The VirginiaEconomy in
2005 and BeyondJohn C. McClain, AICP
Senior Fellow and Deputy Director Center for Regional Analysis, School of Public Policy
George Mason University
May 2, 2005
Virginia Government Finance Officers’ Association
The National Economy
U.S. Gross Domestic Product
-2-1012345678
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1
%
1999 2000 2001 2002 2003 2004 2005
4.5% 3.7% 0.8% 1.9% 3.0% 4.4%
3.1%Q1 05
Productivity
-1
0
1
2
3
4
5
1980
1985
1990
1995
2001
2004%
23-yr Avg. = 2.1
4.94.5
4.0
ISM Manufacturing and Non-Manufacturing Indices
3540455055606570
'Mar-01
'Mar-02
'Mar-03
Mar-04
Mar-05
50MFG
Non-MFG
Housing Trends:New & Existing Home Sales
5000
5500
6000
6500
7000
'Mar-01
'Mar-02
'Mar-03
Mar-04
Mar-05
700800900100011001200130014001500
Existing
(left scale)
New
(Rt Scale)
(000s) (000s)
Consumer Confidence
50
100
150
200
Mar 01
Mar 02
Mar 03
Mar-04
Mar-05
100
Present Situation
Expectations
Peak – Jul 2000
Initial Unemployment Claims
250
300
350
400
450
500
Apr 01
Apr 02
Apr 03
Apr 04
Apr-05
350
Thousands (4-week moving average)
12 ConsecutiveMonths Below 350
Annual Rate of Change in Jobs - US
-3000-2000-1000
010002000300040005000
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
THOUSANDS
Bottom – 2.03 M Feb 02
Feb +2.35 M
Thru Mar 2005
(Highest Rate sinceSep 2000)
Annual Rate of Change in Employed (HH Survey)
-3000-2000-1000
010002000300040005000
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
THOUSANDS
Bottom –2.00 M Jan 02
Turned + Aug 02, 16 mos. before PR
Thru Mar 2004
Leading IndexMonthly Over-the-Year Percent Changes
3.693.98
4.89 4.894.39
3.75
2.84
2.121.85
1.05 1.14 1.22
0.35 0.52
-0.6-1
0
1
2
3
4
5
Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04'Dec-04Jan-05Feb-05Mar-05
%
Coincident IndexMonthly Over-the-Year Percent
Changes
1.221.66
2.282.63 2.71
2.45 2.44 2.62 2.442.69 2.51
3.72
2.95 2.762.31
-1
0
1
2
3
4
5
Jan-04Feb-04Mar-04Apr-04May-04Jun-04Jul-04Aug-04Sep-04Oct-04Nov-04'Dec-04Jan-05Feb-05Mar-05
%
The Virginia Economy
GDP/GSP Trends
0
1
2
3
4
5
6
7
1997
1998
1999
2000
2001
2002
2003
2004
U.S.Virginia
%
Virginia Annual Job Change: 1980 - 2004
-100
-50
0
50
100
150
1980198119821983198419851986198719881989199019911992199319941995199619971998199920002001200220032004
Average = 61,000/Year
Year
86,900
0
- 14- 67
- 22
Virginia and Selected StatesJob Change Mar 04 – Mar 05
7860
26 2658
228
125
36
-13-50
0
50
100
150
200
250
VA NY MA GA PA CA TX IL MI
Thousands
Not Seasonally Adjusted
Virginia and Selected StatesJob Change Mar 04 – Mar 05
2.2
0.7 0.8 0.71.0
1.61.3
0.6
-0.3
-1
-0.5
0
0.5
1
1.5
2
2.5
VA NY MA GA PA CA TX IL MI
Percent
Not Seasonally Adjusted
Virginia and Selected States Ranked by Unemployment Rate
March 2005
3.4
4.9 5.0 5.3 5.5 5.7 5.9 5.9
7.6
0123456789
VA NY GA MA TX CA PA IL MI
Percentage
U.S.5.4%
Not Seasonally Adjusted
1999 - 2004 Job Change By Sector - Virginia
(000s)
-80 -60 -40 -20 0 20 40 60 80
Information
Wlse Trade
Transp & Util
Other Svcs
Federal
Financial
Construction
Leisure & Hosp
Manufacturing
Ed & Hlth Services
Retail
St & Loc Govt
Prof & Bus Svc
Total = 172,000(Ranked by Size of Sector)
Mar 04 – Mar 05 Job Change By Sector - Virginia
(000s)
-30 -20 -10 0 10 20 30
Information
Wlse Trade
Transp & Util
Other Svcs
Federal
Financial
Construction
Leisure & Hosp
Manufacturing
Ed & Hlth Services
Retail
St & Loc Govt
Prof & Bus Svc
Total = 78,200(Ranked by Size of Sector)
1990 - 2004 Share of Job Growth By Sector
U.S. vs Virginia
14.3
2.7
0.9
3.8
6.6
8.8
7.1
12.5
6.9
20.5
33.3
16.7
2.7
1.8
2.0
6.5
5.3
7.7
14.5
8.4
27.1
25.3
0 10 20 30 40
St & Loc Govt
Fed Govt
Transp & Util
Wlse Trade
Mfg
Information
Financial
Other Svc
Const
Leisure & Hosp
Retail Trade
Educ & Hlth Svc
Prof & Bus Svc
USVirginia
%
The Virginia Economy by Metro Area
Metro Areas in Virginia Job Change Last Ten Years
0
13
12
9
17
5
11
86
115
334
-50 0 50 100 150 200 250 300 350
Danville
Winchester
Harrisonburg
Blacksburg
Charlottesville
Lynchburg
Roanoke
Richmond
VB-Norfolk-NN
No. Virginia
