2018 labor force participation rates. Source: VEC. Click for larger view.
Laissez les bon temps roulez. Virginia’s strong employment climate is adding a financial spare tire to Virginia’s unemployment trust fund, now above 83 percent solvency by one actuarial measure and exceeding a federal recommended minimum balance on another measure.
The annual unemployment fund status update for a legislative oversight commission Wednesday lasted about 30 minutes, with the chairman, Del. Lee Ware, R-Powhatan, noting it was far shorter and less dramatic than some previous meetings in tight times, adding “it’s a good drama not to have.” The presentation is here.
The projected $1.45 billion fund balance for next December 31 will be another record, said Virginia Employment Commissioner Ellen Marie Hess. The figures used are not adjusted for inflation, however, and the state has been at higher solvency levels in previous periods of prosperity. The funds are just sitting there earning interest and awaiting the next recession, which history deems inevitable.
The previous bottom for the fund came in 2010, and Virginia needed to borrow federal funds in 2010 and 2011 in order to pay unemployment benefits. The fund has been climbing back since 2012, and Hess projected an 86% solvency level and almost $1.6 billion balance for 2020. Will this unexpectedly long expansion reach through 2020? Continue reading
Unfriendly skies. Washington Dulles International Airport is the most expensive airport in the United States to fly from. In a survey of the 45 largest airports, Travel Pulse found that the average ticket cost $427.37. On the other hand, travelers do get a bit more for their money, such as free carry-ons and seat selection.
Question: Why is Dulles so expensive? Pricy airports tend to be hubs for traditional airlines like United and American, the survey author said. So, are the airlines the problem? Or has Dulles squandered money on ill-conceived capital projects — expanding to accommodate growth that never occurred? Our friend Reed Fawell might have something to say on that topic.
Danville’s revival. If you haven’t visited the City of Danville in the last 20 years, perhaps you should. My wife and I drove through downtown a few months ago and she was blown away by how vibrant it was. It turns out that James Fallows, a senior writer for The Atlantic, was similarly impressed. In a recent article he explains that the city maintained a viable economy into the 1970s and 1980s based on textiles and tobacco, did not experience the same hollowing out of its industrial infastructure, and saw no need to tear them down, as was the fashion in many other cities in the era of “urban renewal.” The textiles-and-tobacco economy collapsed in the 1990s, but the brick manufacturing structures were preserved.
Today, Danville has more “antique architecture” than downtown Charlotte or downtown Atlanta, even though those cities are vastly larger. The revival of former tobacco and textile buildings in Danville’s “River District” has created a unique environment of walkable urbanism that may seed the city’s renewable.
Update. In the first installment of this two installment post I described the metropolitan juggernaut that is modern day Nashville. I also provided some historical perspective on how Nashville became the sixth fastest growing US city (measured along several axes) between 2011 and 2016. As a side note, the 35 fastest growing cities documented in the prior link included no cities in Virginia. I have family in Nashville. For three of the last four years I have visited my family, run in a wildly popular race and witnessed the remarkable growth of Music City. My 2019 trip is complete and this article is the promised update.
First, a step back. Admiring the rapid growth of Nashville requires a fundamental belief. One has to believe that rapid growth in urban areas is a good thing. This is not a universally held belief, in Virginia or in Tennessee. Thomas Jefferson, for example, was quoted as saying, “When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe.” While I understand the bucolic allure of country living I believe that the economic future of the United States and Virginia will largely be in the cities. I think Virginia should be striving to create an environment conducive to fast growing, safe, livable cities. To that end much can be learned from Nashville as well as Charlotte, Austin, Raleigh, etc. Continue reading
Image credit: Power for the People VA
I am not making this up. Yesterday, Dominion Energy joined a newly launched coalition of more than a dozen major corporations and environmental groups – CEO Climate Dialog. This organization will urge Congress to pass climate change legislation. Example members of the group include BP – an oil and gas company, Citibank, Dow Chemical, DuPont, Exelon – a power company and The Nature Conservancy, an environmental organization. Continue reading
Dust Bowl refugees in the 1930s. Will Virginia be on the delivering end or receiving end of the next recession-induced migration?
