Virginia Government Finance Officers Association Economic Update - - PDF document

1

Virginia Government Finance Officers’ Association

Economic Update With Application Toward Local Revenues

The National and Regional Economies—

National growth has slowed but remains strong

Productivity growth very important to long-term growth Fed is at the end of the tightening cycle Risks: housing, oil prices, dollar

State growth has slowed but remains positive

Varies around the state Housing activity is slowing

Slower price appreciation impacts revenues from assessments Slower housing sales impacts recordation taxes

Slower retail sales impacts growth of local 1%

Counties and cities see revenue growth but not as much as last year Education is important for regional growth

2

Real GDP Slows in Second Quarter

Data through 2nd Quarter 2006. Recessions are shaded. Quarterly Annualized Percent Change

• 4
• 2

2 4 6 8 10 1990 1992 1994 1996 1998 2000 2002 2004 2006

The Fed’s Goal: 3.0% - 3.5% Real GDP Growth?

Disinflation I n f l a t i

• n

P r e s s u r e s Unemployment Falls Capacity Utilization Rises Slower Deliveries 3.0% - 3.5% Noninflationary Economic Growth

3

How Fast Can the Economy Grow?

Source: CBO, January 2006.

1.7 2.5 1.6 1.2 1.2 0.7 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 1951-1973 1974-1981 1982-1990 1991-1995 1995-2005 2006-2016

Labor Force Forecast Annual Growth Rate

How Fast Can the Economy Grow?

Source: CBO, January 2006. 1.7 2.1 2.5 0.8 1.6 1.4 1.2 1.5 1.2 2.1 0.7 2.1 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 1951-1973 1974-1981 1982-1990 1991-1995 1996-2005 2006-2016 3.8 3.2 3.0 2.7 3.3 2.8 Forecast Annual Growth Rate Productivity + Labor Force = Potential GDP

4

Bernanke, April 27, 2006 Comments Joint Economic Committee, US Congress

• ``Even if in the committee's judgment the risks to its
• bjectives are not entirely balanced, at some point in the

future the committee may decide to take no action at one

• r more meetings in the interest of allowing more time to

receive information relevant to the outlook,''

• ``A decision to take no action at a particular meeting

does not preclude actions at subsequent meetings. .”

• Future policy actions will be increasingly dependent on

the evolution of the economic outlook, as reflected in the incoming data. Specifically, policy will respond to arriving information that affects the Committee's assessment of the medium-term risks to its objectives of price stability and maximum sustainable employment. Focusing on the medium-term forecast horizon is necessary because of the lags with which monetary policy affects the economy.

• St. Louis Fed President William Poole,

Week of September 25, 2006

• “If inflation pressures are easing, even if only gradually,

and there is a genuine prospect that inflation will return to the comfort zone, then I see no reason to accelerate the decline in inflation by maintaining a restrictive policy in the face of declining employment,”

• “If it appears that the economy is falling below the

baseline forecast path, then my bias will be in the direction of wanting to be sure that the data paint a consistent picture before I advocate a policy easing. But if the picture is consistent, and inflation risk is receding, then I will not hesitate to advocate policy easing.”

• Poole will become a voting member of the Federal Open

Market Committee (FOMC) next year and could take a voting slot at the next meeting if the Atlanta Federal Reserve does not have a new president in place.

5

Pace of Consumer Spending is Still Strong

Retail data through August 2006. Recessions are shaded. Retail Sales and Inventory Growth % Change From Year Ago

• 4
• 2

2 4 6 8 10 12 1997 1999 2001 2003 2005

• 4
• 2

2 4 6 8 10 12 Inventories Retail Sales

Businesses are Confident But Hiring is Off

(Payroll Average Monthly Gain of 145,000 Over 12 Months)

Data through August 2006. Recessions are shaded.

Monthly Change in Thousands

Employment Growth

• 500
• 300
• 100

100 300 500 700 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

6

Factory Usage is Rising

Data through August 2006. Recessions are shaded.

Capacity Utilization Rate

55 60 65 70 75 80 85 90 95 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Computers, Communication Equipment, and Semiconductors Total

Factory Usage is Rising

Data through August 2006. Recessions are shaded.

Capacity Utilization Rate

55 60 65 70 75 80 85 90 95 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Total

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Factory Usage is Rising

Data through August 2006. Recessions are shaded.

