Economy

Employment Growth

Employment Growth

Employment growth reflects the rate at which the economy is creating and filling new jobs. Continuing its recovery from recession and federal budget cuts, Virginia once again added new jobs to its economy in 2015, but this time with brisk growth, outpacing the national average. Wages and salaries also continued to climb.

Why is This Important?

Employment growth is an indicator of expansion in the economy and represents an increase in the economic opportunities available to the citizens of a region or state. Employment growth is generally tracked as a percentage change from a previous year.

How is Virginia Doing?

Although in positive territory from 2011 to 2014, job growth in the Commonwealth continued to lag behind both overall U.S. growth and that found in our peer states. Many economists attribute the overall sluggish increase in the employment rate in part to the federal sequestration implemented at the start of 2012, where significant across-the-board cuts in spending have affected many state economies. Given its extensive military infrastructure and the Northern region's role as part of the Washington, D.C. metropolitan area, Virginia is seen as especially vulnerable. However, with the passage of the bipartisan Budget Acts of 2013 and 2015, these sequestration cuts have eased somewhat.

In 2015, employment growth in the Commonwealth bounced back to 2.2 percent -- above the U.S. average of 2.1 percent and ranking the state 16th overall. Virginia's growth rate was higher than Maryland (1.50%), but lower than North Carolina (2.56%) and Tennessee(2.57%). Utah was the national leader in 2015, with a job growth rate of 3.77 percent.

Regionally speaking, employment growth rates in 2015 were finally all in positive territory, but with wide variations. The Central region again outpaced the rest of the state (3.20%), followed by the Northern (2.01%), Hampton Roads (1.80%), Valley (1.60%), and Southside (1.57%) regions. This marks the first time in over 16 years that the Southside region has seen positive job growth.

The Southwest (0.41%) and West Central (0.91%) regions had the slowest job growth rates in 2015.

Wages and Salaries

Coupled with employment growth, average annual wages and salaries provide a more complete picture of Virginia's economic health. The good news is that in 2015, inflation-adjusted wages and salaries rose in every state but Wyoming -- and often by the heftiest margin in years, although incomes still remain relatively stagnant compared to a decade ago. Virginia's average wage was $54,282, up from $52,992 the year before and again exceeding the national average ($52,937). Virginia also finally exceeded the previous peak ($53,968) the state had attained in 2010.

Nationally, all previous wage patterns held steady in 2015: New York led all states with an average wage of $67,491; Maryland's average wage ($57,168) was higher than Virginia's, and North Carolina ($46,536) and Tennessee ($46,731) were notably lower.

Regionally, the Northern region's average wage of $70,355 once again led the state in 2015 and represents a reversal of declining averages the region had seen since 2010. The Southside ($32,877) and Southwest ($34,475) regions were again the lowest, but all regions in the state saw improved average wages.

What Influences Employment Growth?

The three most important factors influencing employment growth are national business cycles (expansions and contractions in the economy), the mix of industries / businesses, and the relative attractiveness (competitive advantages) of the region.

Although underlying business cycles may be similar across the nation, it is the mix of industries that most affects the magnitude of the variation in any state or region's employment growth. For example, through most of the last 10 years, employment growth in Virginia and the nation has been significantly influenced by a continued shift from goods-producing jobs to service-oriented ones, especially in healthcare, social assistance, and business services. Similarly, a sizable reliance on defense-related industries has made the state more vulnerable to federal spending cuts.

States and regions with competitive advantages relative to other regions are also more likely to maintain their existing businesses and to experience growth. Because business is the driving force behind job creation, an attractive business climate is more conducive to higher levels of employment growth.

What is the State's Role?

The state's primary role in employment growth is to provide the infrastructure -- education and training, workforce development, transportation, and other public goods, such as research and development -- that reduces the transaction costs associated with economic activity and spurs growth. Virginia has developed two assessment tools -- the Workforce System Report Card and the Innovation and Entrepreneurship Report Card -- that are designed to monitor the state's performance in each of these important areas.

The Workforce System Report Card works to better coordinate Virginia's varied workforce development and training resources and to track and improve the quality and marketability of our workforce as a whole. The Innovation and Entrepreneurship Report Card delineates goals for boosting innovation and economic growth via increased support for R&D, new capital, and new technologies, as well as improving the state's talent pipeline and high-tech infrastructure.

Adequate infrastructure also allows private business to better respond to emerging economic opportunities. In addition, the state can assist in employment growth by fostering a competitive business climate.