Virginia’s employment growth continues to lag

Virginia’s employment growth continues to lag the nation and it should remain subpar at least through next year.

The reason: federal spending cuts.

Stephen Fuller, an economist at George Mason University, recently pointed to a potential 4.5 percent decline in federal spending across the nation during the fiscal year that will end Sept. 30 and a further 9.2 percent decrease in the following fiscal year.

If Virginia businesses experience the same percentage decline in federal contract spending, Chmura Economics & Analytics estimates that could translate into a direct loss of 11,300 jobs in Virginia during calendar year 2014 and 21,600 jobs in 2015.

Based on those forecasts that would mean employment would grow 0.5 percent in Virginia in 2014 and 0.7 percent in 2015 — much lower than the national growth rate of 1.6 percent forecasted for 2014 and 1.1 percent in 2015.

The Richmond region should fare better. Employment in the area is forecast to grow at a faster rate of 1.4 percent in 2014 and 1.6 percent in 2015.

In the Richmond metro area, only 1.1 percent of its employment is dependent on defense contract awards compared to 11.3 percent in Northern Virginia, according to a model created by Chmura Economics & Analytics (http://dod-va.chmuraecon.com/).

Northern Virginia is bearing most of the brunt of the cuts in federal spending.

Employment grew 0.1 percent during the 12 months that ended in April and the region is forecast to see a 0.3 percent growth for all of 2014 and 0.5 percent in 2015.

Employment growth in the nation has been hovering around 1.7 percent on a year-over-year basis since January 2012 through April 2014, the latest data available.

By contrast, employment growth in Virginia decelerated over the same period. It grew 1.3 percent for much of 2011 but fell 0.1 percent two months ago April 2014 compared with April 2013.

The professional and business services sector, which is dependent on federal contracting, continues to show the largest losses with a contraction of 18,300 jobs during the 12-months that ended in April.

To put that into context, Virginia expanded by 29,000 jobs in 2012 and 43,000 in 2013. But before the Great Recession, Virginia added an average 67,000 jobs a year from 2004 through 2007.