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News & Press: 2018 Member News

Fourth Quarter Economic Update from the Virginia Chamber Foundation

Thursday, February 1, 2018  
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Below, you'll find the most recent Virginia quarterly economic update, prepared by economist Fletcher Mangum for the Virginia Chamber Foundation. We hope you find this information useful for your business and planning purposes.

 

The Virginia Chamber Foundation has also recently launched the Virginia Economic Dashboard. It's an online tool we use to:

  • Compare Virginia's performance with our peer states
  • Drill down to progress at the local level
  • Track many of these metrics over time

You can explore the Virginia Economic Dashboard here.

 

Thank you for your continued support of the Virginia Chamber of Commerce and the Virginia Chamber Foundation.

 

Barry DuVal

President & CEO

Virginia Chamber

 

January 31, 2018

 

 

Fourth Quarter Economic Update -

Increasing Cloudiness

 

 

 

 

In Sum

 

Except for a brief period from mid-2015 to mid-2016 and then again in the summer of 2017, Virginia's growth in Total Nonfarm Employment has under-performed the national average since early 2011, and the national average itself has been gradually decelerating since early 2015.

 

In 2017 statewide employment growth was primarily driven by five sectors: Education and Health Services, Professional and Business Services, Construction, Financial Activities, and Leisure and Hospitality. Overall, the 2017 data reveal two key issues. First, Virginia is paying a toll for its heavy dependence on an increasingly cash-strapped federal government as year-over-year growth in Virginia's Total Government sector has dropped into negative territory. Second, most of Virginia's under-performance in Total Nonfarm Employment is attributable to under-performance in certain key sectors. In order of impact: Professional and Business Services, Leisure and Hospitality, Transportation and Utilities, Other Services, and Manufacturing.

 

 

Where We Are

 

Total Nonfarm Employment in Virginia increased by 37,200 jobs, or 0.9%, between December 2016 and December 2017.

 

Between December 2016 and December 2017, statewide growth in Total Nonfarm Employment was led by increases in the Education and Health Services (up 15,400 jobs), Professional and Business Services (up 9,400 jobs), and Construction (up 6,600 jobs) sectors. From a regional perspective, the largest job gains occurred in the Northern Virginia (up 20,000 jobs), Richmond (up 11,300 jobs), and Charlottesville (up 2,500 jobs) MSAs.

 

 

Virginia's 0.9% year-over-year growth in statewide Total Nonfarm Employment in September 2017 was below the 1.5% increase posted at the national level. However, four of Virginia's thirteen major industry sectors still out-performed the national norm over the period. Those were: Education and Health Services (up 2.9% statewide vs. up 2.0% nationally); Financial Activities (up 2.8% statewide vs. up 1.6% nationally); Information (down 0.3% statewide vs. down 1.6% nationally); and Wholesale Trade (up 1.3% statewide vs. up 1.2% nationally).

 

On the other side of the ledger, Virginia's Construction (up 3.5% statewide vs. up 3.8% nationally); Leisure and Hospitality (up 1.3% statewide vs. up 2.0% nationally); Manufacturing (up 1.2% statewide vs. up 1.6% nationally); Mining and Logging up (2.6% statewide vs. up 9.1% nationally); Other Services (up 1.2% statewide vs. up 2.0% nationally); Professional and Business Services (up 1.3% statewide vs. up 2.5% nationally); Retail Trade (down 2.0% statewide vs. down 0.2% nationally); Total Government (down 0.5% statewide vs. up 0.2% nationally); and Transportation and Utilities (up 0.2% statewide vs. up 1.5% nationally) sectors under-performed the national norm.

 

Private Sector Average Hourly Earnings in Virginia rose from $27.29 to $27.61 between December 2016 and December 2017, a nominal year-over-year increase of 1.2%, which was below the 2.6% nominal increase posted at the national level. Virginia's labor force participation rate, the proportion of the civilian population above the age of 16 that is either employed or looking for work, increased from 62.4% in December 2016 to 62.9% in December 2017. While at the national level, the labor force participation rate remained constant at 62.4% between December 2016 and December 2017.

 

 

Turning to unemployment, the statewide seasonally unadjusted unemployment rate stood at 3.4% in December 2017, below the national unemployment rate of 3.9% for that month, and an improvement over the state's 3.8% unemployment rate a year before. From a regional perspective, in November 2017 (sub-state unemployment rates are reported later than the statewide rate) the seasonally unadjusted unemployment rates in Virginia's major MSAs ranged from a high of 4.2% in Lynchburg to a low of 3.0% in Northern Virginia.

