James Koch column: Virginia's economic growth lags nation's

The second State of the Commonwealth Report once again finds the Virginia economy muddling along and growing at a rate slower than the United States as a whole. Indeed, economic growth in the nation accelerated in the third quarter of this year and the economy grew at a rate of 2.9 percent, after inflation. Meanwhile, in Virginia, our economy grew at least 1 percentage point slower and this was evidenced by disappointing tax collections.

If President-elect Trump honors his campaign promise to increase defense spending in general and the size of the naval fleet in particular, then we Virginians once again will experience the higher-than-national average economic growth rates that we enjoyed in the first decade of this century. If not, then we will continue to struggle as we gradually transition from an economy heavily dependent upon government spending to one whose private sector is growing robustly and produces value-added products that we sell elsewhere in the nation and internationally. Exports continue to be less important to Virginia’s economy than is true nationally. The reasons for this are not yet clear, but this is a topic you can count on being addressed in next year’s report.

Particularly worrisome is the continued stagnation of the commonwealth’s labor markets. Despite a rate of unemployment that hovers around 4 percent, the number of individuals actually employed in Virginia is about 16,000 below last year’s number at this time. Further, an increasing percentage of Virginians of prime working ages have chosen, for a variety of reasons, to stop looking for employment. This is bad news because one way or another, society ends up paying for their continued existence.

This year’s report focuses attention on Virginia’s hotel industry, which functions somewhat like an economic thermometer. Since bottoming out in 2010, hotel revenues nationally have increased more than 54 percent. In Virginia, however, we recorded only a 22 percent increase, though Richmond performed better than this and Hampton Roads and Northern Virginia measurably worse.

The impact of automation and robots on Virginia’s workers is an attention-getter in the report. A recent study suggested that up to 47 percent of all jobs are susceptible to being eliminated by intelligent machines and software that learn as they operate. Interestingly, higher levels of education are not necessarily a bulwark against having one’s job eliminated. Instead, it is those jobs that require nonrepetitive actions, the ability to adjust on the fly, and the application of judgment that are most resistant to being automated out of existence. Thus, first-grade teachers and social workers are less vulnerable to being replaced by smart machines than are college professors and financial analysts.

The report also assesses the economic impact of stock car racing in the commonwealth. While racing tracks in Virginia still attract large crowds, it appears that stock car racing passed its peak of popularity several years ago and it remains to be seen if the industry can reverse this trend.

Households led by single individuals (young, old and in between) now account for 47 percent of all households in Virginia. The report concludes that a future challenge is to mold our legal and regulatory structure to fit this new reality.

This year’s report closes with an examination of Liberty University as an economic phenomenon. Liberty enrolls more than 100,000 students (15,000 on campus) and has accumulated an endowment of $1.4 billion. Its long-term aspiration is to be considered in the same breath as Notre Dame is for Roman Catholics and Brigham Young is for Mormons.

If you are interested in absolutely up-to-date economic data and information on Virginia and 10 metropolitan areas within the commonwealth, please navigate to www.ceapodu.com. In addition to finding abundant useful data, you will be able to download a PDF version of this year’s report.