Bacon's Rebellion

Democracy Thrives in Sunlight

Virginia’s economy continues to sputter

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by

djrippert
in , ,

Blue state blues.

  The Associated Press is summarizing Virginia’s latest Comprehensive Annual Financial Report regarding the economic health of The Old Dominion.  The news is bleak.

“Personal income grew 4.1 percent in Virginia compared to 4.5 percent in the U.S. Housing prices in Virginia rose 5 percent compared to 6.8 percent nationally. Virginia also lagged behind the national average in employment growth and the number of new building permits for privately owned housing.”

It sees that as Virginia continues to turn from red to blue politically it is also turning from red hot to icy blue economically.  Coincidence?  Perhaps.  However, to the victors go both the spoils and accountability for results.  Democrats have won every state wide race in Virginia since 2009.  Perhaps it’s time to start asking the Democratic politicians some hard economic questions.

Good state, bad state, best state, worst state.  US News & World Report has their own take on the quality of life in the 50 states.  Again, the news is not good for Virginia.  Virginia’s overall rankings fell from #11 in 2017 to #20 in 2018.  The economy ranked 30th overall but 41st in growth.  That growth number puts us in the same neighborhood as Illinois (#44) and New Jersey (#45) – two of Jim Bacon’s favorite targets for fiscal irresponsibility.

Wasn’t super-businessman Terry McAuliffe going to get Virginia back on track?  Whatever happened to all those promises of jobs and growth?  And given that Virginia ranks #9 in terms of opportunity and #39 in terms of infrastructure maybe Ralph Northam ought to resist his inner Karl Marx and think more about roads than increased wealth transfer.

— Don Rippert.

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31 responses to “Virginia’s economy continues to sputter”

  1. LarrytheG Avatar
    LarrytheG

    Well, we’re back to half empty or half full… I’m sure Virginia would love to be more like the states that rank above it but if you look at the rank list (from 2015.. can’t find later)… there are a lot of states that Virginia clearly is better than (and most of them are RED).

    https://upload.wikimedia.org/wikipedia/commons/thumb/6/66/United_States_GDP_by_States.png/640px-United_States_GDP_by_States.png?1546448962890

    The funny thing is that California is often said to be an economic basketcase but it’s the 7 or 8th largest economy IN THE WORLD – yet… the half glass full folks say it’s “terrible”….

    Oh.. and yes… and it is very BLUE – which is where Virginia is heading…

    1. djrippert Avatar
      djrippert

      State GDP is largely a function of population. Bangladesh has a GDP approximately equal to Arizona. However, I am confident that the average Arizonan lives better than the average Bangladeshi.

      As far as Virginia … the trend is the problem. So long as we continue to underperform the US average we will slide down the list of states.

      California is what socialism ultimately looks like. Pockets of fabulously wealthy elites surrounded by masses of increasingly poor and desperate people (deplorables?). The elites better take away the guns before the deplorables do what they always do in those situations.

      1. TooManyTaxes Avatar
        TooManyTaxes

        And let’s keep in mind that robots and other computer-driven technology are likely to make huge advances in the next 5 to 10 years. While much of this new technology can replace skilled craftsman, I fully believe that robots will replace many tasks now performed by unskilled workers. How many cleaners will an office building employ in 2029? Will road construction/repair crews employee people to stop traffic in 2029? How about restaurant busboys? Grape pickers?

        California will, for sure, have a massive under- and unemployed group of people in 10 years. A recipe for riots? And, even in California, there aren’t enough billionaires to pay for bread and circuses. So whatever middle class is left will pay higher taxes to support the masses and will be as angry as the millions of people who cannot find work. Unless and until the Democratic Party of Virginia returns to its roots working people here legally, Virginia will be spiraling towards California.

        Just maybe those terrible dead people who thought a nation must control its borders to be a nation and put its citizens above those of other nations had it right.