In the previous post I argued that there are large pockets of hidden risk in the U.S. and global economies that could trigger a devastating economic downturn. I’m not predicting that a recession is imminent — I do not profess to see the future — but I would suggest that only fools would pretend that these risks do not exist and fail to protect themselves from them.
As I have detailed in previous posts, Virginia is highly vulnerable to an economic downturn. The consolation is that we’ll have plenty of company. The Old Dominion is hardly the only state in the union that has failed to take advantage of 10 years of economic expansion to buffer itself from the next recession, which, unless President Trump has repealed the law of business cycles, is inevitable. What we don’t know is the timing. Do we have five years to adapt, or only one? Continue reading
The economy is chugging along at a 3% growth rate, unemployment is hitting record lows, productivity is surging. The economy looks like it’s in fantastic shape. A friend of mine and long-time Trump hater, normally disinclined to give the president credit for anything, marveled recently that the low-inflation, low-unemployment economy “is as good as it gets.” I hope like heck it stays that way.
But I am an inveterate worry wart. I’ve lived through booms before — the 1980s savings & loan bubble, the 1990s tech bubble, the 2000s real estate bubble. I’ve heard the promises that “it’s different this time.” And I’ve seen the busts that followed. It’s a universal rule that most “experts” did not foresee the meltdowns coming. The same thing may be happening again. Very few are paying attention to the build-up of highly leveraged corporate debt, both in the U.S. and abroad.
I don’t know if the “junk bond” sector will precipitate the next recession. Perhaps the next downturn will originate overseas and spread to the U.S., and a meltdown in junk bonds will merely act as an accelerant to a broader collapse. Whatever the case, the $1 trillion market now represents a significant risk. State and local governments in Virginia need to acknowledge this and other risks lurking in the economy as they go about making spending and taxing decisions. Only a fool would assume that the decade-long expansion, one of the longest in U.S. history, will last forever. Continue reading
Source: StatChat blog
Rural Virginia may have seen a decline in the number of jobs since 2011, but get this: Incomes have been rising faster than in Virginia’s metropolitan areas — 12% since 2010 compared to just 5% for the metros, says Hamilton Lombard on the University of Virginia’s Demographics Research Group blog, StatChat. Likewise, poverty rates have fallen more in Virginia’s rural areas. Continue reading
It’s been a long time since the unemployment situation looked this good. From the Virginia Employment Commission, here are the latest unemployment and job growth numbers for Virginia’s metropolitan areas:
You’d think that Virginia’s mainstream media might bring attention to this good news. But I don’t recall seeing a single front-page article touting the Old Dominion’s job growth and low unemployment numbers. The statistics are routinely buried in short, boilerplate articles on the business page.
Perhaps Virginia editors and reporters don’t think that the best unemployment picture in almost 50 years is news worth noting. Perhaps they think that highlighting these numbers might give undue credit to the moronic President Trump, who stupidly insisted that sustained 3%+ economic growth was possible even while his better-informed detractors did not. Perhaps they fret that good news distracts from their preferred narrative of racism, inequality, suffering, and oppression. Whatever their reasoning, I think the news is worth celebrating.
(With a little creativity, the media could give Gov. Ralph Northam all the credit for Virginia’s numbers. … But the media is not very happy with him either.)
The economy might go all to hell in 2020 — massive global credit creation makes me very nervous — but right now it feels really good. You can count on Bacon’s Rebellion to continue exploring the themes of job creation, wealth creation and opportunity for all Virginians.
Since we have been discussing manufacturing in Virginia, I want to take the opportunity to recommend this wonderful book. It is the story of how one man fought to maintain his manufacturing operation in Virginia. While the main focus of the story is the problem of Chinese subsidization of companies that were competing with Virginia furniture manufacturers, the story does illuminate many of the other problems facing manufacturers in rural Virginia. In addition, for long-time observers and students of Virginia politics and history, the story of the interlocking family operations- Bassetts, Stanleys, Vaughans, and Lanes–that comprised furniture making in Southside Virginia in the 20th century, is fascinating. (I just discovered to my chagrin that Jim Bacon had a long post several years ago about this book. Regardless of my neglecting to check BR history, it does rate a second recommendation.)
The subject of Macy’s book, John Bassett, III, has published his own book on how manufacturers can continue to succeed in America. I have not read this one, but, based on his success, he needs to be taken seriously.
