By Adam Pagnucco.
In a recent budget memo, the county council’s central staff warned the council about mounting trouble in the county’s economy. That trouble is now spilling over into this spring’s politically fraught budget debate.
It has been a long time since the county’s economy has been anywhere close to regionally competitive. As I have been detailing in a recent ongoing series, MoCo has trailed most of its large neighbors on a series of economic measures since at least the Great Recession. Nevertheless, the county executive and council have locked in compensation increases far exceeding revenue growth, inevitably leading to a reckoning whenever the next recession comes. Now a recession appears increasingly likely as the county wrote down its projected future revenues last month.
This year is an election year, a season in which politicians love to play Santa Claus. That’s going to be hard now. In this staff memo, council staff describe economic conditions that are steadily darkening and are bound to affect revenues. Following is an extract from the memo. Will county leaders stow away the presents, or will their elves be deployed to handing out what could be empty boxes?
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A. Condition of the Economy
The unemployment rate increased year-over-year in the region and the County.
o The Bureau of Labor Statistics (BLS) estimates that the Washington metro area’s unemployment rate increased year-over-year from 3.00% in September 2024 to 4.10% in September 2025.
o The BLS estimates that the County’s unemployment rate increased year-over-year from 2.60% in September 2024 to 4.20% in September 2025.
o The unemployment rate for both the County and the region have experienced an increase throughout 2025 when compared to the consistent low unemployment rate following the recovery from the pandemic.
The total number of payroll jobs decreased year-over-year in the region and the County.
o The Center for Regional Analysis (CRA) estimated that the Washington metro area’s jobs decreased by approximately 9,000 from August 2024 to August 2025.
o The CRA estimates that job growth or loss was uneven amongst the different industry sectors. The Professional and Business Services and the Federal Government both experienced significant job loss with an estimated 40,300 jobs lost from August 2024 to August 2025. The Education and Health and the construction industry sectors both experienced job growth totaling about 25,600 jobs.
o The CRA estimates that Suburban Maryland, which includes the County, gained 200 jobs from August 2024 to August 2025. The industry sectors with the largest growth or loss mirrored the region.
o The BLS estimates that the County’s total payroll employment decreased by approximately 7,000 jobs from June 2024 to June 2025 (preliminary).
o The BLS estimates that Maryland total Federal Government payroll decreased by approximately 10,000 jobs from September 2025 to October 2025. This is likely due to the deferred retirement instituted by the Federal administration.
The County’s resident employment decreased in the last year, a key indicator to estimate the County’s income tax.
o Finance estimates that County’s resident employment decreased from 555,030 in 2024 to 548,268 in 2025, a decrease of 1.21% year-over-year.
o Finance estimates that the County’s resident employment will continue to decrease in 2026 to 541,270, a two-year decrease of 2.48% from 2024.
B. Level of Economic Activity in the County
The inflation rate modestly decreased in 2025.
o Finance estimates that the Washington metro area inflation rate for 2025 was 2.44% , a modest decrease from 2.86% in 2024 and 2.80% in 2023.
o The inflation rate is estimated to remain greater than 2.00% through 2028.
o The Employment Cost Index (ECI), which measures inflation in compensation costs, was 3.60% for State and Local Governments in September 2025, a decrease from 4.70% in September 2024.
The County’s office market experienced no significant changes in 2025 and continues to experience elevated vacancies.
o Costar estimates that the County’s Class A office space average rent increased in 2025 to $34.84 per square foot from the $34.67 per square foot in 2024. The vacancy rate for this type of office space was unchanged at an average of 21.40% in 2024 and 2025.
o Costar estimates that the County’s Class B office space average rent increased in 2025 to $29.29 per square foot from $28.33 per square foot in 2024. The vacancy rate for this type of office space increased in 2025 to an average of 18.40% from an average of 18.10% in 2024.
The County’s home sales and median value decreased in 2025.
o Finance estimates that existing home sales decreased by 8.60% in 2025.
o Finance estimates that the median home sales price decreased by 0.90% in 2025.
o The State Department of Assessments and Taxation released the most recent triennial property assessments for Group 1 – residential properties in Group 1 experienced an average 18.20% increase in property values from 2022 to 2025, and commercial properties in Group 1 experienced an average 14.10% increase in property values from 2022 to 2025.
C. Trends in Personal Income
Salary and personal income were flat in 2025.
o Finance estimates that total personal income increased by 1.09% in 2025.
o Finance estimates that wage and salary income increased by 1.11% in 2025.
The COLA for Social Security recipients will be 2.8% in 2025.
D. Impact of Economic and Population Growth on Projected Revenues
The County’s population is not estimated to increase significantly.
o Finance estimates that the County’s population will increase by 0.64% from 2025 to 2026.
o The County’s population growth is estimated to be muted for the foreseeable future, averaging around 0.60% annually.
The County’s revenues are estimated to increase in FY27 when compared to the FY26 approved budget.
o The increase of $130.5 million is modest when compared to recent revenue increases of $269.2 million for the FY24-FY25 growth and $376.0 million for the FY25-FY26 growth.