Federal contractors are pulling back on their hiring, both in the number of jobs and salaries. Many DC residents work for federal contractors. This pullback will have negative effects on the District economy. Lower salaries mean less consumption. Less consumption means lower economic growth in DC. There does not seem to be any evidence that this situation will change any time soon. We expect the federal discretionary budget, both defense and non-defense, to be under pressure for some time to come. DC needs to decrease its reliance on government spending by increasing the growth rate of its private sector economy.