Employment growth reflects the rate at which the economy is creating and filling new jobs. Continuing its recovery from recession, Virginia again added new jobs to its economy in 2014, but at a pace far slower than the national average.
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?
Earlier in the decade, Virginia's employment level grew at a faster pace than the national average, but then began to drop below it. As the nation entered recession in 2008, the employment growth rate turned negative in Virginia, as it did in most states, although its rate of decline was less severe during this time (-3.27% in 2009 and -0.25% in 2010) than in the nation as a whole (-4.60% and -0.61%). Although in positive territory again since 2011, job growth in the Commonwealth continues to lag behind both overall U.S. growth and that found in our peer states. In 2014, employment growth in the Commonwealth was at 0.39 percent -- well below the U.S. average of 1.97 percent and the rates for Maryland, North Carolina, and Tennessee at 0.80, 2.07, and 2.08 percent, respectively.
North Dakota, with a job growth rate of 4.11 percent, was again the national leader in 2014 -- largely due its recent energy boom and related economic growth as thousands move there to find work. But its rate of growth is also an outlier, as no other state has come close to matching North Dakota's year-over-year jumps in job growth in recent years.
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.
Regionally speaking, employment growth rates in 2014 were mixed. The Central region grew at the fastest rate (1.24%), followed by the Valley (0.83%), West Central (0.72%), and Eastern (0.63%) regions. The remaining four regions all experienced job losses in 2014. For the Northern (-0.05%) and Hampton Roads (-0.13%) regions, 2014 marked the first time they were in negative job growth territory since 2009 and 2011, respectively. In the Southside (-0.43%) region, job losses have been occurring since at least 2009; for the Southwest (-1.37%) region, those losses rebounded in 2011 but have again been in negative territory since then.
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 2014, inflation-adjusted wages and salaries rose in every state but Nevada -- albeit only slightly in some. Virginia's average wage was $52,936, up from $52,760 in 2013 and again exceeding the national average ($51,361) -- but still lower than the peak ($53,904) the state attained in 2010. New York again led all states with an average wage of $65,887 in 2014. Maryland's average wage ($55,391) was again higher than Virginia's, while North Carolina ($44,969) and Tennessee ($45,188) had notably lower average wages.
Regionally, the Northern region's average wage of $68,757 once again led the state in 2014, though that figure continues the decline in average wage the region has seen since 2010. The Southside ($32,037) and Southwest ($34,151) regions were again the lowest.
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, 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.
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.
State rankings are ordered so that #1 is understood to be the best.
Data Definitions and Sources
State and Regional Data
Quarterly Census of Employment and Wages, www.bls.gov/cew
Note: When comparing average wages/salaries over time, the dollar values must be "adjusted" to account for inflation. Inflation, which is the general rise in price level, means that a dollar today is generally worth less than a dollar in the past. To account for the difference in value over time, we divide wages/salaries by the consumer price index (CPI), which is one measure of inflation.
See the Data Sources and Updates Calendar for a detailed list of the data resources used for indicator measures on Virginia Performs.