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Comparing the Recession’s Impact Throughout Virginia

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The national recession continues to take its toll on the Richmond metropolitan area.

About 28,000 people in the region have lost their jobs since the area hit peak employment in August 2007.

With the area’s concentration of finance and insurance companies, it’s not surprising that the job loss in the Richmond area is larger than any of the other metro areas in the state.

Northern Virginia shed 18,000 jobs from its peak, Hampton Roads is down by 15,000, and the entire state is off by 94,000 from peak employment.

The current recession is turning out to be worse than the previous two in most regions across the state.

Northern Virginia is an exception, where employment declined only 1.6 percent through March 2009 from its peak employment in July 2008.

During the 1990 recession, which was partially driven by the overbuilding of office space and the downsizing of defense, Northern Virginia lost 4.4 percent of its jobs.

The Richmond area has already chalked up a greater percentage of losses compared with the last two recessions by looking at five economic indicators.

Employment in Richmond is down 4 percent — or 28,000 people — from its peak. The percent decline is the same as in the nation but much higher than the 2.6 percent drop in the state.

Employment in the finance, insurance and real estate industries alone declined 10 percent in the area during the past year.
Auto registrations, a proxy for auto sales, dropped by almost half since its peak early in 2005.

The mild 2001 recession saw an 18.9 percent contraction in auto registrations in the region. Without exception, auto sales in all 11 metro areas across the state have contracted more in the current recession than the last two.

The drop in retail sales, which translates into sales-tax revenue declines, provides some insight into why Gov. Timothy M. Kaine is considering more budget cuts.

With the recession expected to last six to nine more months, the current 7.1 percent drop in retail sales in Virginia from its peak in October 2007 is likely to surpass the 7.1 percent drop that occurred in the 1990 recession.

With Richmond employment decreasing more than in the state, it’s not surprising that sales have dropped further in the current recession than in either of the previous two.

Neither is it unexpected that residential building permits dropped more in the current recession than the previous two in every metro area in the state, because the recession started in the housing sector.

Richmond is no exception, with permits dropping 75 percent so far since the peak in early 2006.

The rising trend in initial unemployment claims provides a leading indicator of the labor market and affirms that the recession will continue as most economists expect. Claims so far in this recession are up 156.1 percent in the Richmond region.

Although every recession has unique drivers, they all result in layoffs and declines in sales.

As this recession begins to wind down over the next few months, the pace of the losses should decline. And barring unforeseen events, this column will be reporting about the recovery early in 2010.

This piece was originally published in the Richmond Times Dispatch.

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