Thousands
Metro Areas in Virginia Job Change Last Five Years
-2
6
6
3
5
-3
-6
29
41
144
-50 0 50 100 150 200
Danville
Winchester
Harrisonburg
Blacksburg
Charlottesville
Lynchburg
Roanoke
Richmond
VB-Norfolk-NN
No. Virginia
Thousands
Metro Areas in Virginia Job Change Last 12 Months
-0.4
1.4
1.7
4.6
2.0
0.2
3.9
12.1
10.3
56.8
-10 0 10 20 30 40 50 60 70 80
Danville
Winchester
Harrisonburg
Blacksburg
Charlottesville
Lynchburg
Roanoke
Richmond
VB-Norfolk-NN
No. Virginia
Thousands
Metro Areas in Virginia Unemployment Rate
7.3
3.0
2.8
3.8
2.9
4.0
3.4
3.6
3.9
2.6
3.4
0 1 2 3 4 5 6 7 8
Danville
Winchester
Harrisonburg
Blacksburg
Charlottesville
Lynchburg
Roanoke
Richmond
VB-Norfolk-NN
No. Virginia
Statewide
20052004
Percent
Metro Area Unemployment Rates in March – BLS Press Release 4/28
•• Lowest of All Metro AreasLowest of All Metro Areas–– 2.6% 2.6% Honolulu, HIHonolulu, HI–– 2.8%2.8% Harrisonburg, VAHarrisonburg, VA–– 2.9%2.9% Charlottesville, VACharlottesville, VA–– 3.0%3.0% Winchester, VAWinchester, VA--WVWV
•• Of Metro Areas with 1 Million + Of Metro Areas with 1 Million + PopulationPopulation–– 3.6%3.6% Richmond,VARichmond,VA, Washington, Washington--ArlingtonArlington--
Alex DCAlex DC--MDMD--VAVA--WV (No. Virginia = 2.6%)WV (No. Virginia = 2.6%)–– 3.9%3.9% Las Vegas, VA BeachLas Vegas, VA Beach--NorfolkNorfolk--NN, VANN, VA
The Importance of Federal Spending to the
Virginia Economy
Metro Comparisons Job Change Last Five Years
(2/00 – 2/05)15 Largest Metro Areas
-158-133
-118-98
-12-2
33
1742
5872
158193
268
-200 -100 0 100 200 300
Detroit
Chicago
SF-Oakland
Boston
Seattle
New York
Dallas
Atlanta
Minneapolis
Philadelphia
Los Angeles
Houston
Phoenix
Miami
Thousands
WASHINGTON
Total Federal Spending inVirginia
0102030405060708090
19901991
19921993
19941995
19961997
19981999
20002001
20022003
Billions Current $
Average Annual Increase = 6.5%Total into VA Economy = $768 Bil.
02-03 Change= +7.9B$, 9.6%
Federal Spending by TypeVirginia
0
10
20
30
40
19901991199219931994199519961997199819992000200120022003
Procurement
All Other
Billions Current $
Retirement
Wages
Total Federal Spendingin Virginia by Area
0
10
20
30
40
19901991199219931994199519961997199819992000200120022003
Rest of State
No. Virginia
Hampton Rds
Billions Current $
Federal Procurement in Virginia
0
10
20
30
40
19901992
19941996
19982000
2002
Rest of State
No. Virginia
Hampton
Billions Current $
Total
Federal Spending by TypeNorthern Virginia
0
10
20
30
40
19901991199219931994199519961997199819992000200120022003
Procurement
Total
All Other
Billions Current $
Average Annual Increase = 8.8%1990-2003 Total = $ 311 Bil.
Federal Spending by TypeHampton Roads
0
10
20
30
40
19901991199219931994199519961997199819992000200120022003
Procurement
Total
All Other
Billions Current $
Average Annual Increase = 3.2%1990-2003 Total = $ 187 Bil.
Procurement Dollars Are More Important Than Salary Dollars
.567.56720.920.91.951.95Procurement $Procurement $
.475.47521.021.01.891.89Payroll $Payroll $
PersonalPersonalEarnings**Earnings**
Jobs*Jobs*TotalTotalOutputOutput
Virginia Economic Multipliers
* Per $1 Million** Procurement-related job has higher earnings ($4,380)
The Outlook for 2005+
Productivity, Unemployment and Job Growth
Annual Percent Change, 1998-2008
-2
0
2
4
6
8
19981999200020012002200320042005200620072008
Unemployment
Job Change
Income Productivity
GDP
Interest Rate Trends and OutlookAverage Annual Rate, 1998-2008
0123456789
19981999200020012002200320042005200620072008
30-Yr Fixed
InflationFederal Funds
10-Yr Treasury
GDP/GSP Outlook
0
1
2
3
4
5
6
7
1997199819992000200120022003200420052006200720082009
U.S.
Virginia
%
Economic Outlook – 2010(Annual % Change)
-1
0
1
2
3
4
5
6
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
%
Jobs
GSP
Job Change in Virginia
75,00075,0002007200785,00085,0002006200697,00097,0002005200586,90086,900200420042,7002,70020032003
58,00058,000Annual Annual Average 94Average 94--0404
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