,000 (22%) to 182,000 by October 2000. Overall, the District experienced a loss of about 80,000 jobs (12%) between March 1990 and December 1998 (Table 3). Note that federal employment increased during and after the recession from mid-1990 to early 1991, even as total jobs declined and continued to fall just after the recession (Chart 2). The decline intensified as the federal government started to cut positions after 1993. For the decade, the District lost 47,000 total jobs, or 7% of the jobs located in the District, as a pickup in job growth towards the end of the decade offset some of the loss.

Table 3 showing the change in DC total and federal employment from peak to trough between 1990 and 2000, in thousands. Federal employment peaked at 234.2 thousand in January 1993 and fell to a trough of 182.1 thousand by October 2000, a decline of 52,100 jobs (-22.2%). Total DC employment peaked at 692.0 thousand in March 1990 and fell to 612.2 thousand by December 1998, a decline of 79,800 jobs (-11.5%). Source: US Bureau of Labor Statistics.

Chart 2: A line graph titled 'DC Total and Federal employment from 1990 to 2000,' indexed to January 1990 = 100. The blue line (Federal Government) rose slightly to about 105 by early 1993, with a 'Reinventing Government' annotation marking that peak, then declined steeply to approximately 82 by 2000. The orange line (Total Nonfarm) declined more gradually from 100 to about 89 by the mid-1990s before beginning a gradual recovery toward 96 by 2001. Gray shading marks the early-1990s recession. Source: US Bureau of Labor Statistics.

Job losses in the District during the 1990-2000 decade were a local phenomenon, occurring when employment was booming nationally (Charts 3 and 4). In contrast to the 7% job decline in the District, total employment in the United States increased by 20% during the 1990s (Table 4). Generally, job growth nationwide outpaced the District's in each decade since 1990, except for the 2000s. The 2000s were different because of the Great Recession. During the Great Recession, job growth slowed more sharply across the nation than in the District. This was primarily due to the federal government increasing hiring and spending following the financial crisis that precipitated the Great Recession.

Table 4 and line chart comparing DC and US jobs at the start and end of each decade from 1990 to 2025, in thousands. The table shows DC lost 47,000 jobs (-6.8%) in the 1990s while the US gained 21,587,000 (+19.8%). DC recovered in the 2000s (+63k, +9.9%) and 2010s (+94k, +13.4%), then declined again in the 2020s (-25k, -3.1%). The line chart below indexes each decade to 100 at its start, illustrating DC's 1990s trajectory as a steep decline to roughly 90, in contrast to the steady growth seen in all other decades. Source: US Bureau of Labor Statistics.

Chart 4: A line graph titled 'Jobs in US each decade from 1990 to 2025,' indexed to 100 at the start of each decade. Four lines represent the 1990s (blue), 2000s (orange), 2010s (green), and 2020s (pink). The 1990s, 2000s, and 2010s all show consistent growth, reaching approximately 119, 108, and 116 respectively by month 120. The 2020s line shows a sharp drop near the start of the decade (to about 86) followed by a strong recovery back to roughly 100 by month 40. Source: US Bureau of Labor Statistics.

The reductions in the federal government workforce were a significant factor in the decline in total employment in the District during the 1990s (Table 5 and Chart 5). However, given the importance of the federal government to the District’s economy, it is not surprising that other industries suffered job losses as the federal workforce shrank. Trade, Transportation and Utilities, Construction, Information, Leisure and Hospitality, and Finance were among the industries that lost jobs. Meanwhile, the Professional and Business Services sector grew, as many federal workers were replaced by contractors. Other industries that added jobs during this period included Education, Health, and Non-profit sectors. These are industries that were not as dependent on the federal sector.

Chart 5: A multi-line chart titled 'Personal income growth in the US each decade from 1970 to 2025, millions (current dollars),' with all values indexed to 100 at the start of each decade. The six lines (1970s-2020s) all trend upward over 120 months, with most ending between 127 and 132. The 1970s line (light blue) shows the most volatility, spiking sharply near month 40 before declining. The 2000s (red) end lowest at 114.1 due to the '2007 Financial Crisis' marker near month 100. The 1990s (green) end at 129.2. The x-axis shows 'Months from start of decade.' Source: US Bureau of Economic Analysis.

The 1990s were also the worst decade for employment among District residents in the decades from 1980 to the present (Table 6 and Chart 6). During the 1990s, employed District residents shrank by as much as 17% before a partial recovery in the latter part of the decade. Employment levels ultimately ended up 8% lower than at the beginning. This was the only decade covered here when the number of jobs for District residents was lower at the end than at the start. The District's unemployment rate remained high throughout the 1990s following a brief recession that ended in early 1991 (Chart 7). Unlike previous economic downturns, where unemployment rates decreased following a recession, the District's unemployment rate stayed elevated for most of the decade, even as the US  unemployment rate fell as the national economy grew.

