Blame sequestration. Experts say federal budget cuts may explain why employment in Virginia is growing at a slower pace than it is nationwide.
Virginia ranked 12th among the states in the number of people employed, at more than 3.5 million. But Virginia doesn’t compare so favorably in job growth – the percentage of employment change.
The state ranked 31st nationally with an employment growth rate of 0.9 percent (32,000 jobs) from March 2012 to March 2013. Nationally, employment grew 1.6 percent during that time period.
That information comes from data published recently by the federal Bureau of Labor Statistics. The data covered the first quarter of this year for the top 335 counties (those with more than 75,000 workers) and for all states. The statistics include employment numbers and average weekly wages for this year and last year.
Virginia’s lower employment growth rate could be tied to its high concentration of government employees, suggested Leslie Stratton, a professor of economics at Virginia Commonwealth University.
“Government is the primary employer in the state, and employees have been falling over the past few years due to state budget cuts,” Stratton said.
Stratton also claims that Virginia, home to many federal workers, “is more likely to be affected by sequestration that others.”
Sequestration, which took effect last spring, imposed deep cuts in federal spending. They kicked in because Congress failed to reach a bipartisan agreement on reducing the federal budget deficit. This resulted in automatic budget cuts, both defense and austerity, that began earlier this year and could further inhibit Virginia’s employment growth.
According to a recent report by the Thomas Jefferson Institute for Public Policy, Virginia “has become more dependent on federal spending over the past decade with contract awards rising 188 percent between fiscal years 2001-2011.” The report said Virginia received $58.9 billion in federal contracts in fiscal year 2011 alone, equivalent to nearly 14 percent of its gross state product.
The report noted that the Department of Defense would continue to reduce its spending by 13 percent through the rest of the year.
“Because of Northern Virginia’s and Hampton Roads’ reliance on federal contracts, these cuts will likely take a toll on these regions’ economy,” according to the institute, which advocates “limited government, free enterprise and individual responsibility.”
Dr. Stratton said the problem is not just spending cuts but the talk of spending cuts.
“As unpopular as sequestration may be, it’s the uncertainty associated with it that will cause more trouble everywhere,” she said.
With tightened government budgets come tightened wages in a state with so many workers dependent upon the public sector.
Average weekly wages in Richmond, for example, fell 0.7 percent, to $1,111, between March 2012 and March 2013. Dr. Carol Scotese, who chairs the economics department in VCU’s School of Business, attributed the drop to the city’s number of state and federal employees.
“Budgets have been tight and wages raises have been scarce in that sector … Richmond’s falling wages could be explained by such concentration in that sector as state employees haven’t seen a wage increase in five or six years now,” Scotese said.
On average, the Old Dominion ranked tenth in weekly wages, with an average of $1,027 per employee – just above the $989 national average.
Overall average weekly wages in Virginia rose by 0.8 percent over the past year. That was slightly above the national average at 0.6 percent.
Statewide, Prince William County sported a 2.9 percent increase in employment, the largest in the state, while its neighbor, Arlington, lost 1.6 percent of its jobs.
Similarly, Newport News boasted a 3.6 percent increase in average weekly wages while Richmond scored at the bottom with a 0.7 percent loss in average wages.
Nationally, the greatest gain in average weekly wages was in San Mateo, in California’s Silicon Valley, with a 14.8 percent increase. The average worker there makes $1,859 a week.
The greatest loss was in another technology haven: Williamson County, Texas, home of Dell Computer Corp., registered a 13.4 percent loss in average weekly wages. The average worker there makes $1,053 a week.
By Mike Waldron