        1. Reed Fawell 3rd Avatar
          Reed Fawell 3rd

          These comments are right on the money.

  2. LarrytheG Avatar
    LarrytheG

    re: ” and desperate people (deplorables?)” – well..unlike the “deploreables” in the South and Midwest Trump states, these “deploreables” vote BLUE!

    Truth is , California is more like the OECD countries and Blue Urban cities than the rural and Midwest USA.

    California’s economy is very diverse economically… pesky facts:

    California is Largest Food Producer in the U.S.

    California is the world’s 5th largest supplier of food, cotton fiber, and other agricultural commodities. In the U.S., California is the largest producer of food despite having less than 4% of the farms in the country.

    On the other hand – California is the largest tech economy in the US.

    Finally, if things are that bad for the “masses” – what better state would they
    go to for a better life? Texas? 😉

    1. djrippert Avatar
      djrippert

      California also has the 6th highest Ginni coefficient of any state. It generates plenty of wealth and the majority of that wealth goes straight into the pockets of the urban rich like Nancy Pelosi.

      If you in the “bottom 80%” of wage earners you have to ask yourself three questions:

      1. Is there growth (and available work)?
      2. Will I get a fair share of the economic growth?
      3. Can I afford to live here?

      The answer in California is increasingly:

      1. Yes
      2. No
      3. No

      And yes Larry … they are moving to Texas:

      “During that 12-month period, California saw a net loss of just over 138,000 people, while Texas had a net increase of more than 79,000 people. Arizona gained more than 63,000 residents, and Nevada gained more than 38,000.”

      https://www.cnbc.com/2018/03/19/californians-fed-up-with-housing-costs-and-taxes-are-fleeing-state.html

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        Excellent article and commentary, Don.

  3. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Before we get too pessimistic, let’s look more closely at the numbers. First of all, the graph in the lead story is misleading–it shows a downward trend, whereas the personal income of Virginians increased. In fact, the 4.1 percent increase for 2018 was much better than the 2017 increase of 2.7 percent. True, the state increases were less than the national rates, but as Ric Brown always pointed out, Virginia historically recovers at a slower rate than the nation as a whole. The CAFR also has an important statistic in which Virginia beats the nation–its unemployment rate of 3.4 percent versus the national rate of 4.1 percent.
    As for the U.S. News ratings, I am always leery of these types of ratings. They depend on the measures used. As usual, the devil is in the details. The problem with comparing 2017 and 2018 rankings is that U.S. News (or McKinsey, its consultant) used a different pot of measures in 2018. In 2018, it added a measure, Quality of Life, that was not used in 2017. It also narrowed a 2017 measure, Government Administration, to Fiscal Stability in 2018. And how we do on these new or revised measures? Not so good.
    Quality of Life–overall 41
    Two subcategories
    Natural environment–overall 39
    One measure for Natural Environment was Low Industrial Toxins; Va. was dead last in this one.
    Social environment–overall 44
    One measure was Social Support. We were dead last here, too.

    For Government Administration in 2017, Virginia was ranked 2 overall. In the more focused 2018 measure, Fiscal Stability, Virginia had an overall rank of 14. This measure is interesting. It was divided into two areas, each given equal weight–long term and short term. We did well on long term–ranked 5. On short term, we were ranked 30. For the short term measure, McKinsey looked at budget balancing (the budget surplus or deficit per person) and liquidity (ability to pay bills within 30-60 days). In both areas, the state scored below the median of 25. These results seem out of line.
    I did not take the time to perform all the calculations, but the changes in the methodology, with the measures of two new measures on which Virginia did not score well, certainly contributed to the state’s drop in overall rating.

    1. djrippert Avatar
      djrippert

      Lol. The unlabeled graph with no scale was intended to show a drop in relative performance vs the other states. The biggest issue is being rated 41st in economic growth. Hence, the article title “Virginia’s economy continues to sputter”. As for the observation that Virginia always recovers more slowly than most other states – I guess I’d ask why. Then I’d ask – how much more slowly. This expansion has been going on a long time. In fact, if Virginia doesn’t catch up quickly we’ll be in the next contraction.

