Why Virginia Job Growth Lags Region, Nation

Chesapeake Climate Action Network webpage boasting about the defeat of a gas pipeline expansion, a signal seen by location managers all around the U.S.

by Steve Haner

“Virginia’s economic recovery continues to outpace the nation… Our unemployment rate remains well below the national average and has fallen consistently every month for the past fifteen months… I’m proud of our roaring economic growth…”

So claimed Governor Ralph Northam (D) in a September 17 news release.

It came just after Virginia’s economy showed especially anemic results in August employment data, capping a period of poor performance effectively described in a recent Bacon’s Rebellion post by Richmond economist A. Fletcher Mangum.  Virginia’s job growth this spring and summer has trailed the vast majority of other states, with the August data placing us at a shameful 47th out of 50. Simply achieving the national average growth rate that month would have meant 75,000 more jobs.

The anemic performance has causes, many a matter of government policy. One factor tied to government policy is federal contract spending, and while that proved a stable anchor during the recent COVID storm, in the period before and since it has provided little growth. Years of rhetoric about weaning the state off that dependence have produced little real change.

The path away from that dependence is private investment and growth. Compared to just a few years ago, is Virginia a better or a worse place to locate a new business or increase investment in an existing one? Has Virginia shown what is called in the business world “continuous improvement?” No.

Virtually all policy decisions in recent years have shown Virginia’s legislative and executive majority want to regulate and tax businesses more, empower organized labor and earn its gratitude, place an automatic escalator on the minimum wage, and unleash a flood of successful litigation on employers accused of any possible grievance an employee might raise.

Virginia’s Right to Work law is indeed an inch away from disappearing, and every business leader in the United States knows it. This election decides it. The major roadblock in the past two years has been a single senior Democratic senator and committee chair, Richard Saslaw of Fairfax, who is now widely believed to be retiring after this term. His power has already dissipated with that report.

In preparation, the legislature has authorized the establishment of public employee union contracts at the local level, which must inevitably spread to state workers. It has imposed Davis-Bacon prevailing wage controls to drive up labor costs on public contracts and made the project labor agreement model the preferred approach, in both state and local projects. Right to Work is one standing wall of a collapsed house, masking a now very pro-union climate, a thin façade which business leaders around the nation see past.

The Tax Foundation has a tax climate ranking which is well-regarded by the business community, even if dismissed by those who favor higher taxes.  Until recently Virginia was routinely in the top 20 for overall business taxes and top ten for corporate tax policy, but the 2021 ranking put us number 16 in corporate tax policy and in the bottom half (number 26) on overall business tax climate.

Faced with the opportunity to reap windfall state revenue from the 2017 federal tax changes, Virginia’s 2019 General Assembly offered modest tax relief to individuals and zero tax relief to corporations. Faced with a similar opportunity after Congress flooded businesses with COVID-related grants, the 2021 legislators got out their harvesters again and reaped more bounty.

Corporate income tax collections rose 83% in four years. The Tax Foundation noticed and ranked accordingly. It certainly has also noted the ongoing effort to impose mandatory unitary combined reporting rules on multistate companies doing business here. Multistate companies have the easiest time leaving. The 2022 General Assembly may add a new reason.

The Atlantic Coast Pipeline is dead. A modest regional expansion of an existing natural gas line also serving Hampton Roads is dead, killing one and maybe two planned power plants. The Mountain Valley Pipeline which will bring more energy to Western Virginia customers remains embattled. Virginia’s existing government is openly and gleefully hostile to fossil fuels in all forms, when just a couple of states over, they celebrate and market their abundant gas supply.

Business leaders in the entire United States have noticed Virginia is now an anti-natural gas state, even at the local level. What energy is allowed is about to get expensive, Northeastern United States-level expensive, even Germany-level expensive.  All of the projections show heavier price rises for commercial and industrial users than for homeowners, by design, but these will obviously be passed on.  Energy costs for the poor will be subsidized by a new energy tax hitting the biggest users the hardest.

Most of the new investments allowed will be in solar and wind. Business leaders have seen what has gone on in solar and wind-reliant Texas, California, and now much of Europe. If energy reliability and costs really matter to a prospect, Virginia will lose the bid.