Capacity Utilization Rate

55 60 65 70 75 80 85 90 95 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Computers, Communication Equipment, and Semiconductors Total

Consumer Price Index (CPI)

Consumer Price Index % Change From Year Ago Data through August 2006. Recessions are shaded. 0.0 1.0 2.0 3.0 4.0 5.0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Total Excluding Food & Energy

8

Looking Ahead: Real Gross Domestic Product

3.2 2.8 3.4 3.3 3.2 3.9 0.0 1.0 2.0 3.0 4.0 5.0 2007 mst. 2007 alt. 2006 mst. 2006 alt. 2005 2004 Real GDP Annual Percentage Growth Rate

U.S. Forecast

9

U.S. Forecast

What is the neutral fed funds rate?

Risk to the Forecast: Foreign Investment

Data through 4th Quarter 2005.

Net Foreign Flow of Dollars into US Treasuries and Agencies, Millions of Dollars

• 200,000
• 100,000

100,000 200,000 300,000 400,000 500,000 600,000 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 Treasuries Agencies

10

Risk to the Forecast: Foreign Investment

Data through 4th Quarter 2005. Net Foreign Flow of Dollars into US Treasuries and Agencies, Millions of Dollars

• 200,000
• 100,000

100,000 200,000 300,000 400,000 500,000 600,000 1990 1992 1994 1996 1998 2000 2002 2004 Treasuries Agencies

Risk to the Forecast: Foreign Investment

Data through 4th Quarter 2005. Net Foreign Flow of Dollars into US Treasuries and Agencies, Millions of Dollars

• 200,000
• 100,000

100,000 200,000 300,000 400,000 500,000 600,000 1990 1992 1994 1996 1998 2000 2002 2004 Treasuries Agencies

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Summary: National Economy

• Housing will slow further (Risk—faster-

than-expected)

• Consumer spending continues at a slower

but moderate pace

– Employment gains – Wage increases

• Businesses continue to invest
• Short-term rate hikes end
• Risk: Oil price rises again

Employment Growth By State, July 2006

Nevada 5 .3 % Utah 4 .7 % Michigan -0 .1 % Louisiana -9 .0 %

Percentage Change From a Year Ago

• 10.0%
• 8.0%
• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 #26 Virginia, 1.4% #12 SC, 2.5% #16 NC, 2.1% #27 DE, 1.3% #36 MD, 1.0% #30 TN, 1.2%

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Virginia Continues to Grow Faster than the National Average

Employment Growth Percentage Change From a Year Ago

• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 4.0 5.0 Apr-91 Apr-93 Apr-95 Apr-97 Apr-99 Apr-01 Apr-03 Apr-05 United States Virginia Benchmark Data through August 2006. Source: Chmura Economics & Analytics and Virginia Employment Commission.

Employment Growth By Sector

Percentage Change From a Year Ago 0.9

• 0.8
• 0.2

1.5 0.7

• 3.2

2.9 1.4 1.1

• 0.7

4.4 5.1 2.8 0.6 0.2 1.6 1.3 2.2 2.9 2.7 0.1 1.6 1.3

• 0.2

2.2

• 0.7
• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 Total Const Mfg TWU Wholesale Retail Info FIRE PBS Educ/Health Leisure Other Services Govt Virginia US Data through August 2006. Source: Chmura Economics & Analytics and Virginia Employment Commission.

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Employment Growth By Sector

Percentage Change From a Year Ago 0.9

• 0.8
• 0.2

1.5 0.7

• 3.2

2.9 1.4 1.1

• 0.7

4.4 5.1 2.8 0.6 0.2 1.6 1.3 2.2 2.9 2.7 0.1 1.6 1.3

• 0.2

2.2

• 0.7
• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 Total Const Mfg TWU Wholesale Retail Info FIRE PBS Educ/Health Leisure Other Services Govt Virginia US Data through August 2006. Source: Chmura Economics & Analytics and Virginia Employment Commission.

Claims Rising Slightly Point Toward Slower Job Growth

Data through July 2006. Source: Chmura Economics & Analytics and Virginia Employment Commission.

Virginia: Initial Unemployment Claims 6-Month Moving Average 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 Jun-92 Jun-94 Jun-96 Jun-98 Jun-00 Jun-02 Jun-04 Jun-06

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Slower Retail Sales Point to Slower Growth in Sales Tax Receipts

Data through July 2006. Source: Chmura Economics & Analytics and Virginia Department of Taxation. Virginia: Retail Sales Percentage Change From a Year Ago, 6-Month Moving Average

• 6
• 4
• 2

2 4 6 8 10 12 14 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05

Auto Registrations Back Near Record Levels

Data through August 2006. Source: Chmura Economics & Analytics and Virginia Department of Taxation. Virginia: Auto Registrations Percentage Change From a Year Ago, 6-Month Moving Average

15,000 20,000 25,000 30,000 35,000 40,000 45,000 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

15

The Housing Market is Slowing

Data through August 2006. Source: Chmura Economics & Analytics and U.S. Census.

