How Virginia’s Metro Areas Are Weathering the Recession

How’s Virginia faring in the recession? Northern Virginia and Hampton Roads are doing well among the nation’s metropolitan areas. Richmond is about in the middle.
That’s the conclusion of a new Brookings Institution study of the nation’s top 100 metro areas.See:
All in all Virginia isn’t in bad shape, the study implies. Hardest hit areas include California, such as the Bay Area, Los Angeles and the Central Valley and most of Florida. The rust belt from western Pennsylvania, across northern Ohio and on into Michigan are also hard hit. The strongest single area seems to be the central Southwest, including most of Texas and Oklahoma. The Northeast is mixed as is the Deep South.
The obvious reason for NOVA’s and Virginia Beach-Norfolk-Newport News’ strength is the federal government. Both areas are filled with civil service and defense jobs.
Richmond is a little harder to explain. With its chemical plants and cigarette factories, the Richmond area is more of a blue collar manufacturing area than its Old Dominion sisters. Although it is the seat of state government, Virginia’s public sector is taking its lumps with significant layoffs and budget shortfalls.
Raleigh-Durham, another point of comparison for Richmond, fares better, Brookings reports. There are similarities with tobacco and state jobs, but the North Carolina capital region is home to the Research Triangle and its many pharmaceutical and health care jobs that are more recession-proof and simply outclass what Richmond has to offer.
Brookings implies that we may be on the way to a weak economic recovery. I’ll take that. After the past 18 months, I’ll take anything.
Peter Galuszka

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27 responses to “How Virginia’s Metro Areas Are Weathering the Recession”

  1. Larry G Avatar

    Here would be a interesting Brookings Report:

    " The TOP 50 Metro Areas after subtracting the Federal and State Public-Sector Jobs"

  2. Anonymous Avatar

    Larry, good question.

    Peter, I've been reading where some respected economists expect that growth (if and when have it) might soon stop and a second recession begin. Interest rates, in reaction to the fear of inflation, seem to be rising, which, in turn, is discouraging purchases. Also, there is very little capital flowing to many businesses.

    And, of course, our Wall Street friends are speculating on commodities, especially gas and oil, pushing up prices in the face of an extremely weak economy and large stockpiles. That factor also hurts economic growth.

    If the President asked me what to do, I would recommend his regulators require raising the margin requirements for commodities to 50% from 10% and that he seek an increase in the federal tax rate for short term (less than six months' holding time) to 80 or 90%. (I support further capital gain tax rate reductions for investments held long term, say three or five years).

    I think such actions would reduce speculation, raise revenues, take pressure off inflation expectations and direct more capital back into producing goods and services and away from gambling on events and market manipulation. But I don't expect to be called by the White House.


  3. Anonymous Avatar

    "An oil future is simply a contract between a buyer and seller, where the buyer agrees to purchase a certain amount of a commodity — in this case oil — at a fixed price [source: CFTC]. Futures offer a way for a purchaser to bet on whether a commodity will increase in price down the road. Once locked into a contract, a futures buyer would receive a barrel of oil for the price dictated in the future contract, even if the market price was higher when the barrel was actually delivered."

    Speculation works to keep prices down as much as it does to keep them up.


  4. Anonymous Avatar

    "What speculators do is bet on what price a commodity will reach by a future date, through instruments called derivatives. Unlike an investment in an actual commodity (such as a barrel of oil), a derivative's value is based on the value of a commodity (for example, a bet on whether a barrel of oil will increase or decrease in price). Speculators have no hand in the sale of the commodity they're betting on; they're not the buyer or the seller.

    By betting on the price outcome with only a single futures contract, a speculator has no effect on a market. It's simply a bet. But a speculator with the capital to purchase a sizeable number of futures derivatives at one price can actually sway the market.

    A speculator purchasing vast futures at higher than the current market price can cause oil producers to horde their commodity in the hopes they'll be able to sell it later on at the future price. This drives prices up in reality — both future and present prices — due to the decreased amount of oil currently available on the market.

    Investment firms that can influence the oil futures market stand to make a lot; oil companies that both produce the commodity and drive prices up of their product up through oil futures derivatives stand to make even more."

    source: "How things work"

    The speculator alone cannot influence the price of oil, because first of all he is investing not in oil but a derivative of oil. Secondly, the value of that derivative is fixed each day, based on the actual price of oil delivered. The speculator has to settle his contract, make good his profits or losses, every day until the contract closes.