      The real issue is that for years Virginia’s GDP was increasing nicely with a caveat. Dollar growth in Virginia’s GDP from federal spending was greater than the total growth in GDP. In other words, non-Federal areas of growth were shrinking.

      I’ve written several articles on this blog on the topic of Virginia’s tanking economy. The first (written in 2013) was deleted when Jim Bacon had to reset some blog IDs in order to help control spam. Based on WordPress’ algorithms, all posts by those IDs were also reset. My ID was one of those IDs reset and my article “Is Virginia’s Economy Tanking?’ was lost. I wrote a follow up article in 2015 which can be found at …

      https://www.baconsrebellion.com/has-virginias-economy-officially-tanked-2/

  4. TooManyTaxes Avatar
    TooManyTaxes

    What is social support? Does it mean lack of personal networks? Or lack of higher taxes to support those who don’t or can’t support themselves?

    And Larry, folks can still vote Blue but that won’t stop the economic, social and technical changes from occurring. Jobs for those without skills will begin disappearing leaving them with bread and circuses. Ask the Romans how well that went for them. And by ignoring immigration laws, places with bread and circuses will get lots of takers. We should be focused on addressing the problems for those American citizens and legal immigrants who lack skills. But the left wants to ignore them (or as Hillary Clinton did, call them deplorables) and import more poverty.

    I was talking to a friend of mine who is even older than I am. He was at a holiday party where the hostess told him she was shocked that her cleaning lady told her than she (the cleaning lady) and her friends all support Trump because he takes a hard line on illegal immigration. They don’t want newcomers undercutting their earnings.

    1. LarrytheG Avatar
      LarrytheG

      @TMT – do you realize that 2/3 of “illegals” are folks who have overstayed their VISAs? How does a wall fix that?

      1. TooManyTaxes Avatar
        TooManyTaxes

        I have never distinguished between people who overstay visas and those who cross the border illegally. We need to kick out the former while we stop the latter from coming over the border. I do suspect that those who overstay visas present a much smaller demand on taxpayer resources than the latter do. But we need to control our borders and when we do, we can look at a merciful program to let those here illegally for say 10 years and who have paid taxes and not run afoul of the criminal laws except for an infraction or two remain. We also need to focus legal immigration on people with needed skills.

        If we passed a law that limited federal tax deductions for employee or contractor compensation to half the amount paid unless the employer could prove it subjected all employees and long-term contractors to the E-Verify program and that it did not employ unauthorized persons, the job market for unauthorized workers would dry up within two years. And this would catch those who overstayed visas.

        1. LarrytheG Avatar
          LarrytheG

          I think if we just enforced E-Verify it would take care of a lot of the problem. We are being hypocritical in our policies. We demonize people who want jobs and ignore the folks who are employing them and incentivizing them to come.

          1. TooManyTaxes Avatar
            TooManyTaxes

            Larry – I agree fully. We need to put much of our focus on the employers who ignore the law. Maybe the police should also ignore the calls of business owners who report property thefts unless they can prove they have complied with E-Verify. LoL

        2. LarrytheG Avatar
          LarrytheG

          FYI

          https://pics.me.me/don-t-want-to-lose-my-job-to-an-illegal-immigrant-27098055.png

  5. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    This is how McKinsey defined “Social Support” for the U.S. News report:
    “Social support measures average satisfaction and frequency of participation in social events as well as how supported people feel by their social networks and how often they give or receive unpaid help.”

    1. TooManyTaxes Avatar
      TooManyTaxes

      Thanks. That does seem to be a material factor in a functioning society.

  6. djrippert Avatar
    djrippert

    From 2000 to 2005 Virginia’s GDP (in chained 2009 dollars) grew at a CAGR of 2.78%.

