So here comes yet another report warning that Virginia is already two different states or is in danger of becoming such and raising questions about how we can govern a place with such vast disparities in wealth and opportunity.
Yes, I know we’ve heard this all before, but perhaps we still ought to pay attention, eh?
This particular report comes from Old Dominion University and its annual “State of the Commonwealth Report” from the Dragas Center for Economic Analysis and Policy and the Strome College of Business. This is always an insightful report – full of charts and graphs and actual facts on the state of the Virginia economy, not to be confused with how politicians might describe the Virginia economy, depending on their political persuasion.
Here are some of the relevant parts of the ODU report:
Page 46: “Population and economic activity continue to shift toward Virginia’s urban crescent, defined by Northern Virginia, Richmond and Hampton Roads. These shifts, along with political currents, suggest that the Commonwealth is pulling apart, creating a challenge for current and future decision makers on how to spur development in those areas of the state that have been left behind.”
Page: 54: “The increasing concentration of population and economic activity in the urban crescent and, in particular, Northern Virginia and Richmond, is creating ‘two Virginias.’ Political and economic divisions will only sharpen in the coming years unless we have honest discussions about how to improve growth across Virginia over the coming decades.”
Page 61: “A familiar story emerges from this data. Two of the largest metro areas, Richmond and Washington-Arlington-Alexandria, saw individual employment grow faster than the state or the nation. Winchester, Charlottesville and Harrisonburg also outperformed the state and nation. … The Roanoke, Lynchburg and Kingsport-Bristol metro areas lagged much further behind, reinforcing the perception that economic prospects were lacking in these regions.”
A familiar story indeed. So with Virginia “pulling apart,” when are we going to have these “honest discussions”? Or are we already having them? To be fair, the Senate Finance Committee did devote much of its November retreat in Roanoke to hearing presentations on the state of the rural economy, and one Northern Virginia legislator – state Sen. Jeremy McPike, D-Prince William County – declared it should be “all hands on deck” to turn things around. We also know that building a new economy is a generational challenge; the truism about Rome’s construction schedule holds here. Of course, such glossy words as “generational challenge” are cold comfort for those living in the here and now. I’m sure our new governor has a lot of briefing books piled up on his desk; this report is one he should add to his reading list. It ought to be required reading for a lot of local government officials, too. Their localities may not be mentioned – this report is built around what the Census Bureau recognizes as metro areas so, regrettably, Danville and Martinsville aren’t included – but the context is sure useful.
I’ll skip over the report’s sections on population growth (or lack thereof). For the best assessment of that, I refer you to the presentation that demographer Hamilton Lombard of the University of Virginia’s Weldon Cooper Center for Public Service made last fall at the Governor’s Conference on Rural Prosperity. It’s not for the faint of heart.
Instead, let’s zero in on the economic portions of this report.
Gross Domestic Product: New River is a bright spot, Lynchburg shrinks more than any other metro in Virginia
The report points out that “a number of metro areas in the Commonwealth struggled to generate consistent growth over the decade and these woes are likely to persist in the coming years.” More specifically: “From 2010 to 2020, there was not a single year when all the metro areas in the Commonwealth experienced economic growth.” When politicians – most recently Glenn Youngkin during his gubernatorial campaign – talk about Virginia falling behind other states in economic growth, here’s one big reason why. Those slow-growth or no-growth regions are pulling down the rest of Virginia. Accordingly, the report said, “it should be no surprise that Virginia’s real GDP growth lagged behind the nation’s over the last decade.”
So who is growing and who isn’t? Well, we sort of already know the answer to that, don’t we?
From 2010 to 2020, inflation-adjusted gross domestic product in the United States grew 1.6%. In Virginia, it grew just 0.7%.
Surprisingly, Northern Virginia did not lead the way. Richmond did – at 1.5%, so even the metro area with the biggest GDP growth was below the national average. Winchester was second at 1.2%, then Charlottesville and Northern Virginia at 1.0%, followed by Blacksburg-Christiansburg at 0.8%. (This figure is why a lot of the economic hopes for this part of the state rest on the New River Valley. Virginia Tech is an economic engine, and this is where a lot of the action is, from drone research to life sciences lab to the company that supplied the genetically modified pig heart for that recent history-making human transplant.)
Some metro areas actually saw their GDP shrink:
Roanoke -0.1%
Harrisonburg -0.2%
Kingsport-Bristol -0.3%
Hampton Roads -0.4%
Staunton -0.6%
Lynchburg -0.7%
Why did Lynchburg see its GDP shrink more than any other metro in Virginia? The answer to that is beyond the scope of this report, although ODU does pinpoint when that shrinkage took place – primarily during the pandemic year of 2020 (the most recent year studied for this report). That year every metro in Virginia saw its GDP shrink, but Lynchburg’s GDP shrank more than most – by -5.6%. So we don’t know the why, but we do know the when. The Virginia metro that saw its GDP shrink the least during the pandemic? Winchester – down just -0.1%.