    However, if the speculators drive producers to withhold product hoping for highr prices, that will affect the market, but the speculators themselves have no control.

    Unless, they are so huge that they can affect the market, or if they are large producers themselves, in which case they are actually betting against themselves: it's a hedge. The producer(producer) makes money if the market goes down and the producer(speculator) makes money if it goes up.

    Either way they do not control the market and derivative prices can change on a whim, as we have seen.

    But, if really huge speculators or producers control substantila parts of the deriviatives market, then you have a problem. The "free market" has failed at that point and it is time for the regulators to step in.

    That didn't happen, so the place to put the blame is the regulators, not the speculators.


  5. Anonymous Avatar

    "raising the margin requirements for commodities to 50% from 10% and that he seek an increase in the federal tax rate for short term (less than six months' holding time) to 80 or 90%. (I support further capital gain tax rate reductions for investments held long term, say three or five years). "

    Raising the margin requirements is probaly a good idea but 50% may be too extreme. It would limit liquididty in the market. (Talking futures here, not derivatives).

    Say I'm in the feedstock business, I buy a cow and fatten him on grain for six weeks, and then sell him. I pay capital gains on the difference between what I bought her for and what I sell her for, less my costs to keep and feed. You want to take 90% of that?

    But now say I'm in the cow/calf business. My breeders I keep for a long time, so when they sell I get a lower capital gains for them under your plan. The cales I can keep ownership of and contract with the stocker to raise them to maturity, feedlot for fatteniing, at so much a pound. I contract with the slaughterhouse at so much a carcass, and the freezer/distributor at so much a pound per month.

    This is now a long term investment, from gestation to freezer, and all I have to worry about is the final price per pound.

    Half or threquarters through I have a good idea of how much my cows have gained and how much I owe, and a better idea of waht the price will be. Now I can go buy a hedge. If the price goes up, I lose on the cows (that I have to deliver at a fixed price), but I'm protected by the hedge. If the price goes down I make money on the cows but lose my investment in the hedge.

    Except the hedge is now a short term investment and you think I should pay 90% of my unearned, ill-gotten, short-term profits in taxes? And if it goes the other way and I lose my investment, you think I should have to put 50% into the hedge instead of 10%?

    Expect your grocery prices to go up, if you follow that plan.


  6. Gooze Views Avatar
    Gooze Views

    I have heard the same things you have about a possible double dip recession. It could be that the Fed and everyone got too freaked out last September and October when the market crashed and it seemed that a complete financial meltdown was upon us. But I remember some naysayers warning that too much credit designed to unstick financing could come back to haunt in terms of a return to 70s-style inflation –too much money chasing after too few goods. I think your other ideas are interesting but I agree with RH that speculators alone can't really move the markets on a serious and steady way. In some ways they are good things sort of like remoras on sharks feeding off crumbs.
    As you know I am no conservative but I do find Amity Shlaes book on the Depression instructive — especially how so many serious missteps after the 29 crash prolonged the agony for many years.

    Peter Galuszka

  7. Anonymous Avatar

    " I remember some naysayers warning that too much credit designed to unstick financing could come back to haunt in terms of a return to 70s-style inflation –too much money chasing after too few goods."

    I think that is still possible. On the other hand, we seem to have a limitless appetite for meaningless goods. somebody will find a way to suck up all that money.

    Maybe a housing boom would do it.


  8. Darrell -- Chesapeake Avatar
    Darrell — Chesapeake

    Speculators? Yeah right!
    How things are really working.

    Once again, repeat after me. The Feds Are Gaming The System.

    Their buddies at GS are leading the charge, providing fake rallies with their little computers, and making a handsome profit in the process. And the little guys think good times lie ahead.

  9. Anonymous Avatar

    To address Ray's concerns, exempt any person or business that buys or sells 80% of the volume of his or its futures contracts during a tax year from the higher tax. A hog farmer can hedge in pork bellies and the airline or trucking company can hedge on oil,jet fuel or gasoline futures.

    There is considerable evidence that oil prices last year and this year are swinging much than changes in supply and demand would warrant. Reward people who put money into new ventures and companies. Commodities need much more regulation. Short-term profit taking needs much higher taxes. Long-term risk-taking needs higher rewards. People who work on Wall Street need new jobs.
    We have way too many of them as it is today.


  10. Larry G Avatar

    Ever since Enron, I've become convinced that the wrong folks who really understand how the market works can and do – manipulate commodities for maximum giggles and grins (and profits).

