The conventional wisdom about the Great Recession’s impact in Virginia is that it wasn’t as deeply felt as in other parts of the country. After all, Virginia’s unemployment rate was 5.8 percent in August, the 11th-lowest of any state. And its jobless rate has consistently remained well below the national one, which dipped to 7.3 percent in August.
But a new study finds that the downturn has been felt unevenly across the commonwealth, with those in jobs supported by federal spending seeing a fairly healthy labor market, while other industries see a more troubled market that more closely mirrors what has been experienced nationwide.
Study authors Keith Hall and Robert Greene of the Mercatus Center at George Mason University, a research group with an anti-regulatory bent, call it “a tale of two labor markets,” and it’s a dichotomy they say illustrates that Virginia’s jobs recovery is not on as steady a footing as many residents think.
Without its large share of government and contracting jobs, “Virginia would have gone through a very similar sort of recession that the average state went through,” Hall said.
The study found that 30 percent of jobs in Virginia are directly or indirectly tied to federal spending, a share significantly higher than in most states across the country. And employment in these job categories grew between 2007 and 2012.
For example, Virginia saw a 4.3 percent increase in government jobs during this period, while the nation saw a 1.4 percent decrease in these positions. In the professional services sector, which includes the region’s throngs of government contractors, Virginia saw a 4.9 percent increase in jobs, while the nation registered a 0.1 percent decrease.
But many others sectors underperformed compared to the national change. Jobs in four sectors — construction, manufacturing, information and trade — have recovered at a slower rate than the national average. And the construction industry, for example, had a 26.7 percent decrease in jobs in Virginia, which was in line with the national change of 26.1 percent.
Hall and Greene also note that the commonwealth’s relatively low unemployment rate is not an entirely encouraging signal about the health of its economy. That’s because they say its drop after the recession has much to do with a decline in the labor force participation rate.
For example, the study found that if the labor force in 2012 had been the same size as it was in 2007, Virginia’s unemployment rate would be as high as 8.6 percent.
While some of the decline in labor force participation is likely a result of aging baby boomers moving into retirement, Hall said some of it is likely because young adults have not entered the labor force, and some people have gotten discouraged and given up looking for work.
This pattern is not unique to Virginia. In fact, a drop in the labor force participation rate has also been a key driver of the recent decrease in the national jobless rate.
The study also found that Northern Virginia’s unemployment picture compares favorably with that of the rest of the state. While the jobless rate in this region was 4.4 percent, it was 6.6 percent in the rest of the state.
The Mercatus Center is a nonprofit research group that embraces a free-market philosophy about the economy. It has received funding from private donors, businesses and foundations, including from the Koch family foundations, which are affiliated with the conservative/libertarian-minded leaders of industrial conglomerate Koch Industries.