Virginia: Single-Family Building Permits 6-Month Moving Average 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

The Housing Market is Slowing

Data through August 2006. Source: Chmura Economics & Analytics and U.S. Census.

Virginia: Single-Family Building Permits 6-Month Moving Average 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

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Housing Permit Drop Varies Greatly By Region

Data through August 2006. Source: Chmura Economics & Analytics and U.S. Census

Richmond: Single-Family Building Permits 6-Month Moving Average 100 200 300 400 500 600 700 800 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

Housing Permits in NVA are Back to 1996 Levels

Data through August 2006.

Northern Virginia: Single-Family Permits 6-Month Moving Average 200 400 600 800 1,000 1,200 1,400 1,600 1,800 Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06

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A Sign that Investors are Pulling out of the Market in the Washington MSA

Washington Metro Area Home Sales vs. Inventory 10,000 20,000 30,000 40,000 50,000 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Homes Sales Active Inventory

Why? Home Price Appreciation

GWR Home Price Index and Affordability

0% 10% 20% 30% 40% 1998 1999 2000 2001 2002 2003 2004 2005 2006 Recession Appreciation Appreciation U.S. GWR

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…Impacts Affordability

GWR Home Price Index and Affordability

0% 10% 20% 30% 40% 1998 1999 2000 2001 2002 2003 2004 2005 2006 0% 10% 20% 30% 40% 50% Recession U.S. Affordability Appreciation Affordability Appreciation GWR U.S. GWR Affordability - % of households that can afford a median-priced home.

Home Price Appreciation Has Reached Double Digit Levels

Richmond Home Price Index

0% 10% 20% 30% 40% 1998 1999 2000 2001 2002 2003 2004 2005 2006 0% 10% 20% 30% 40% 50% 60% Recession Appreciation Appreciation U.S. Richmond

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Affordability is Still High

Richmond Home Price Index and Affordability

0% 10% 20% 30% 40% 1998 1999 2000 2001 2002 2003 2004 2005 2006 0% 10% 20% 30% 40% 50% 60% Recession U.S. Affordability Appreciation Affordability Appreciation Richmond U.S. Richmond

Home Affordability in Virginia’s Metropolitan Areas, 2006 Qtr 2

Source: Chmura Economics & Analytics

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Housing Bubbles

House Price Appreciation Percent Change From A Year Ago

• 10
• 5

5 10 15 20 25 30 35 40 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Source: Office of Federal Housing Enterprise Oversight (OFHEO) Home Price Index Washington DC MSA Los Angeles/Long Beach MSA San Francisco/Oakland MSA 367

• 28.4
• 173

437.2 610.2 New Orleans-Metairie-Kenner 366

• 18.5
• 21.4

94 115.4 Gulfport-Biloxi 365

• 2.9
• 1.2

39.9 41.1 Danville 363

• 2.5
• 1.5

59.3 60.8 Jackson 363

• 2.5
• 3.2

127 130.2 Cedar Rapids 299 59.7 59.7 Harrisonburg 193 1.4 2.3 161.7 159.4 Roanoke 184 1.5 9.2 624.2 615 Richmond 165 1.7 13 778.2 765.2 Hampton Roads 128 2.2 1.2 57 55.8 Winchester 102 2.5 73.4 3,007.1 2,933.7 Washington-Arlington-Alexandria 73 2.9 3 106.4 103.4 Lynchburg 73 2.9 2 71.7 69.7 Blacksburg-Christiansburg-Radford 59 3.1 2.9 96.3 93.4 Charlottesville 5 6.8 4 63.2 59.2 Prescott 4 7.2 13.4 200.8 187.4 McAllen-Edinburg-Mission 3 7.4 4.2 61.1 56.9 Morgantown 2 7.7 3.7 51.9 48.2 Yuma 1 9.3 4.4 51.7 47.3

• St. George

Ranking Virginia’s Metropolitan Areas in the Nation, Employment Growth Rate

Number of Jobs in Thousands

Rank Percent Number Jul-06 Jul-05

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Significant Variation in Employment By County/City

Data through 1st Quarter 2006.

Nonfarm Employment: Northern Virginia vs. the State

Change From a Year Ago, In Thousands Since 1993 848,400 Net Gain in VA 451,300 Net Gain in NVA

Data through August 2006.

• 100
• 50

50 100 150 200 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Northern Virginia Rest of State

22

Nonfarm Employment: Nonmetropolitan Areas vs. the State

Since 1993 848,400 Net Gain in Metro VA 13,700 Net LOSS in Rural Areas

Data through August 2006.

