When members of the Senate Finance Committee gathered at Radford University last month, they sat through hours and hours of charts and graphs detailing the state’s economic condition.
Two of those charts deserve a closer look.
They came in a report from Anna Kovner, executive vice president and director of research for the Federal Reserve Bank of Richmond. Some of her key points I dealt with in my previous column on the retreat — layoffs are increasing, job postings are declining, wage growth is slowing for the lowest-paid workers, the overall economic hiring outlook looks pretty flat.
There were two charts, though, that required some follow-up questions. I now have those answers. They’re not particularly happy ones, but if you’re turning to economic reports to find joy, you’re usually looking in the wrong place.
The first chart was one that showed employment growth (or contraction) over the past year in most (but not all) of the state’s metro areas:
What we see here shouldn’t surprise anyone who has been following the changes in the Virginia economy, but some things are still worth underlining.
We see the fastest job growth in the Winchester and Richmond metros. Those are also the two fastest-growing metros, population-wise, and those two things are surely connected. Both are seeing job growth at twice or more both the state and national rates.
On the downside, that means every other metro in Virginia is running below the state and/or national rates.
What we should really pay attention to are the three metros at the bottom of the chart. Two of those three — Northern Virginia and Hampton Roads (listed here by the shorthand “Virginia Beach”) — are the two biggest metros in the state. When your two biggest economic engines are at the bottom of this chart, that’s not a good thing.
Northern Virginia shows absolutely no change. We all know the reason for that: President Donald Trump’s downsizing of the federal government. If anything, the surprise is that there’s enough other job growth to balance out those cuts — at least there was through August. Under the circumstances, maybe we should feel fortunate that Northern Virginia’s not on the negative side of the ledger. Still, when your biggest metro has no year-over-year job growth, that’s not a good sign.
Hampton Roads, meanwhile, is losing jobs. So is Harrisonburg, but it’s a much smaller metro — and we’ll come back to Harrisonburg.
We’ve seen similar figures for Northern Virginia and Hampton Roads before, but here’s yet more confirmation that there are economic problems in both places. Gov.-elect Abigail Spanberger was at the presentation, and was taking notes, so I hope she caught these figures when they went flashing by on the big screen.
Next we come to wages, and this is where I was the one taking notes.
Once again, we see Winchester leading the way.
We also see Virginia’s wage growth is far higher than the national rate — 8.8% v. 0.9%.
Northern Virginia’s wage growth rate is low — 1.2% — but it is still growing and at a higher rate than the U.S., so we should take our wins where we can find them.
However, three metros in Virginia have wage rates that are contracting: Kingsport/Bristol, Lynchburg and, once again, Harrisonburg.
Kingsport/Bristol isn’t all that surprising given the economic challenges facing that region. Disappointing, but not surprising, so let’s move on to the other two.
Harrisonburg has been losing jobs, so maybe it’s not surprising that its wage growth is in the negative range. The bigger question is why, because that runs counter to what sure looks like a booming economy in the region. My inquiry to the Federal Reserve took me to Joe Mengedoth, a regional economist with the Federal Reserve, who said by email: “The losses are on the private side in both goods producing and services sectors, but more heavily on the producing side.” He also cautions that the chart shows percentages, so with Harrisonburg being a smaller MSA, so are the actual number of job losses — about 500. Bad for the Harrisonburg area but perhaps not that significant in the statewide scheme of things.
Then there’s Lynchburg. At first glance, this makes no sense. Lynchburg is showing pretty good job growth — slightly behind both the state and national pace, but ahead of many other metros in Virginia. So why are wages going down?
Mengedoth had a simple explanation for how Lynchburg wound up in the minus range: Sure, the Lynchburg metro is creating jobs, he says, but it’s creating lower-wage jobs that are pulling the average down.
Here’s more of what he had to say by email: “The average hourly wage data will move up or down depending on the wage rates of the jobs added vs. lost in a month. So if more high paying jobs are being added, all else equal, this would push up the hourly rate. And if more low paying jobs are being added, it would lead to a lower average. So my take would be that Lynchburg is growing in employment but the growth could be coming more from lower wage jobs. For example: retail employment is up 0.8% and professional business services employment is down 1.9% year-over-year. This is just one comparison of two sectors, but I’m just using that to highlight what could lead to lower average wages over time.”
Actually, things are a bit more complicated than that, he says, because “hours worked have fallen off over the last two years.” Even a higher wage won’t matter that much if workers can’t put in enough hours to take advantage of it.
Those two things together have conspired to pull Lynchburg’s average wages down.
These figures may be unique to Lynchburg, but the trends aren’t.
A separate presentation at the Senate Finance Committee showed that Virginia overall was losing jobs in higher-wage sectors and gaining them in lower-wage ones. The biggest job declines were in sectors where the average pay is six figures ($116,000 per year in professional services, $115,000 in federal government jobs) while the biggest gains were in health care and social assistance, where the wage rate is half that. Virginia is creating jobs, but we’re effectively trading down in income. Lynchburg, it would seem, is simply doing the same.
It will be of no comfort at all to tell people in the Lynchburg metro that their community is a perfect example of what’s happening to the economy overall, especially when others are somehow defying these trends. Nonetheless, that appears to be what is happening.
People in the Lynchburg metro should hope that someone other than me was taking notes on this.
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