Virginia – A legend in its own mind. The U.S. Department of Commerce has published the 2011 GDP growth for each of America’s 50 states. Virginia, the oft-cited best state for business, finished in 40th place. The Old Dominion squeaked out a barely positive 0.3% GDP growth rate in 2011. U.S. real GDP by state grew by an average of 1.5% in 2011. This marks the second year that Virginia has fallen behind the national average. Last year (2010), Virginia finished with a 3.0% growth rate. The overall average growth rate for the U.S. was 3.1%.
What do you feed an invisible cat? Evaporated milk. Virginians have seen and heard little from Lt Governor Bill “the jobs czar” Bolling lately. Perhaps Virginia’s dismal economic performance is one reason that Lt. Gov. Bolling is keeping a low profile. After all, there is more than a year until the next governor’s election and maybe Virginia’s economy will improve between now and then. Meanwhile, Gov Bob McDonnell has been visiting Sweden while Marco Rubio is being vetted for the Vice President slot on the Republican ticket. Perhaps Mr. Romney has an aversion to running with the governor of an economically under-achieving state. Of course, even Virginia’s #40 position is better than where Gov Romney took Massachusetts during his tenure as governor. I seem to remember #47 being bandied about.
The Best State for Business? The Richmond spin machine never sleeps. There is no end of surveys, polls and projections touting Virginia’s brilliant economic performance and, by proxy, the excellence of its state government. Jim Bacon posted a blog entry entitled, “Virginia’s Major Metro Economies Looking Pretty Darn Good” just five days before the state GDP figures were published. In the post, Jim notes that Virginia’s three biggest metropolitan areas were rated among the country’s top economic performers by the Brookings Institution. Bacon went on to write, “Outside Virginia’s major metro areas (and Charlottesville), the economy was not so hot.” It seems that may be something of an understatement. Just recently, Bacon found an even more far-fetched “analysis” of Virginia’s economic prospects which he detailed in his post, “We’re No. 4! We’re No.4!”.
Crying Uncle (Sam). Virginia is a major beneficiary of the recent unprecedented level of government spending. Yet, even with that, the state is incapable of achieving even average GDP growth. The open question is how far Virginia’s economic performance will fall once the inevitable government cutbacks begin. There is good news. We’re number 40 now and there are only 50 states – we only can fall 10 more places.
D.J. Rippert
Does this have anything to do with the fact that Virginia is highly dependent on Government money and the stimulus has run out? It is genuinely a question, I really do not know.
Saunders –
Even though the stimulus has run out, the governement is still spending more money than ever. Here is the gross federal government spending:
FY07 – $2.7T
FY08 – $3T
FY09 – $3.5T
FY10 – $3.5T
FY11 – $3.6T
FY12 – $3.8T
The stimulus was meant to be the extra $500B in FY09 (vs FY08). However, under President Obama, every year is a stimulus year. In fact, the actual stimulus year (FY09) now looks cheap.
Source: http://www.usgovernmentspending.com/total_2007USrt_13rs5n
Unfortunately, any decrease in Virginia GDP cannot be blamed on reduced federal spending.
Or that because Virginia didn’t fall as far into recession as other states, it didn’t have as much of a bounce after hitting bottom?
Tennessee is ranked #13.
Virginia is #40
But the biggest dip Virginia took post 2008 was -0.7. Tennessee, on the other hand, in the same year fell -4.7. So Virginia is better off now than Tennessee, even though they are ranked a whole bunch above us.
To paraphrase Rod Stewart, “Every series tells a story, don’t it?”.
Your idea could well be true. I’d have to spend quite a bit longer with these numbers to be sure.
However, state GDP growth in the US fell on average by 50% from 2010 to 2011. The average went from 3.1% to 1.5%. Virginia’s growth rate fell by 90% – from 3.0% to 0.3%. And Virginia’s growth in 2010 was slightly below average so the decline was not the statistical letdown one often sees after a statistical blow-out.
