THE BIGGEST challenge facing Gov.-elect Ralph Northam and the new General Assembly next year is Virginia’s “underwhelming economic performance” over the past several years. Without robust economic growth and the revenue it generates, many new initiatives—including transportation improvements—will remain on the “wish list” for lack of funding.
In a 160-page report released last month, Old Dominion University’s Center for Economic Analysis and Policy warned that “not only is economic growth in Virginia overall stuck in neutral, there is also a distinct possibility that many metro areas may be shifting into reverse.”
“Output gains are anemic and lag the United States,” ODU’s third annual “State of the Commonwealth Report” pointed out. “More Virginians are in the labor force, gainfully employed and enjoying larger paychecks. However, when Virginia is compared to neighboring states and the nation, its economic performance is mediocre.”
While the compound annual growth rate—CAGR—of the U.S. as a whole was 2.1 percent between 2010 and 2016, following the Great Recession, Virginia’s was only 0.7 percent, according to ODU economics professor Bob McNab and president emeritus James V. Koch.
“Virginia continued to struggle to produce economic growth across all its metropolitan regions,” their report noted. In fact, at 2 percent, Richmond was the only metropolitan area in the commonwealth to come close to the national CAGR.
Even Northern Virginia only grew at a “tepid” 1.2 percent rate, while the economies of Harrisonburg, Lynchburg and Staunton contracted during the same time period.
The report predicts that the commonwealth will end 2017 with a 1.8 percent growth rate, which is an improvement, but still below Virginia’s historical average—and well below the U.S. economy.
“Positive, and in some cases strong, employment growth suggests that economic activity picked up in 2017 inside several of Virginia’s metro areas,” the report pointed out. But even this good news is tempered by the fact that in most of Virginia’s metropolitan areas, wage growth slowed in 2017. That “is alarming as wages should be rising as we approach full employment.”
Recent data from the Bureau of Labor Statistics shows that job growth in each of Virginia’s large metropolitan areas slowed this year when compared with 2016, the ODU report found. “While Northern Virginia and Richmond continued to add jobs, albeit at a slower pace, job growth stalled in Hampton Roads. Because these three metro areas contain 73 percent of all jobs in the commonwealth, slow job growth regionally translated into slow growth for the state.”
George Mason University’s Center for Regional Analysis also found that Richmond was “the only Virginia metro area to have consistently positive economic growth over the past five years.” In contrast, the cities and towns along the Interstate 81 corridor saw the largest declines—after posting gains of nearly 3 percent between 2014 and 2015.
“Virginia’s regional economies, except for Richmond, appear to be decelerating,” the ODU report concluded. Another worrisome statistic: Although taxable sales in Virginia grew between 2014 and 2017, “suggesting a growing economy,” they have still not recovered to their pre-Great Recession levels.
The ODU report calls for “concerted political action to alleviate burdensome regulations, promote long-term investment and improve regional cooperation,” admitting that “this is hardly a new recommendation, but one we need to repeat until the commonwealth climbs out of its current rut.”
It’s obvious there’s a problem when the Virginia economy is growing at less than 2 percent, while the national economy is chugging away at 3.3 percent.
With the divisive 2017 gubernatorial election behind us, it’s incumbent upon the governor-elect and members of the General Assembly from both parties to put their political differences aside and do whatever it takes to shift Virginia’s economy from neutral to a higher gear.
In a 160-page report released last month, Old Dominion University’s Center for Economic Analysis and Policy warned that, “Not only is economic growth in Virginia overall stuck in neutral, there is also a distinct possibility that many metro areas may be shifting into reverse.”