    I agree with TMT – right now with gasoline – it's totally clear what's causing the price spikes and it ain't usage.

    every nickel increase is coming out of your (and mine) pocket and going to some scrumball conniving with like-thinking bottom-feeders.

    this is why we need the Gov involved in the "free market".

  11. Anonymous Avatar

    "A hog farmer can hedge in pork bellies and the airline or trucking company can hedge on oil,jet fuel or gasoline futures."

    Well, yes, but they are likely to be inclined to hedge the same direction. Youalso need the pure speculators to provide liquidity.

    Sure, there are huge operators who can manipulate the market. That is why we need government controls, and also government controls to provide the kind of relief mentioned above.

    But at the end of the day it still comes down to the same old argument.

    Total Cost = Production Cost + External Costs + Regulatory Costs (to control the external costs).

    The lowest costs and most profit for everyone, involve seeking out the right balance, not advocationg draconian measures.


    One measure of how things are doing is traffic. I understand the average commute time inthe DC area is down 12% due to decreased traffic. At the same time the bond ratings for a number of turnpikes and bridges have been lowered due to decreased toll revenues.

    Where were the ratings agencies when we needed them?

    Larry thought I was crazy when I suggested paying people to car pool, but now I understand that commuter Coneections is planning to do just that: $2 a day for eery day you car pool on certain routes.
    If the riders contribute to the driver that could be $40 a week.

    I wonder where the money is coming from?


    I understand there are tankers full of oil being held off the market. I'll do the same thing when hay prices are low: I don;t advertise and let it sit until I can get a better price. Obviously, such a strategy is not free, and cannot continue forever, but it isn't illegal to keep what you own.

    Also, those big oil companies pay enormous taxes (on their ill gotten p[rofits): if you hate profits, then you ought to love GM.


    " Reward people who put money into new ventures and companies. "

    If they are successful, and don't depend on huge subsidies, or killing someone elses business to make them market ready. We do reward people who do that, they are called venture capitalists and they depend on speculators to provide them with capital.

    I think we can agree that some parts of the financial world were off the deep end, but let's not throw the baby out with the bathwater.


  12. Anonymous Avatar


    Well, I gues it isn;t a secret any more, is it. That is the wonder of the market: it all depends on knowledge or rumors, take your pick.

    How do we know the Examiner isn't printing this story to game the market? Surely the bigwigs at the Examiner have some investments they would like to be able to steer.

    There is nothing wrong with gaming the system as long as you are playing by the rules. The point is to get the rules right so that we can all play equally.

    Total Cost = Production Cost + External Cost + Regulatory Cost.

    We can only eliminate ALL external costs with enormous regulatory costs which also increase production costs. There does exist a method for searching for the lowest total cost. But as long as we focus first on one part and then another (Too Much Profit: Too Much Cheating: Too Much Government) we never find the "right" answer.


  13. Larry G Avatar

    re: " I wonder where the money is coming from?"

    from the tolls they are going to charge the solo drivers…

    when you talk about paying folks to carpool – who do you think should do the paying?

    do you think the folks who don't clog up the roads at rush hour should pay?

    what would they get from paying folks to carpool?


    the folks who pay are the same folks clogging up the roads.

    they pay each other…

    so the guys who want to drive solo – will pay others to not drive solo.

    and the folks who find a way to avoid using the roads at rush hour – their reward is to not have to pay – neither in lost time nor in paying others to carpool.


  14. Anonymous Avatar

    "when you talk about paying folks to carpool – who do you think should do the paying?"

    I think you should toll the people in the regular lanes: they are the ones that get the benefit, the people getting paid are the ones doing the work of organizing and operating a car pool.

    Since the people in the regular lanes far outnumber those in the car pool lanes, their expense would be minimal. (Then again, so would the benefit they recieve, probably)

    You think that those who pay to use the HOT lanes should be the ones paying the car poolers, but they are already paying for the benefit they get: it is only the regular lane drivers who get something for nothing out of this. (And of course the people down state who have avoided a gas tax increase while supporting this subterfuge.) But, if you use the HOT lane singles to pay the HOT lane car poolers, I expect that the HOT lane contractor is likely to object.

    Anyway, the whole excuse for the HOT lanes is that the carpool lanes were underused. Had officials taken my advice and paid carpoolers to do what the officials wanted done, the right price would have guaranteed the right amount of traffic using the car pool lanes and the HOT lanes wouldn't have been needed. At least not to fill the lanes, you might still need additional lanes.

    So, all you have to do is raise the price paid and take another lane from the regular lanes.