Personal income: Lynchburg sees slowest growth
The basic numbers we already know. Northern Virginia is home to the wealthiest localities in the country and Southwest Virginia is home to some of the poorest. The demographer Lombard, in his presentation, points out that Virginia has the biggest gap between rich and poor localities of any state in the country. Now, that’s partly because we have the richest counties, not the poorest ones, but the gap is real nonetheless.
The ODU report frames up income differently by looking at how much per capita income grew in each metro area from 2010 to 2019 (Yes, 2019; some of the underlying federal stats the report relies on have different end dates). Not surprisingly, it’s a case of the rich getting richer, but not a case of the poor getting poorer because every metro area saw its income rise – some just saw it rise faster than others.
Nationally, per capita income nationwide grew 2.0% during that period – from $42,367 to $51,424.
In Virginia, it grew by 1.5% – from $46,217 to $53,837, although those averages mask some big regional differences.
Here’s one telling takeaway: Only one Virginia metro saw its personal income rise faster than the national average – Charlottesville, up 2.7%.
Only three saw their rates rise faster than the state average but below the national average: Richmond at 1.9%, Blacksburg-Christiansburg and Harrisonburg at 1.7%, Winchester at 1.6%.
Much like Sherlock Holmes’ dog that didn’t bark, what we should notice is the locality that’s not here: Northern Virginia’s income grew 1.4%, below both the national and state averages, so the rich didn’t get quite as rich as we might think.
The Bristol, Lynchburg, Roanoke and Staunton metros all saw their incomes grow at a rate slower than the state average, with Lynchburg having the slowest growth rate of all.
Labor pool: Shrinking in Bristol and Lynchburg
Another thing the ODU report looked at was the size of the local workforce (which is obviously related to population) and how it changed.
From January 2010 to February 2020, two metros in Virginia saw their labor pool shrink: Kingsport-Bristol (-4.9%) and Lynchburg (-0.3%). The former shouldn’t be surprising, given the population losses in Southwest Virginia, but Lynchburg’s inclusion here is, since the Lynchburg metro is growing, albeit slowly. This is three straight categories where Lynchburg winds up on the negative side of things. These figures are important because if you’re a company looking to locate somewhere, you’re more likely to want a place with a growing labor pool (more hiring options) than a shrinking one (fewer).
Of course, the workforce nationally contracted during the pandemic, and we still don’t know how much that will skew things permanently. Once again, we see Winchester on the “better” end of the scale, but the order of other metros doesn’t always match up with what we might expect, with Charlottesville seeing the biggest contraction. How much of that is student-related? The report doesn’t say.
Job growth: Lynchburg has state’s slowest growth rate
We see similar things in a related category – employment growth. From January 2010 to February 2020, Lynchburg, Kingsport-Bristol and Roanoke had the slowest employment growth rates in the state. That’s now four categories where Lynchburg turns up in the worst position.
Pandemic recovery: Winchester and New River Valley lead the way
Here’s the flip side of the figures above: How many jobs have gone away during the pandemic? From February 2020 to October 2021, Charlottesville and Richmond have lost a bigger percentage of jobs than any other metros. But two places have actually seen job growth during that time: the New River Valley and Winchester. Remember how I said a lot of economic hopes in this part of the state rest on the New River Valley? Here’s another reason why. If these places can grow jobs during the pandemic, what can they do once all this passes?
So how does all this add up? And what should we do about it?
For our purposes, several things are clear (although they were pretty clear already). Virginia’s economic divide isn’t necessarily between the urban crescent and the rest of the state. Here we see that Virginia’s economic divide basically runs along Interstate 64. North of I-64, places such as Charlottesville, Harrisonburg and Winchester – all outside the urban crescent – seem to be doing pretty well. South of that, that’s where the problem is. We all know about the economic challenges in Southwest, so none of the figures with the Bristol metro seem noteworthy. The repeated low figures for Lynchburg do – why does it rank so low here? This bears more investigation; the numbers certainly don’t match my impression of Lynchburg which, to me, seems a pretty happening place. And, as noted, the New River Valley has a lot going for it. That is increasingly becoming the economic engine of this part of Virginia.
As for prescriptions, the report lays out this paragraph in bold:
“Virginia can act to improve regional outcomes if it chooses to do so. We continue to offer the following suggestions. Targeted investments in infrastructure are necessary to promote economic development and attract new businesses. Improving the quality of education, including investments in physical infrastructure, is necessary to produce a workforce that can compete in an increasingly globalized economy. Virginia’s antiquated tax structure must be reformed to compete with neighboring states. Regulatory relief, or at least regulatory clarity, is also a necessary component of economic growth. Lastly, regional collaboration should be more than a slogan. The Commonwealth should continue to promote regional collaborations through efforts like GO Virginia. These recommendations are not new, but until Virginia acts, they bear repeating.”
None of these are new. We’ve been talking about school modernization (which covers both school construction and upgrading existing facilities) for a long time. We’re finally starting to see some movement; whether it’s enough is another question. Youngkin has an opportunity to lead here, if, as the report says, he “chooses to do so.” He’ll certainly like the part about reforming Virginia’s tax structure. But all these solutions are so broad as to be meaningless unless and until there are some specifics behind them. Otherwise, we’ll surely have more reports telling us how there are two Virginias.