 

What to Look For

1. Employment: Except for a brief period from mid-2015 to mid-2016 and then again in the summer of 2017, Virginia's growth in Total Nonfarm Employment has under-performed the national average since early 2011, and the national average itself has been gradually decelerating since early 2015, although that deceleration appears to have moderated in 2017.

Statewide employment growth in 2017 was primarily driven by five sectors: Education and Health Services, Professional and Business Services, Construction, Financial Activities, and Leisure and Hospitality. Of these five sectors:

  • Virginia's Education and Health Services sector out-performed the national norm throughout 2017.
  • With the exception of June and July, Professional and Business Services, Virginia's most important sector because of its size and relatively high wages, generally under-performed the national norm throughout 2017 and since August that gap has been widening.
  • Although Virginia's Construction sector generally under-performed the national norm in 2017, growth in that sector generally accelerated throughout the period, thereby closing that gap by the end of the year.
  • Virginia's Financial Activities sector not only out-performed the national norm throughout 2017, it also generally exhibited accelerating growth, while growth at the national level was decelerating, thereby increasing the gap between the two.
  • With the exception of the summer, Virginia's Leisure and Hospitality generally under-performed the national norm throughout 2017.

In combination with data presented earlier, these trends point to two key characteristics of Virginia's economy in 2017. First, the state is paying a toll for its heavy dependence on an increasingly cash-strapped federal government as year-over-year employment growth in Virginia's Total Government sector continues to under-perform the national norm, while both continue to decelerate. Second, most of Virginia's overall under-performance in Total Nonfarm Employment growth is attributable to its under-performance in certain sectors, of which Professional and Business Services tops the list, followed by Leisure and Hospitality, Transportation and Utilities, Other Services, and Manufacturing. Had these and other sectors performed at the national average, Virginia's year-over-year employment gain would have increased from 37,200 to 59,100 in December and our overall employment growth would have been on par with the national average.


2.Wages: News on the wage front was mixed. Although Private Sector Average Hourly Earnings in Virginia exceeded the national average in December 2017 ($27.61 in Virginia vs. $26.58 nationally), average hourly earnings have been growing more slowly in Virginia than the national average since May 2017 and the gap between the two is increasing. As of December the year-over-year increase in Private Sector Average Hourly Earnings was 1.2% in Virginia vs. 2.6% nationwide.


3.Labor Force Participation: Labor force participation, the proportion of the 16 and over population that is either employed or looking for work, fell precipitously during the recession both in Virginia and nationally. In Virginia, that trend began to reverse in July 2016 as the year-over-year change in labor force participation turned positive. Moreover, from December through September 2017 Virginia's growth in labor force participation continued to accelerate while the national labor force participation rate leveled off. Overall, Virginia's labor force grew by 40,722 additional workers between December 2016 and December 2017.


4.Unemployment: In December 2017, Virginia's seasonally unadjusted unemployment rate was 3.4%, below the national rate of 3.9%, and down from 3.8% the year before.

 

Announcements

 

1.New and Expanding:Virginia Economic Development Partnership announcements of new or expanding businesses in the 4th quarter 2017:

  • Statewide: 4,998 jobs and $2,667.9 million in direct investment.
  • Big Stone Gap: 49 jobs and $0.9 million in direct investment.
  • Blacksburg-Christiansburg-Radford MSA: 445 jobs and $3.2 million in direct investment.
  • Charlottesville MSA: 177 jobs and $7.4 million in direct investment.
  • Harrisonburg MSA: 127 jobs and $81.3 million in direct investment.
  • Kingsport-Bristol-Bristol MSA: 405 jobs and $19.9 million in direct investment.
  • Richmond MSA: 100 jobs and $1,000.0 million in direct investment.
  • Roanoke MSA: 328 jobs and $52.9 million in direct investment.
  • Staunton-Waynesboro MSA: 15 jobs and $0.2 million in direct investment.
  • Virginia Beach-Norfolk-Newport News MSA: 2,292 jobs and $105.0 million in direct investment.
  • Northern Virginia MSA: 922 jobs and $1,391.5 million in direct investment.

2.Reductions and Closures: Virginia Economic Development Partnership announcements of reductions and closures in the 4th quarter 2017:

  • Statewide: 621 jobs.
  • Harrisonburg MSA: 12 jobs.
  • Richmond MSA: 60 jobs.
  • Roanoke MSA: 69 jobs.
  • Northern Virginia MSA: 154 jobs.

 

Data sources:

  • U.S. Bureau of Economic Analysis
  • U.S. Bureau of Labor Statistics
  • Virginia Economic Development Partnership
  • Virginia Employment Commission

 

 

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