McAuliffe (D) has made transitioning the commonwealth’s economy away from federal spending a top priority. He has been an active and creative pitchman for the state, putting his political connections and out-sized persona to work trying to attract new businesses such as D.C. United and build international trade.
The governor is currently in the midst of a trade mission through six European countries; he announced Tuesday that a Welsh company, Elephant Auto Insurance, would expand its U.S. headquarters in Henrico County, adding 1,173 jobs.
But Virginia is bleeding federal jobs, badly hampering its economic output. Cuts to the federal government, particularly sequestration, have battered defense contractors, who have also cut back.
From 2010 to 2014, the federal payroll dropped $1.16 billion, or 7.5 percent, causing consecutive monthly federal job losses in the commonwealth for more than a year, according to the Virginia Employment Commission.
“Virginia’s economy, because of the incredible dependence on the public sector, particularly the federal defense piece, is not growing at the same rate as other states,” said Maurice Jones, Virginia’s secretary of commerce and trade. “This is not new – this is exactly the news we have been reporting for some time and is exactly the reason why we’re hustling and doing what we’re doing.”
Jones said it is a testament to the administration’s push for new jobs that the numbers are not worse given the toll that federal cutbacks have taken. Jones made the comments in a phone interview from Milan, where McAuliffe’s 11-day, six-country economic development tour had landed the Virginia delegation for the day.
The trip began with an overnight flight to London Monday and has been non-stop ever since, Jones said.
“We flew into London and arrived Tuesday morning,” he said. “We literally took a shower at the airport and we went to call on a prospect.”
The group has met with companies that might want to set up shop in Virginia, hosted a reception for agricultural buyers and talked up the commonwealth as a travel destination in media interviews, Jones said. They met with two manufacturing prospects in Milan Thursday, although Jones was not at liberty to disclose them. And one big deal has already been announced: Elephant Auto Insurance, the company McAuliffe went to see right after touchdown and a shower, sealed the deal on a $2 million expansion that will bring 1,173 jobs to suburban Richmond.
From Milan, the delegation is headed to Stuttgart, Germany, and then Stockholm, Sweden — and then on to the Paris Air Show, which is the real focus of the trip, according to McAuliffe spokesman Brian Coy. Coy called it a “target-rich environment” for the governor to make pitches to European aerospace executives.
McAuliffe hopes to attract all kinds of aerospace businesses to Virginia, but he is particularly focused on drones, Coy said. After Paris, the governor will stop in Brussels to discuss agriculture-related projects, and then he will head home.
Coy also said that McAuliffe will announce an “exciting” deal Friday, but he was not authorized to provide details.
“This is the central rationale of his governorship,” Coy said. “No matter how hard we are working our tails off on economic development, our growth is being hampered by federal decision-making. Defense cuts, sequestration, civil servants, contractors, businesses and professional services…it’s all sort of part and parcel. The governor’s whole thing is: Let’s move past this.”
“We’re going to lag behind as long as the federal government is our bread and butter,” he added.
Virginia wasn’t demonstrating much growth when McAuliffe arrived. It posted 0.6 percent GDP growth in 2011, 0.7 percent in 2012 and 0.4 percent in 2013.
The governor’s staff pointed to other economic indicators showing a better situation. The unemployment rate in March was 4.8 percent, more than half a percent lower than the 5.4 percent rate nationally.
Collections to the Virginia General Fund this fiscal year are up 7.5 percent over last year, reflecting in part a resurgence in the housing market that other states have enjoyed as well.
Maryland and the District, while not faring particularly well recently, are outpacing Virginia. D.C. experienced 1.6 percent growth in 2014 after dropping 0.6 percent the year before. Maryland was up 0.8 percent in 2014, 36th among states, and 0.7 percent in 2013.
Some Northern Virginia counties have been hit hardest of any jurisdictions in the region when it comes to personal income. Between 2012 and 2013, per capita income fell 3.2 percent in Loudoun County, 2.4 percent in Arlington and 2.3 percent in Prince William County. It was 2.3 percent in Jefferson County, W.V. No Maryland County lost more than 2 percent during that time. The District fell 2.3 percent.
For McAuliffe, there are political ramifications as well as economic ones. The governor has repeatedly said that the best thing he can do to help Hillary Clinton win in 2016 is to focus on Virginia. Even Republicans have credited his deal-making prowess.
But the economic headwinds are such that significant progress will be difficult.
Laura Vozzella and Rachel Weiner contributed to this report.
Follow Jonathan O’Connell on Twitter: @oconnellpostbiz