Sure, the CNBC network’s ranking put Virginia in first place again, but as explained before one new category saved the state from a downgrade and kept us above our rival North Carolina, the newly created “Life, Health and Inclusion.” The business climate headwinds described above may or may not hurt a future CNBC ranking, but they have filtered into the rooms where investment decisions are made. That is what matters.

First published this morning by the Thomas Jefferson Institute for Public Policy. 

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22 responses to “Why Virginia Job Growth Lags Region, Nation”

  1. Eric the half a troll Avatar
    Eric the half a troll

    “The anemic performance has causes, many a matter of government policy. One factor tied to government policy is federal contract spending, and while that proved a stable anchor during the recent COVID storm, in the period before and since it has provided little growth”

    Since we did not take such a hit in the recession, the baseline is already higher than others and the “growth” will be less – that is the benefit of a stable anchor. We have the 16th lowest unemployment rate which is the only measure that matters in this regard. Your 47th out of 50th is meaningless.

    1. LarrytheG Avatar

      Steve is doing the best he can with the “TJ” lens… The truth is that Virginia’s economy is highly dependent of Fed spending in NoVa and Tidewater and it is consistent and reliable and as such efforts to attract more business are not like other states that have high stakes and are willing to give away substantial incentives.

      The last thing in the world I want to see is a Kansas type approach from the GOP in Virginia. A proven big time fail.

      No one likes taxes but the reality is that taxes pay salaries that then buy/goods and services – really no different than if that money were spent in the private economy.

      The question is – is that tax money well spent in terms of benefits to the taxpayers and in Virginia – where the lions share of that money is spent on education, health care and transportation – it’s a no brainer…

      What would the GOP do different? They’d screw things up royally like Gilmore did with the car tax and McDonnell did with things like trans-vaginal “inspections” and opposition to the Medicaid expansion.

      No thanks.

    2. Stephen Haner Avatar
      Stephen Haner

      The basic unemployment rate is what means little. That’s not even the most important unemployment measure! Virginia’s actual labor force participation rate is also quite low. No, over time those job growth stats really do matter, and if they were good, the D’s would be touting them.

      We are down 140,000 jobs from right before the pandemic. That is not a minor fact. Other states are recovering faster. Larry has the right approach — ignore such facts and look over there!!

      1. LarrytheG Avatar

        I think if we actually knew what those jobs are that were “lost’ it might help. Would it be a shock if they were in the restaurant and entertainment sector?

        There are articles in the WSJ no less that say some of those jobs are not coming back and some of it has to do with the fast food chains that have decided they can still be profitable with drive-thru only.

        Finally, I’m often a tad bit suspicious when JAB and Steve start throwing data around, and even more so under the guise of TJ.. 😉

  2. tmtfairfax Avatar

    COVID-19 and improvements in technology has proven that many, but certainly not all, federal government servicing or advocacy jobs can be done outside the Beltway. About half a dozen of my colleagues do this already. I’ll start next year sometime. More and more people will avoid the GA’s increasing efforts at making business and the quality of life worse by working in Washington from elsewhere.

    1. LarrytheG Avatar

      “working from home” not just a Virginia thing, right?
      If working from home becomes a trend, it will have some significant impacts and may screw up some traditional measures of work and employment stats.

      1. tmtfairfax Avatar

        The point is, there are better places to live than NoVA. Let’s take a simple example. Neither VDOT nor Fairfax County maintains sidewalks or trails. They have potholes, big cracks, and are invaded by overgrown plants. Fairfax County won’t even put gravel on the tracks at middle schools. Years of complaints are ignored.

        I saw much better maintained trails in Alaska 40 miles from the nearest village.

        1. how_it_works Avatar

          They’re probably also really dark at night because VDOT doesn’t believe in street lighting.

        2. LarrytheG Avatar

          I’ll await your move and new digs to see if your expectations are met.

          And if you REALLY want to see neglected and decrepit infrastructure I’d invite you to Rova and other states including places in NC, WVa and some other states especially those where the Counties, not the State are responsible for county roads.

