virginia government finance officers’ association the ...vgfoa.asp.radford.edu/conference...

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

www.cra-gmu.org