    My question was really where does Commuter Connection get that kind of money. They have no hand in the HOT lane till that I know of. Is it a grant?

    Yes, it is gratifying to see another of my contentions take root.


  15. Anonymous Avatar

    "do you think the folks who don't clog up the roads at rush hour should pay?"


    At present the roads are available to everyone on an equal basis. That basis is sometimes a congested one. Whether you choose to avail yourself or not, you still have the option, any time you like.

    If you use the road off hours you cause (and enjoy) less external costs due to congestion. Does that mean you get to travel for free?

    Now, if you change the basis, and change it equally for everyone, so that any road anywhere is subject to additional charges when in heavy use, then your question makes sense.

    As it stands, it is exactly as the governor said, finanancial constructs like the HOT lanes only make sense in heavily traveled areas. As such they are an effective localized tax which violates the intention of the state constitution.


  16. Larry G Avatar

    Chap Petersons BLOG say this about Va economy:

    " June Numbers Tell Bleak Picture"

  17. Anonymous Avatar

    "The Federal Highway Administration reported today that travel on all roads and streets increased by by +0.6% (1.4 billion vehicle miles) in April 2009 compared to April 2008. This was the first monthly percentage increase compared to the same month in the previous year since October 2007, and follows 17 consecutive monthly percentage decreases "


  18. Anonymous Avatar

    Higher inflation and the loss of some more jobs is small price so that all investors have liquidity for their investments — NOT.

    Just as with silver in 1980, the CFTC should adopt a liquidation-only trading rule. "Under this measure, traders could only hold their futures contracts until maturity with no chance to sell the contract to another trader. This policy effectively forced speculators out of the silver market." Nader Habibi,
    Henry J. Leir Professor of the Economics of the Middle East,
    Brandeis University.


  19. Anonymous Avatar

    You think speculators are sharks who produce nothing and jigger the market.

    Some of that obviously does happen.

    But without speculators you have no liquidity in the market. A producer who needs his money today or this month may not be able to find a buyer.

    This leads to WORSE market manipulation than what we have now. Don't forget that speculators were admitted into the process for a reason. If I'm a producer and there are no speculators, who is going to buy my hedge? It can't be an end user, because he wants his hedge to go the opposite direction to my best interests.

    By reducing the market to only the users and producers, you will wind up kicking out a lot more than just the speculators. Small producers and users will be forced out as well.


  20. Anonymous Avatar


    I understand your argument, but it still seems to me that the commodities futures process, as it works today, permits those seeking liquidity to export many of the related costs to the general public in the form of higher than necessary prices for oil and gasoline, which, in turn, are making the macro and micro economic situation worse.

    This speculation is yet another example of people trying to make money without providing any value to society or the economy. As I understand the situation, there are futures contracts for more oil and gasoline units than there are physiscal units. And the rest of us pick up the costs.

    Let people speculate on the price of oil in six months, but make them suffer the consequences, plus or minus, of the price six months later. Eliminate the ability to profit from short-term swings. The financial class has screwed up the US for years to come. Them and the filthy politicians from both parties. Enough is enough.


  21. Larry G Avatar

    I agree. We also need to differentiate between someone who is engaging in a risky behavior where some skill is involved and a group of people who have agreed to conspire and manipulate a supply of commodity.

    We know this happens. We have ample experience with it that resulted in anti-trust laws.

    But just like with the mortgage banking regulations that did not keep up with more and more sophisticated financial practices, the same is true of the situation with monopolistic speculative practices.

    The Enron debacle was proof that monopolistic speculation was not only possible but clearly achievable – and all perfectly legal.

    What they got the Enron guys on was not their market practices but technical tax and tax reporting violations.

    I don't disagree with what Ray is saying – as long as these folks are acting as individual and not alliances engaging in a conspiracy to control a significant portion of a whole commodity market.

    Right now, we are seeing gasoline going up NOT in response to higher usage…

    so you have a theoretical market mechanism – supply and demand – not working …

    this is more like a guy who owns a gas station and also is in charge at City Hall and he effectively prevents competition then raise the prices as high as he can.

    I'm not in favor of price controls but I'm also not in favor of seeing gasoline go up 25, 50 cents a gallon when the demand for it is static or even declining.

    that kind of speculation, as TMT say is not contributing anything to the economy – only fattening the pockets of those who have figured out a way to manipulate the market.

    This is yet another reason why we need to have a government – acting in the interests of people – to insure that the "free market" is … relatively free.