          1. how_it_works Avatar

            The point here is that the cost of living and taxes in Fairfax are not commensurate with the quality of life and level of government services provided.

            Nobody (with a brain) wants to pay northern state taxes and cost of living for southern state crap.

            Which is exactly what you get in Fairfax (and Loudoun, and PWC)…Hee-haw Virginia half-ass crap, and you pay through the nose for it.

          2. LarrytheG Avatar

            Isn’t there a lot of subjectivity there?

            what standard would you use to compare Fairfax/NoVa to other equivalent urban centers with beltway style suburbs?

            If NoVa is so bad, why do so many people still live there and not go to where it is “better”?

          3. how_it_works Avatar

            Infrastructure might be one standard. NoVA is pretty poor in that regard compared to similarly-wealthy suburbs.

            As far as why people still live in NoVA–it’s still a very transient area. Few people stay in NoVA for a lifetime. You come, make your money(probably working some Federal job or contract), and leave.

          4. LarrytheG Avatar

            Haven’t found too many urban areas I’d like to live in including NoVa but don’t think NoVa is that different in many respects. It’s just a pile of people all trying to use cars to get around.

          5. how_it_works Avatar

            How about the lack of sidewalks (or shoulders) and the lack of street lighting?

            Standards that work fine for rural Virginia in the 1950s do not work for Northern Virginia in the modern era.

          6. LarrytheG Avatar

            I don’t know about Fairfax but down Fredericksburg way, VDOT wants sidewalks on most projects and in fact if you look at SmartScale which funds Virginia projects, they downgrade projects that don’t have ped/bike.

          7. how_it_works Avatar

            Sure, for new construction. But they aren’t doing much in the way of adding sidewalks to neighborhoods that were built without them. I’ve seen neighborhoods built over 30 years ago with curb cuts for sidewalks, and the sidewalks were never put in.

          8. LarrytheG Avatar

            VDOT does not build sidewalks in urban areas for the most part unless a major road is updated/improved.

            No they don’t go back and retrofit but to be honest I’m not sure many DOTs in other states do either.

            There is confusion sometimes over what VDOT is responsible for and what the county/city is responsible for.

            Some folks think VDOT is responsible for drainage. They only responsible for drainage in their right of way for the most part. Others, city, county, private owners are responsible for drainage on land that VDOT has no access to.

          9. how_it_works Avatar

            Well, in most other states the state DOT is NOT responsible for local streets in sub/urban areas.

            And you can see the difference in, say, Manassas City compared to PWC. Most of the streets in Manassas City are well-lit with sidewalks, which is NOT the case for PWC.

            Even Manassas Park was able to fund sidewalks in the older part of the city.

            Strangely enough, I am pretty sure that VDOT paid for much of the sidewalk installation in Manassas Park.

          10. LarrytheG Avatar

            Cities and Towns in Va levy taxes that pay for sidewalks.

            For a while, VDOT offered localities to put sidewalks in when they did new roads or upgraded existing ones but it was up to the locality to approve it and the cost of doing so was added to the project which reduced money for other projects.

            Now days, VDOT encourages/incentivizes/forces the sidewalks if it is in an urbanizing locale with ped/bike “traffic”.

            But back in the day, VDOT did not and I’d wager that few state DOTs did either.

            And any locality today can spend the money to backfit sidewalks to roads that don’t have them.

            It’s not really on VDOT.

  3. Nancy Naive Avatar
    Nancy Naive

    Anybody speak Dutch? Ain’t the old Babcock-Wilcox still in Lynchburg? This would have been a boon to Virginia employment if Trump hadn’t given it to Vlad.

    1. LarrytheG Avatar

      I think your point is dead on. The problem in Virginia and other states is rural vs urban. Rural jobs have cratered and don’t look like they’re coming back anytime soon though there is some flickering potentials.

      Steve goes on and on about unemployment and “participation” on a Virginia basis. How about showing it on a regional basis or at least show RoVa vs NoVa and other urbanizing areas?

      Pretty sure the problem is much worse in RoVa and last time I checked neither the GOP nor Youngkin were touting solutions other than the same old canards like lower taxes and less regulation.

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