    From 2011 to 2016 (the last year I have data) Virginia’s GDP (in chained 2009 dollars) grew at a CAGR of 0.61%.

    “Real Virginia per-capita GDP is 0.03% lower today than 5 years prior in 2011. In that time the population in Virginia grew by 301,773 (3.72%) people. The per-capita GDP decline plus the population growth are approximatly equal to the GDP decline Virginia shown above.”

    This is getting ugly and The General Assembly is blissfully ignorant.

    https://www.deptofnumbers.com/gdp/virginia/

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      These woeful numbers point up the potential importance of the Amazon transaction, the need to tether Virginia’s future to the powerful trends of the future, instead of relying on the dead hand of the past. There is a long way from the lip to the cup, but it is necessary to recognize the reality of now, and how the Amazon transaction may help take Virginia into a new future if we keep our eye sharply and resolutely on the ball, a big task in our modern world, I know.

      1. TBill Avatar
        TBill

        Good Reed. I did a word search for “Amazon” and by gosh you had the only 2 instances of the word.

  7. V N Avatar
    V N

    We’re paying all these tax dollars to city, state, regional economic development people. Wonder why they aren’t tracking it?

    1. smoretva Avatar
      smoretva

      “We’re paying all these tax dollars to city, state, regional economic development people. Wonder why they aren’t tracking it?”

      These types of growth statistics are closely followed at the state level and in many regional and local economic development groups. They also represent a central focus of the five-year strategic plan for economic development of the commonwealth that was completed in late 2017.

      See https://www.vedp.org/strategicplan

      The assessment of Virginia’s economic competitiveness in that strategic plan suggests there is much to do to position Virginia and its various regions for healthier growth. Some of those things are being implemented now. Others are in the governor’s proposed budget.

      The latest five-year growth forecasts from Moody’s pulled in December ranked Virginia no. 18 for employment growth and no. 19 for GSP growth — not setting the world on fire, but better than the most recent five-year historical growth rankings for Virginia (no. 30 for employment growth and no. 38 for GSP growth).

      For a little more info, see my presentation from last month’s economic summit (sorry, large file due to pictures):

      https://drive.google.com/open?id=1u3E-H59SZEWQVQnBw7bjDCcCY7-lkizW

      1. Reed Fawell 3rd Avatar
        Reed Fawell 3rd

        Steve Moret’s presentation from last month’s economic summit linked in above is impressive on several fronts, most particularly its choice of subjects focusing on areas of opportunities, and challenge. This is not boilerplate. It is not pie in the sky. It is not theory, or cant. Nor is it trivia, or endless lists of trees, without any view of the forest and what ails it. Yes, it’s drawn in broad outline and there are many parts, but that is the way the real world works. And what so many of us forget, particularly those in power, attending to only special interests, and/or little things at hand, rather than the big picture of what is really going on, often under the surface driving problems that are often chronic. So many solutions and opportunities are missed altogether.

        For example, what is the most powerful engine of growth and economic development in a state. Is it an office park? Or is it a fine K-12 school filled with kids of all colors and classes, working and learning to their fullest potential? Or is it building places for hip highly educated singles to the exclusion of everyone else? Or is it building places the serve all citizens, no matter their education or talents, offering all citizens maximum chance at finding and keeping their places in life, and being proud of it, and of themselves? Or is it some combination of the above?

        While Steve Moret’s presentation does not express itself in these terms, these are the terms and issues that I read into his report. And they are vitally important, and far too often totally overlooked in these sorts of presentations, but not here, not in this one found at:

        https://drive.google.com/open?id=1u3E-H59SZEWQVQnBw7bjDCcCY7-lkizW

        Go carefully through this presentation. There is a huge amount here. Far more than meets the eye at first. And it’s only the tip of an iceberg. That tip is build on an enormous amount of data, study and experience. That is obvious if you read it carefully, think carefully about it says.