  22. Anonymous Avatar

    "Let people speculate on the price of oil in six months, but make them suffer the consequences, plus or minus, of the price six months later. "

    I agree that it is a question of how much control is enough.

    How would you manage control of short selling, wherein speculators bet the price will go DOWN?

    It seems to me you would have to control down bettors the same as up bettors or wlse you would have an imbalance.

    I don't hear anyone suggesting we limit short sales.

    And remember, short or long contract, they have to settle every day, if their margin is out of range.


  23. Larry G Avatar

    I'm not opposed to folks speculating per se. What I'm opposed to is speculation combined with market manipulation that amounts to monopolistic behaviors.

    Seems like the stock market has a way of stopping trading on a stock if it appears that something not kosher is going on. Let's do that for commodities also – short or long sales.

  24. Anonymous Avatar

    "What I'm opposed to is speculation combined with market manipulation that amounts to monopolistic behaviors."

    Me too. But lets say that instead of just bombing every speculator. Regulators probably have adequate tools to prevent this activity, but for political reasons they did not use them.

    Now the question is how do we set up new rules that don't kill the reason we have such markets. How do we institute those rules such that the will of the majority cannot simply overrun them?

    This is exactly the argument we have run before: sure the majority rules, but they do not get to rule in a way that damages the minority. Stable government needs some checks and balances that defuse but do not remove the power of the majority, and which do so in an ethical way.


  25. Anonymous Avatar

    "Thomas Petzinger, Washington economics editor for the Wall Street Journal, discussed the "paradox of freedom and control." He told the story of a large chemical company in which leadership articulated a short, simple set of rules based on corporate values. Members of the corporation then had the freedom to do what was required as long as they stayed within "the bowl" or the parameter of the rules. This method preserves trial and error and provides freedom within a circumference of control. Petzinger described the sweet spot between freedom and control as "the edge of chaos."

    This kind of describes my philosophy, you have a few simple rules, and then let chaos reign.

    It scares the bejeezus out of most people, who only want the status quo.


  26. Anonymous Avatar

    Sorry, this a bit late, but the article just appeared on July 3.

    It's more evidence that financial speculators are the maggots of society and need strict regulation. They are anti-free markets.

    Rogue broker’ blamed for oil spike
    By Javier Blas and Izabella Kaminska in London

    Published: July 2 2009 12:07 | Last updated: July 2 2009 20:26

    The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company.

    PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.

    London-based PVM said it had informed the Financial Services Authority, the UK regulator. But officials at the Commodity Futures Trading Commission, the US regulator, claimed they had been kept in the dark for several hours in spite of an agreement between the watchdogs last year to exchange such market-sensitive information spontaneously.

    Oil traders in London and New York said the “unauthorised trading” explained the exceptional spike in business activity and prices in the early hours of Tuesday that some initially thought must have been caused by a geopolitical event. “Trading volumes rose overnight and prices jumped more than $2 a barrel without apparent justification,” a senior oil trader in New York said.

    Prices rose in one hour from $71 to $73.5, the highest level for the year, according to Reuters data. In total, futures contracts for more than 16m barrels of oil changed hands in that hour – equivalent to double the daily production of Saudi Arabia, the world’s largest oil producer, and far more than the traditional 500,000 barrels for that time of the day.

    Traders said the broker implicated had allegedly accounted for at least half of the unusual activity, with the rest the result of others chasing the rally. Oil prices on Thursday fell to $66.5 a barrel, down almost 10 per cent from Tuesday’s peak.

    The Financial Times has identified the PVM broker as Steve Perkins. PVM declined to comment and Mr Perkins could not be reached. Fellow traders said Mr Perkins was considered an experienced broker, well-regarded in the market.

    This is the second episode of rogue trading in the oil market this year. In May, an oil trader at Morgan Stanley was banned by the City watchdog after he hid from his bosses potential losses on trades made under the influence of alcohol.

    The incidents come as regulators are considering tougher oversight of the commodities markets after policymakers complained that speculators fuelled last year’s surge in oil and agriculture prices.

    The involvement of PVM is ironic considering the company’s head, David Hufton, has been an outspoken critic of speculators in the oil market, calling some of the exchanges “electronic oil casinos”. In 2006, he said that “if futures exchanges did not exist, oil prices would be a lot lower”.

    The $10m loss is a heavy blow for PVM, which reported profits of just $5.6m in the year to July 2008, according to its accounts.

    Additional reporting by Brooke Masters

    Copyright The Financial Times Limited 2009

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