Chart 6: A line chart titled 'DC unemployment rate: 1980 to February 2025.' The vertical axis ranges from 4.0 to 12.0 percent. The unemployment rate peaked above 11 percent in the early 1980s, then declined through the late 1980s before rising again to approximately 8.5 percent in the early 1990s during the 'Reinventing Government' period, labeled on the chart. The rate fell steadily through the 2000s to around 5.5 percent before spiking sharply during the 2008 recession and again to approximately 11 percent during COVID-19 in 2020. By early 2025, it had fallen to approximately 4.0 percent. Gray shading indicates recessions. Source: not labeled.

Chart 7: A line graph titled 'DC unemployment rate: 1980 to February 2025.' The unemployment rate peaked near 11% in the early 1980s, declined to about 4.5% by the late 1980s, then rose again to roughly 8.5% in the early 1990s around the 'Reinventing Government' period. It fell steadily through the late 1990s to a low near 5.5%, climbed back above 10% during the 2008–2010 recession, and then declined again before spiking sharply to about 11.5% in 2020 during the COVID-19 pandemic. By early 2025 it had fallen to approximately 4%. Gray shading indicates recession periods.

What happened to the population?

The District's population peaked during World War II as the federal government expanded in response to the war effort. After the war ended, the population began to decline, although there were brief periods of stability and increases. Following the riots in 1968, the population experienced a steep decline that continued until the beginning of the twenty-first century, only stabilizing briefly in the 1980s (Chart 8). The population was already in decline before the federal workforce reductions, but the workforce reductions exacerbated the decline. The population decline during the 1990s was as severe as in the 1970s when residents fled the District following the riots in 1968. In fact, for much of the 1990s, the rate of population loss was higher than in the 1970s. This is not to say that the federal workforce was the leading cause of the population decline. Many forces were at work in the District’s population decline since the 1940s: the war's end, the suburbanization that accompanied the building of the highway system, the 1968 riots, bigger houses, less crime, and higher quality schools in the suburbs, among other factors. However, the job reductions would have been a contributing factor, with fewer people being attracted to the region and the District as jobs disappeared.

Table 7 and Chart 8: The top portion shows Table 7, 'District population by decades from 1940-2025, thousands,' with columns for Start, End, Change, and % Change. Population grew 17% in the 1940s (690 to 807), fell in the 1950s through 1980s, dropped 14% in the 1990s (604 to 519), then recovered 3.5% in the 2000s, 17% in the 2010s, and 4.7% in the 2020s. The bottom portion shows a line chart of 'District Population: 1900-2024, thousands,' with population rising sharply during World War II to a peak near 900, then declining through the 1960s-1990s to around 520, with annotations for 'World War II begins,' 'World War II ends,' '1968 Riots,' and 'Reinventing Government.' Recovery resumed in the 2000s reaching approximately 700 thousand by 2024. Source: US Census Bureau.

Chart 9: A multi-line chart titled 'District population by decades from 1940-2025, start of decade = 100.' Each line represents a different decade (1940s through 2020s), indexed to 100 at the start of that decade. The 1940s line rises steeply to approximately 130 before declining, while the 1970s and 1990s lines (highlighted in red) show sustained declines to about 88, the worst performance of any decade. Most other decades show modest gains. The 2020s line ends near 118 after about 4 years. The x-axis shows 'Years from start of decade' (0-9). Source: US Census Bureau.

Concluding remarks

What does the District's economic performance in the 1990s, following significant federal workforce cuts, suggest about the potential impact of current federal downsizing? The District's economy has changed in some ways since then. Federal employment now accounts for a quarter of the workforce, compared to one-third at the beginning of the downsizing in the 1990s. This shift is a direct result of that downsizing.

Much of the employment growth since the 1990s has occurred in Professional and Business Services, primarily involving federal contractors. This trend emerged as the federal downsizing replaced federal workers with contractors, which helped to cushion the overall decline in employment. However, if the current federal downsizing also reduces federal contracting, the impact on overall employment could be more severe than it was in the 1990s.

On a positive note, the District's population has been growing since the 2000s and is currently at its highest level since the mid-1970s. The District's ability to continue attracting and retaining residents will depend on its capacity to create new job opportunities as federal and possibly contracting jobs are lost. To achieve this, the District must leverage its core strengths, which include a highly educated workforce, good transit infrastructure, good universities, national monuments, world-class museums, and its status as an international city.

What is this data?

This analysis is based on employment statistics from the US Bureau of Labor Statistics (BLS) and population data from the US Census Bureau, which were retrieved from the Federal Reserve Bank of St. Louis Federal Reserve Economic Database (FRED®) system.