        Note at the end of the presentation, the listing of “What’s Next to Keep Driving Virginia’s Economy forward.” That list includes 10 items. The 9th item is “Develop a robust state marketing program.”

        When a state has a economic development program operating at the caliber and competence of the Virginia Economic Development Program, that state should fund the money and provide that program with the means to create the vision and brand, to market it far and wide, and manage its consequences, so the state and its people have to the best opportunity to thrive and prosper into the future. With a start like Amazon, why would anyone in Va. walk away from such opportunity.

  8. LarrytheG Avatar
    LarrytheG

    The bottom line on the Virginia economy and it’s prospects for the future is good to great depending…. but again, if you look at any economic metric chart of the 50 states – there are many, many who are far, far below Virginia with very little prospects of improving to any great degree that would push them up in the rankings.

    Virginia does have a rural collapse like several states do but ironically the state that the naysayers say is “failing” – California – it’s not only the number 1 tech state, it’s the number 1 Agriculture state. It has a VERY diverse economy such that if one sector is down the other sectors stabilize it and with a population of 40 million there is going to be out-migration to states with lower costs of living – yes like Texas where jobs are not the best.

    As long as the Federal Govt is where it is including the Pentagon, and all of the Cabinet level HQs and 20+ military bases and agencies… Virginia will always be fine – perhaps stuck in the middle but nothing like the states that relied on manufacturing and agriculture – which is also a weakness in Virginia with RoVa.

  9. LarrytheG Avatar
    LarrytheG

    re: robots and illegals taking what jobs are left…

    Good LORD!

    Well.. we’ve gone from the industrial revolution where a LOT of folks lost their jobs to a technology-based economy then to a knowledge-based economy and yes a lot more folks have lost their jobs and voted for liars who said they would bring those jobs back and voted against those who said and say that more education is imperative if you want a job in the 21st century.

    Yes, robots are taking more and more low level labor jobs (as well as higher level data keeper jobs) – no question about it – but someone has to build those robots and drones and data centers and autonomous cars and smart roads and you name it.

    The world is changing dramatically and education is paramount for those who want work. Robots still have to be operated and maintained and repaired and it’s just plain myopic to play “the sky is falling and we’re all doomed” game.

    And the awful reality is that with the advent of the internet – education at any and all levels is easily available to anyone who wants to improve themselves. The problem we have is people are basically lazy. They want someone to “give them” a job..train them… and then let them occupy a position with pay and benefits and let the “man” worry about where the money comes from to pay them.

    You’ll NOT find a mindset more to that idea than in NoVa with govt and contractor workers by the way – they are very little different in that regard to RoVa folks who just want a rote factor job with pay and benefits rather than have to work to achieve a 21st century education that makes them legitimate competitors for 21st century jobs.

    Our problem is – way too many are basically lazy and basically just want someone to give us a job. We actually fear education… it’s too “hard” and we have to work at it… to learn… so we vote for idiots who say they’re gonna bring back our jobs…and vote against those who tell us the truth about getting an education.

  10. Dick Hall-Sizemore Avatar
    Dick Hall-Sizemore

    Larry,
    This is a little harsh. There are folks in their 40s, 50s, and 60s, in the rural areas, small towns, etc., who had solid jobs, but have been displaced by automation and they are scared. They are not all lazy, but sitting down at a computer and getting trained on something entirely new is not an easy thing for them to do. And the jobs they can get with this new training, if they are available, are not likely to pay as much as they used to make.

    1. LarrytheG Avatar
      LarrytheG

      Dick – yes , “lazy” is a bit harsh and you do well explain the issue.

      It actually is a heartbreaking thing for people to lose their jobs with no replacements but unfortunately, that’s the reality inherent in the 21st-century economy. Unfortunately also, way too many people never really wanted to take personal responsibility for getting enough education to be able to qualify for more and better jobs.. all they ever wanted was for someone to GIVE them a job and train them … a career… in a factory. It was the American Dream… a job, a house, a car, etc… and all you had to do was show up for work.

