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Why Does Virginia’s Job Growth Rate Continue to Lag the Nation?

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Virginia keeps adding jobs on a monthly basis, but the state’s job growth rate continues to lag the national growth rate.

In fact, monthly employment in Virginia has grown at a slower pace since 2011 on a year-over-year basis than in the nation 86 percent of the time.

The reason: Part of it is the cuts in federal defense spending, and part of it is the more moderate growth of adding jobs in the state’s largest metropolitan area, Northern Virginia. 
From June 2018 to June 2019, employers in Virginia added a net total of 27,600 jobs, a 0.7% job growth rate that lagged the national job growth rate of 1.5%.

Defense cuts may explain part of the slower employment growth in Virginia since 2011.

Between 1990 and 2011, average annual employment growth in the state was relatively slower than in the nation 25 percent of the time. During three of those years (in 1991, 1994 and 1995), defense spending in the nation declined.

But Virginia is more dependent on defense spending than any other state, with defense spending making up 8.9% of its gross domestic product, compared with a national average of 1.7%, according to figures from the Defense Department’s Office of Economic Adjustment.

In fiscal year 2011, defense spending slowed considerably from prior years as the war in Afghanistan was winding down and then declined 17% from fiscal year 2011 through fiscal year 2015 because of sequestration related to the Budget Control Act of 2011. Defense spending rose by less than 1% in fiscal year 2016 and fiscal year 2017 and has since increased more than 5% a year over the past two fiscal years.

Another reason for the slower growth in the state is due to its largest metropolitan area, Northern Virginia. Some analysts have said “As goes Northern Virginia, so goes the state.”
Northern Virginia’s year-over-year employment growth was 1.1% in June 2019. That’s faster than the state, but slower than the national growth rate.

Annual employment figures dating to 1990 show a slowing trend.

From 1991 through 2018, employment in Northern Virginia grew 1.9 times faster than the nation, but much of this is attributable to the period from 1992 through 2011, when employment in Northern Virginia grew an average 2.9 times faster than the nation.

Since 2011, employment in Northern Virginia grew 12%, compared with 14% in the nation.

From a total jobs perspective, 652,000 of the 1.14 million jobs created in the state from 1990 through April 2019 were in Northern Virginia. That is 57% of the state’s jobs created over that time.

Yet since 2011, employment increased by 159,000 in Northern Virginia and 340,000 in the state, with only 47% of the gain coming from Northern Virginia.
With employment in Northern Virginia growing at a more moderate pace, it looks like the pace of employment growth in the state will continue to lag below the national average unless some of the other metro areas take up the slack.

This commentary originally appeared in the August 5 edition of The Richmond Times-Dispatch.

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