One bit of data stands out … federal spending by state. Here are Virginia’s numbers:
FY07 – 110.1B
FY08 – 118.5B
FY09 – 155.6B
Unfortunately, that’s the latest data available. However, the addition of $45.1B in federal dollars spent in Virginia is quite a buffer against recession.
In two of those three years, Virginia had the highest defense spending of any state. Not the most per capita – the most dollars.
Source: http://www.usgovernmentspending.com/federal_spending_by_state.php?chart=Z0&year=2009&units=b&rank=t
My unconfirmed suspicion is that the very heavy defense spending – especially in the intelligence world – has either slowed or declined from FY09 – FY12. Meanwhile, the non-defense economic problems in the state are no longer covered by the amazing growth in federal spending.
Finally, in the BEA numbers it looks like Virginia fared particularly poorly in manufacturing in 2011. Durable goods manufacturing grew but by less than most other states (from a casual scan of the numbers). Meanwhile, non-durable manufacturing took it on the chin worse in Virginia than almost anywhere else.
All of this could help explain the seeming paradox of Jim Bacon’s article about the economic strength of Virginia’s metro areas vs the slow GDP growth statistics. It’s quite possible that Virginia’s urban centers are doing better than average while Virginia’s rural and small town areas are really hurting.
If true, that could make next year’s governors election more interesting than usual.
Will, There is some evidence to support your theory. Look at the BEA data that Don linked to, which details the numbers for four years, 2008-2001. Virginia out-performed the nation the first three years, and under-performed the last year. For the four years combined, national GDP grew a grand total of 0.1%. GDP for Virginia grew 2.5%.
I’m also inclined to support Don’s theory that federal spending propped up the Virginia economy during the recession, and I would hypothesize that the slowdown last year can be attributed to a deceleration of federal spending.
I’m not at all convinced that NoVa will take any substantial hits even in a draconian govt downsizing because much of what is here is headquarters type agencies that actually will coordinate downsizing.
For instance, Belvoir and Quantico came out ahead in the last BRAC.
Not as much confidence about Hampton but the Navy has a superb deep-water port so hard to believe they’d consolidate east coast port operations but who knows?
this is all the more reason why Va should treat it’s Community Colleges and higher ed institutions are more than just academic institutions but rather the means for Virginians to acquire 21st century job skills.
I don’t know LarryG. I am looking for office space since my company’s operations in NoVa are growing. I am seeing a lot of empty office space with the distinctive SCIF rooms you only see in classified operations.
You have to look at the federal military spending numbers. Unfortunately, they are only released as of FY09 at this time.
An anecdotal tidbit … the certification programs one must go through to be qualified to build those SCIF rooms have seen a mild dip in participation over the past 6 months. Same with NAVFAC’s construction quality management certification program – the wait list used to be a couple months long and these days there is rarely a wait list. Demand seems to have dipped for the government contracting and secure side of the business. Meanwhile, you can’t find enough client-friendly “inside” superintendents to run all the interiors work because retrofit is hot now as companies are leasing space and building it out to make it their own as opposed to building new construction.
Yeah, HHM – that makes good sense to me. I am seeing a lot of sub-lets on the market at very low prices. I lookes at $14 / sq ft for a year in Tyson’s (5,000 st ft lease). I am seeing $25/sq ft at Worldgate. Lots of SCIFs buried in these offices. Given that I am looking to sub-let rather than enter a prime lease, I have less concern about retrofit. I am resolved to more or less taking what I get. But, I see two things:
1. The SCIF surplus you mention and …
2. The astounding premium paid for mixed use areas (at least, retail and commercial).
Reston Town Center: $50 sq ft
Within a mile of the Town Center: $35 sq ft
Reston, more than 2 miles from Town Center: $20 – $25 sq ft
Despite Jim Bacon’s thinking to the contrary, there is substantial demand for commercial, retail and residential space far away from the urban core. However, that demand is being generated in compact, mixed use areas rather than scattered, isolated use communities.
