Employment growth reflects the rate at which the economy is creating and filling new jobs. Virginia again added new jobs to its economy in 2012, continuing its recovery from recession.
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?
Between 2000 and 2005, Virginia's employment rate grew at a faster pace than the national average, but then lagged the U.S. growth rate during 2006-07. As the nation entered recession in 2008, Virginia's employment growth rate turned negative, as it did in most states. Its rate of decline was less severe during the recession (-2.20% in 2009 and -0.60% in 2010) than the nation as a whole (-3.02 and -0.68%, respectively). However, although Virginia employment grew again in 2011 (1.30%) and 2012 (1.35%), it lagged overall U.S. growth (1.91% and 1.86%). Virginia's employment growth rate was also lower than its peer states in 2012: Maryland (1.74%), North Carolina (1.73%), and Tennessee (1.98%).
North Dakota, with a job growth rate of nearly 7 percent (6.91%), was clearly the national leader in 2012 -- 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 this 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 2011 were positive for all but two areas. The Northern region grew at the fastest rate (1.72%), followed by the Central (1.28%) and Valley (1.19%) regions. The Eastern and Southside regions experienced employment losses, while growth was minimal in the remaining regions.
Coupled with employment growth, average annual wages and salaries provide a more complete picture of Virginia's economic health. In 2012, Virginia's average wage was $53,104, exceeding the national average ($49,612). New York again led all states with an average wage of $61,863 in 2012. Maryland's average wage ($55,493) was higher than Virginia, while North Carolina ($44,216) and Tennessee ($43,328) had notably lower average wages.
Regionally, the Northern region's average wage of $68,553 once again led the state in 2011. The Southside ($31,617) and Southwest ($35,280) 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 two trends: 1) reduction in manufacturing employment due to global competition and labor-saving technology enhancements, and 2) strong employment gains in the professional and business services industry.
As a result, states and regions with a high number of manufacturing jobs experienced downward pressure on employment growth, while those with a higher percentage of professional and business services experienced upward pressure on growth.
Finally, states and regions with competitive advantages relative to other regions are 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 -- that reduces the transaction costs associated with economic activity. Adequate infrastructure 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 Annual Personal Income, Bureau
of Economic Analysis, U.S. Department of
Regional Economic Information System,
Bureau of Economic Analysis,
See the Data Sources and Updates Calendar for a detailed list of the data resources used for indicator measures on Virginia Performs.