USS Harry S. Truman, CVN 75. Navy Photo.
Despite 12 years of work for the Virginia shipyard where these magnificent beasts are born, maintained and where they go to die, I am no expert on nuclear aircraft carriers. Political games around budgets, however? There I have a bit of experience.
A few years back the United States Navy made what appeared to be a serious effort to retire the USS George Washington at the mid-point of its life, but it fizzled, and the ship is currently undergoing the overhaul needed for an additional 25 years of service. The work is employing thousands of craftsmen and contractors and consuming plenty of taxpayer dollars. Continue reading
Gentlemen may prefer blondes but localities prefer proffers. A proffer is an arrangement between a locality and a land developer whereby the developer offers something of value in order to get a rezoning request approved. Why do developers want land rezoned? For residential development they want to build more homes on the land than the land’s current zoning allows. Why would localities object to these rezoning requests? Theoretically, the locality’s strategic and financial plans are based on providing services at an overall population density dictated by the current zoning. Adding more density increases the locality’s costs for services like public schools. Localities are understandably worried about the unfunded mandates that up-zoning can cause. How do proffers help? Items of value (money, land, astroturf, etc) are given to the locality by the developer in order to fully or partly cover the additional costs to the locality of development at higher density than was planned. These proffers reduce the developer’s profit margin on the project at hand so they are not popular with the development community. Continue reading
The road to the Silicon Swamp is paved with gold.
1-The Future. In 2011 Marc Andreessen, founder of Netscape, wrote an essay for the Wall Street Journal titled, “Why Software is Eating the World.” The eight years since Andreessen’s essay was published have served to vindicate, validate and verify the accuracy of his thesis. Yet while software eats the world, it doesn’t necessarily dine in the same old restaurants. Car making used to be centered in Detroit. Now Silicon Valley is the new Detroit. Not only are upstarts like Tesla centered in The Valley but traditional car manufacturers are heading west too. As Andreessen noted, traditional non-technology companies all need to become software companies in order to survive. Metropolitan areas with strong software skills will attract not only technology companies but non-technology companies as well. Embrace software or be eaten by it. The future belongs to those who code.
2-Ecosystem. Silicon Valley isn’t Bentonville, Arkansas. No one company dominates Silicon valley and therein lies its enduring strength. The Valley is an economic growth machine fueled by start-ups, spin-outs, mergers, acquisitions, bankruptcies and oceans of venture capital. The idea that NoVa’s benefits from the Amazon deal start and stop with Amazon is myopic. Talented employees will come to National Landing, work for Amazon, and then leave to start new ventures. The 25,000 Amazon jobs should be seen as a starting point rather than a final outcome. In fact, startups founded by Amazon veterans like Fugue are already operating in the area. Continue reading
Projected temperature increases in the range of loblolly pine in 2040-2059 time frame under IPCC worst case scenario
Despite rising temperatures, increasing concentrations of carbon dioxide (CO2) in the atmosphere will give a 30.4% productivity boost to the growth loblolly pine forests in Virginia and 11 other Southeastern U.S. states by 2060, according to recent research from Virginia Tech.
The research team lead by Harold Burkhart, professor of forestry, modeled the effects of increased ambient CO2 concentrations and the interaction of changing climate and C02 enrichment on loblolly pines, which constitutes more than half of total pine volume.
Change in precipitation in loblolly pine range in 2040-2059 time-frame under worst-case IPCC scenario.
The study, “Regional Simulations of Loblolly Pine Productivity with CO2 Enrichment and Changing Climate Scenarios,” assumed that CO2 levels will continue to increase in line with the Intergovernmental Panel on Climate Change’s worst-case RCP 8.5 scenario. It modeled the impact on a stand of planted loblolly of about 500 trees per acre growing until harvested after 25 years. Continue reading
A few weeks ago I cited United Van Line data suggesting that more people continued in 2017 to move out of Virginia than moved in. Now Hamilton Lombard at the University of Virginia’s Demographic Research Group has confirmed the trend using Internal Revenue Service data.
Total population continued to grow last year thanks to natural population increase, but the overall rate slowed due to continued out-migration, Lombard reported in the StatChat blog. The sustained emigration trend represents a marked departure from previous decades. Continue reading
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. Continue reading