If Fairfax and Loudoun Counties can demonstrate the minimal discipline to make mixed use development a requirement around the Phaase I and Phase II Metro stops it will be a huge benefit to both counties. Given the reawakening of rational thought around Merrifield, I have some hope for Fairfax. Lousoun is another story. I just don’t know if Loudoun gets the mixed use thinking yet. It took Fairfax 30 years to wake up. Hopefully, Loudoun is a quicker study.
We still need to know how many of the Orange Line’s 17 slots will be transferred to the Silver Line.
there will likely be “some” downsizing of the headquarters components of programs cut but the brunt of the cuts will not be headquarters operations where career program managers often slide sideways into other similar programs.
Especially true of career Federal employees and getting to be true with the larger Federal Contractor operations who basically supplement many of these agencies – with DOD – retired military – for instance, someone who was in charge of Fire Control or Ship Navigation – their direct military experience is often invaluable to the headquarters types making decisions about planning and future systems.
DJ says office vacancies are “up”. Probably so – but not because the govt has cut spending as of yet, right? So what’s causing these SCIF vacancies?
I know this sounds weird but contractors compete for those Fed dollars and yes.. they speculatively build SCIFs in anticipation of winning a govt contract and so they can put in their proposal that they are ready to roll with an existing SCIF in hand.
As long as DC is the center of the Federal Govt, it’s going to be a place where a lot of companies want to have a part of their operations notwithstanding the recent departure of some corporate operations.
Much of rural RoVa outside the urban areas are de-facto economic zombies. The kids who live there need to migrate to the urban areas but in order to compete, they’ll need educations equivalent to what Fairfax provides or else they’ll end up in service occupations with marginal affordable housing opportunities.
This is the reason I am such a strong proponent of online education for those kids in rural areas. The ones that are bright and capable need opportunity and we need them to grab that opportunity because every one that does is one less that needs taxpayer assistance.
NoVa, with it’s built-in mostly recession-proof Fed economy has significant high tech incubation opportunities along these lines if it continues to attract bright, young, well-education people to the area.
Unlike DJ, I do not think we have to have best-of-breed, world-class education – that would be nice – but all we really need is GOOD institutions that are affordable to kids of limited means and that’s why Online is so critical IMHO.
Larry – as an Orange County High School graduate, I know first-hand that we are NOT best-of-breed in our public secondary schools across the state. But the greatest obstacle to those kids in rural areas is the culture and perception of education; this is much more dangerous than the lackluster schooling. My parents are great people and they taught me how to love and be loved, how to be curious, how to be kind. But they didn’t even mention college to me. That was my idea – a way out of a creepy little town and a path towards something better. I took the SATs one time and applied to one university because I didn’t have enough money in my account to afford multiple admission fees. I was accepted in early admission and then asked my dad if he would help me pay tuition – this was the first he’d heard of me wanting to go to college. He took a second mortgage out and worked a lot of overtime and I made it through in 3 1/2 years. Most teenagers aren’t ready to self-motivate like that. What is missing most from these rural communities is the perception that education is valuable. I’m not sure how to fix that. And if we don’t fix it, DJ isn’t going to have enough bright, young, well-educated people to work for him and make his business competitive.
HHM – you are MY KIND of person! But you really do prove my point!
There are kids that dream no matter their parents aspirations or lack of.
Those kids, given opportunity, will grab hold and sometimes like in your Dad’s case, they’ll see it as something worth supporting their kids on.
It’s not that some parents don’t care about their own kids – they do but that they themselves lack education and vision (or timeframe) to have a “do-over” on life.
A kid who is bright and has potential would be recognized in a rural school by the teacher and if there was an online option to better challenge that kid and it constituted a path to a better life, my view is that more than a few kids would recognize that – that gold ring on that merry-go-round, was something the COULD GRAB and we want to encourage that far and wide in rural Virginia.
Tech companies are crying for qualified workers. RoVa is dying with kids with no future. It’s a win-win-win (the last win is taxpayers).