Virginia’s economy under Gov. Terry McAuliffe has improved since Congress agreed on a budget last fall. Is more growth to come? (Linda Davidson/The Washington Post)

Not all is well in Virginia. Vacated office parks are dragging down local tax coffers. Home values in the exurbs of Fairfax and Loudoun counties are lagging the rest of the region. The federal government continues to slim its workforce and its work space, which historically does not bode well for other sectors.

But there is little doubt that things are on the upswing in the commonwealth, particularly after data reported by the U.S. Department of Commerce Tuesday showed that Virginia posted 1.4 percent GDP growth in 2015, well above its nearly flat 2014 GDP which ranked third-to-last nationally.

That growth isn’t going to set the world on fire. It was 32nd nationally, just ahead of New York and Michigan but behind Maryland, which posted 1.5 percent growth. D.C. posted 2.5 percent growth in 2015, though it is typically compared to other urban cities and not larger states.

California and Oregon led the nation in 2015 GDP growth, at 4.1 percent, followed by Texas, Colorado and Montana.

Virginia’s 1.4 percent gain is its best showing in a long while (beating 0.6 percent in 2011, 0.7 percent in 2012 and 0.4 percent in 2013) and officials under Gov. Terry McAuliffe (D) point out that the commonwealth had one of the best improvements nationally from 2014 to 2015 and finished last year strong, with 2.4 percent growth in the fourth quarter, 13th nationally. D.C. and Maryland were also among national leaders during the fourth quarter.

The growth came from an array of sectors including construction, manufacturing, information and especially professional, scientific and technical services — the hallmark of the Northern Virginia economy.

“Our sector that has provided for us historically the largest growth and largest wages is back on track,” said Maurice Jones, Virginia’s secretary of commerce and trade. He said the growth reflects the state’s investments in cybersecurity, information technology and other areas. Virginia’s unemployment rate was only 3.9 percent in April. “That’s a really, really good sign for future growth in high-wage jobs in Virginia.”


D.C., Maryland and Virginia all had strong fourth quarters. (Dept. of Commerce)

Analysts at TD Bank took notice at the Washington area’s surging professional services sector, writing in a June report that the “D.C. metro economy is finally emerging from the shadow of budget cuts.”

“[A]fter years of little to no growth, green shoots have begun emerging across the regional economy. These should turn into increasingly robust economic growth over the medium run,” said the report. “For one, the hard hit professional and business services sector, previously reliant on federal money, is beginning to diversify away from federal contracts, with the high-tech and cybersecurity sectors leading the way in venture capital funding. The regional economy should also find some reprieve by additional federal government funding towards cybersecurity research as well as the lifting of federal government spending caps.”

Like Jones, the bank analysts attribute the resurgence to a highly educated regional workforce capable of securing business outside of government. “The professional, scientific, and technical sector has since made a full recovery, rising to it’s pre-sequester level by early-2015,” said the report, referring to the mandatory federal budget cuts known as sequestration.


Certainly some of the newfound stability in Virginia and the Washington region can be attributed to the two-year budget agreement that Congress and President Obama agreed to last fall, ending months of uncertaintyand avoiding a potentially disastrous default. But Virginia’s resurgence is happening despite continued federal job cutbacks. GDP growth attributable to government actually fell in Virginia during the fourth quarter by 0.6 percent. Only the agriculture and utility sectors fared worse. 

The federal government continues to cut back on real estate as well, which was once considered a blip but now appears more sustained as the General Services Administration continues to find more efficient ways to use space. Total GSA leasing reached a peak in December of 2012 at 198.9 million square feet, according to data from Colliers International. Since then it’s been on a consistent slide, dropping to 192.2 million square feet in March.


Those who have predicted government leasing to turn around are still waiting. Colliers executive Kurt Stout recently wrote that with the GSA looking to consolidate headquarters space in the Washington region the trend is likely to continue.

“Ultimately, the investment community will need to adjust to the fact that a half-century of consistent inventory growth began to fall back in 2012 and austerity is the ‘new normal,'” Stout wrote.

Maybe that new normal isn’t so bad.

This post has been corrected to include the proper April unemployment rate. 

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz