Sub-Par Economic Growth for Virginia in 2012

Source: Bureau of Economic Statistics. (Click for more legible image.)
Source: Bureau of Economic Analysis. (Click for more legible image.)

Is this what Virginia’s economic performance looks like in the “new normal?”

The Washington-Northern Virginia metropolitan region, long Virginia’s economic engine, has seen its economy sputter and slow. In 2012, the regional economy grew less than one percent, according to new data released by the Bureau of Economic Analysis. That’s what a $17 trillion national debt, trillion-dollar-a-year deficits and sequestration will do to you. Can all those really smart people in Northern Virginia reinvent an economy not so dependent upon federal spending? Let’s hope so.

Hampton Roads, the second largest metro region, has been plodding along with a sub-par growth rate for the last three years running. Meanwhile, after showing strong growth in previous years, the smaller metros — Charlottesville, Lynchburg, Winchester, Harrisonburg, Staunton, Blacksburg, Bristol — put in a dismal performance that flirted with recession. Indeed, according to BEA data, the GDP of Charlottesville and Harrisonburg actually shrunk. (For reasons unknown, Danville did not appear in the BEA list.)

The only sparks of light were Richmond and Roanoke; both grew faster than the national average. Unfortunately, there is no way of knowing whether the 2012 results were a lucky fluke or an indication of a longer-term vitality. In any case, the two regions are not large enough to pull the entire state out of its slump.

Here’s what we’re dealing with. Virginia’s number one economic driver, the federal government, is not growing. And it’s not going to grow for the foreseeable future. Northern Virginia and Hampton Roads have to reinvent themselves before they can start pulling the economy again. Of the two, Northern Virginia, with its vast IT industry, would seem to have the best chance, although it is possible that the Panama Canal widening might bolster Hampton Roads’ maritime sector.

The hot industries in the U.S. today are energy and farming. (Take a look at Texas and North Dakota to see what a strong energy sector can do for you.) Alas, Virginia is a net energy importer, and its one region of energy production, the coalfields of Southwest Virginia, are in a slump. Farming in Virginia is increasingly a boutique industry — wineries, horses and produce serving urban markets. It is not sharing the boom in the corn belt.

Virginia does have competitive strengths in manufacturing. Perhaps the emerging “re-shoring” trend will help. Otherwise, it’s hard to know where future economic growth will come from.

Update: Virginia’s median household income fell more than two percent last year, the worst drop in the country, reports the Washington Post today. By contrast, incomes plateaued in Maryland and increased in Washington, D.C. The District economy is more dependent upon federal spending than even Northern Virginia, so something other than federal spending cuts must be affecting incomes.


Source: Bureau of Economic Analysis
Source: Bureau of Economic Analysis

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6 responses to “Sub-Par Economic Growth for Virginia in 2012”

  1. DJRippert Avatar

    I’ve been writing about this for some time – Is Virginia’s Economy Tanking? (

    You can only have negative and flat Gross State Product for so long before it starts to show up across a state’s economy.

    Meanwhile, Richmond and Roanoke are far from immune to this trend. From the Washington Post article:

    “A Washington Post analysis of census data by county shows that almost every region in Virginia experienced a decline in that critical yardstick. In every county in Northern Virginia, the median income slipped, just as it did in most counties and cities around Hampton Roads and the areas around Richmond and Roanoke.”.

    Virginia is much more dependent on defense and intelligence spending than Maryland or DC. I suspect that those two sectors are dragging the state down.

    As for reinventing the economy in NoVa – I don’t know why you think that will happen. Every other “reinvention” – from Pittsburgh to Louisville – has been the result of government working with business to affect the change. In Virginia, our overlords in the Imperial Clown Show in Richmond sit on their arses doing nothing but shoving their corrupt hands into the pockets of companies like Star Scientific and Consol energy.

  2. I think an even starker way to look at Va (or any state, city, or locality) is to

    1. look at total jobs gained yoy
    2. subtract out the govt jobsl – Fed, State and Local
    3. subtract out the jobs to serve rooftops (for population growth)
    4. subtract out the service sector jobs.

    what you have left is true net private economy job GAINS and I’m betting that number is in the tenths of of percent or negative in many places.

    It’s not just a reduction in govt or even “ObamaCare” – it’s companies that are leveraging technology to get every bit of productivity they can get with
    the least amount of labor costs in a global economy.

    to harp on the same old subject – this is why education is so important these days – not just STEM – but any field of which requires higher level skills and education AND for which there ARE jobs in demand.

    I see way too many kids these days graduating for HS and College that have no viable career path and they end up working in service jobs and living at home with parents or they don’t go to college – they end up as retail clerks, or in some kind of trade serving local rooftops or a deputy or medical tech) – all perfectly honorable professions that will feed your family and pay taxes but not provide you with the lifestyle of the prior generation.

    Once we’re out of wars (ha ha), that will be one less career path for a HS graduate or generic degree collegiate.

  3. Breckinridge Avatar

    Live by DoD, die by DoD.

  4. National Defense – that’s DOD + homeland security + VA + NASA satellites for the military + DOE – Nuke ship reactors and weapons, plus their share of the debt, plus the entitlements for all the DOD+National Defense retirees, etc…spends about 1+ trillion a year – and our total revenues from corporate and individual income taxes is 1.5 trillion a year.

    we are spending about 2/3 of our available revenues on National Defense.

    that’s more than the next 10 countries combined.

    but if you look at ANY state or ANY city or region in the USA –

    AND –

    1. – you subtract the Fed, State, Local govt jobs

    2. – you subtract the jobs that are specific to serving rooftops – in terms
    of job “growth” because higher population will generate more jobs for rooftops service jobs

    what, in any given area, are true new job producers?

    do that calculation for Richmond or Hampton Roads or Roanoke and strip away these other things to look at the bare private sector job creation.

    I think globalization and automation are changing – dramatically changing – reducing, new job creation.

  5. Another big factor is the demise of Wall Street as an investor in businesses and its focus on short-term trading.

  6. Wall Street is on it’s own mission. Main Street is not their responsibility.

    I’m still not sure how govt “creates jobs” except by taxing people and using those taxes to pay for goods and services or by essentially bribing companies by offering them less taxation and less regulations than other businesses but even then – unless those jobs serve markets beyond the area where they are geographically located (and taxed) then they are not really net additional jobs over and above the needs of local rooftops or govt jobs.

    beyond that – these companies that do produce “net” additional jobs – are usually totally free to move their operations 0r change them in place to use less workers.

    Companies around the world – are doing everything they can to possibly reduce their human labor costs to the smallest amount needed that cannot be done by machines.

    where does this eventually go?

    what companies should we expect to be recruit-able to come to Virginia, to Richmond, Roanoke…etc?

    I do not think Va should be in the business of paying bribes to attract companies (I agree with Jim Bacon) but what should Va be doing instead?

    Should we be incentivizing small-businesses and start-ups? should we be incentivizing – incubating technology companies?

    where should Virginia be investing their efforts?

    Charlottesville – and Blacksburg have some hints I think.

    But also our own education system – both K-12 and Higher ED should be pointed to the future.

    We cannot compete in the 21st century if our kids are getting 20th century education and we are arguing about whether there should be SOLs or testing or sending kids to non-public schools on a wild-eyed premise that they have to be better – even though we have virtually no real proof to show that.

    are we truly serious about true economic development for the 21st century?

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