      The same thing has happened to farming – family farms have been wiped out by industrial-scale farming… and a lot of white-collar jobs that involved the care and feeding (curating) of data have been taken by computers… etc..

      So “lazy” is harsh because it is scary – but it is what it is and people who believe politicians that say they will bring back jobs – that’s “lazy” AND destructive and it fails to deal with the realities – which is what is really “harsh”.

      By the way – adding your voice to the discussions here is – much appreciated. Looking forward to more from you!

  11. LarrytheG Avatar
    LarrytheG

    re: “growth statistics” –

    There is irony and frustration in how this is viewed – in exurban locales which are “growing” but not in local jobs – just commuters to distant jobs.

    And it has big and profound negative impacts on traffic. I-95 between DC and Fredericksburg has essentially been co-opted for regional commuting to the point where out-of-state travelers on I-95 just trying to move up and down the coast are effectively blocked in the DC area at rush hour. I-95 no longer functions as it was built originally to do. And THAT is harmful to the economy also.

  12. Inthemiddle Avatar
    Inthemiddle

    Yes, it’s tough living in such a bleak environment. Our unemployment is under 4% and we rank 18th in per capita income, at $51,736, compared, for example, to NC, which ranks 32, at $44,325.

    But Don raises an interesting psychological phenomenon that is generally overlooked by economists – people feel better when their income is increasing faster, even if their income base is lower.

    In any case, it’s best to skip the US News & World Report and go straight to the report the article refers to, which does a good job of providing a wide range of data, highlighting strengths as well as challenges in the VA economy.
    https://www.ceapodu.com/wp-content/uploads/2018/12/2018SOC-Report.pdf20ceapodu.com_.pdf

    A final comment, what does the Republican/Democrat division have anything to do with this discussion? Our textile industry didn’t disappear because of one party or another – it disappeared because American consumers preferred cheaper substitutes manufactured elsewhere and our free enterprise system rewarded suppliers who met their demand. Are we prepared to say that economic development occurs because of Democrats, since most of the state’s economic development is occurring in ‘blue’ counties?

  13. LarrytheG Avatar
    LarrytheG

    re: ” Yes, it’s tough living in such a bleak environment. ”

    If you live in RoVa and the jobs are gone or even elsewhere and you are older and/or your education or job experience is not good then there are essentially two Americas these days.

    And if you are not in the better half and your prospects for a good job are dismal – you’re in trouble.

    So the reality is with an overall low employment rate – basically the urban areas are in full employment – even have labor shortages but in RoVa – the unemployment is 10-20%.

    Yes. the textile workers and blacksmiths and others had no one to blame but there WERE other jobs that did not require significantly more education.

    DicK Hall said my assessment of “lazy” was harsh – and it was but the reality is that the reality of the 21st century labor market is also harsh.

    If you are not young, have a decent education and willing to work long hours and be prepared to leave and find a new job – and instead you wanted a career job at one company that would provide you with good pay and benefits – then bad stuff is in store.

    You ask yourself what are the “other” career type jobs that are available these days and you can be an educator or a military or civilian security person or health care . but it’s a shorter and shorter list…

    Not only are manufacturing jobs becoming scarcer and the ones that remain require significant education – but white collar jobs that basically were info processing/gate-keeping are also going away.

    I went by a commuter lot this morning in Spotsylvania and it normally is 3/4 or more full and today it’s less than a quarter – the difference? the govt shutdown.

    Most of the folks who live in Spotsylvania and work in NoVa are govt workers.

  14. Amazon in Northern Virginia: 5 Positives – Bacon's Rebellion

    […] schools and a myriad of other “needs” will be hard to fund given Virginia’s sputtering economic growth.  If the Old Dominion is going to become the progressive nirvana envisioned by some we’d […]

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