• 100
• 50

50 100 150 Jan-91 Jan-93 Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Rural Metropolitan Areas

Employment Growth in the Manufacturing Sector

Data through August 2006.

Employment Growth - Manufacturing Sector Percentage Change From a Year Ago

• 10.0
• 8.0
• 6.0
• 4.0
• 2.0

0.0 2.0 4.0 Apr-91 Apr-93 Apr-95 Apr-97 Apr-99 Apr-01 Apr-03 Apr-05

Virginia United States

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West Piedmont Workforce Area (Danville,

Henry, Martinsville, Patrick, and Pittsylvania) Skewed

Toward Mfg

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Reasons for Longer-Term Shifts in Growth

• Infrastructure

– Highways – Internet – Quality of life

• Education

Overview: The Knowledge Economy

• Broad trends – muscles vs. knowledge
• Individuals clearly benefit from more

education

• Does a more educated population

contribute to faster economic growth with Virginia?

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Cheap Labor in Foreign Countries Drove Trends

Source: Department of Labor.

Percentage of Employment in Goods vs. Service, United States

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 1947 1952 1957 1962 1967 1972 1977 1982 1987 1992 1997 2002

Service Producing Goods Producing

Cheap Labor in Foreign Countries is Driving Trends

21.33 18.83 9.16 7.27 5.83 5.41 2.57 2.38 5 10 15 20 25 UNITED STATES JAPAN KOREA SINGAPORE HONG KONG TAIWAN BRAZIL MEXICO

Source: U.S. Department of Labor.

Hourly Compensation for Production Workers in US Dollars, 2002

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Cheap Labor in Foreign Countries and and Better Education in Better Education in US Drove Trends

4.0 4.9 5.9 6.4 9.2 9.4 4.1 5.1 6.7 7.2 6.0 7.1 5.4 6.1 11.7 12.1 2 4 6 8 10 12 14 Brazil China Hong Kong, China India Mexico Singapore South Africa United States

Source: World Bank Database.

Average Years of Schooling of Adults, Selected Countries 1990 2000

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Broad Relationships Between Education and Economic Well-Being Are Well Established

• More education is

associated with higher wages

• More education is

associated with a lower unemployment rate

396 Some high-school, no diploma 8.8 554 High-school graduate 5.5 622 Some college, no degree 5.2 672 Associate degree 4 900 Bachelor's degree 3.3 1,064 Master's degree 2.9 1,307 Professional degree 1.7 $1,349 Doctoral degree 2.1 (Dollars) (Percent) Median weekly earnings in 2003 Education attained Unemploy- ment rate in 2003

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Mean Real Earnings of Workers 18 Years and Over by Education Attainment $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 1975 1980 1985 1990 1995 2000 Less than High School High School Graduate Some College/Associate's Degree Bachelor's Degree Advanced Degree

Source: U.S. Census Bureau, Current Population Survey Recessions are shaded.

Broad Relationships Between Education and Economic Well-Being Are Clear

Mean Real Earnings of Workers 18 Years and Over by Education Attainment $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 1975 1980 1985 1990 1995 2000 Less than High School High School Graduate Some College/Associate's Degree Bachelor's Degree Advanced Degree

Source: U.S. Census Bureau, Current Population Survey Recessions are shaded.

Broad Relationships Between Education and Economic Well-Being Are Clear

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Our International Competitive Advantage is Education

4.0 4.9 5.9 6.4 9.2 9.4 4.1 5.1 6.7 7.2 6.0 7.1 5.4 6.1 11.7 12.1 2 4 6 8 10 12 14 Brazil China Hong Kong, China India Mexico Singapore South Africa United States

Source: World Bank Database.

Average Years of Schooling of Adults, Selected Countries 1990 2000

U.S. 8th Grade Math Scores Falling Behind Some Less Developed Countries

604 585 582 579 502 487 467 392 275 100 200 300 400 500 600 700

Singapore Chinese Taipei Hong Kong Japan United States Intern’l

• Aver. (38

Countries) Thailand Chile South Africa Source: International Association for the Evaluation of Education Attainment.

8th Grade Math Scores, 1999

Are W e About to Lose the Are W e About to Lose the Edge that Underpinned Edge that Underpinned Our Grow th? Our Grow th?

30

Distribution of Combined Mathematics Scores of 15-Year Old Students, by Country 2003

100 200 300 400 500 600 700 Brazil Tunisia Indonesia Thailand Uruguay Serbia Russian Federation Latvia Macao-China Liechtenstein Hong Kong-China Partner Countries Mexico Turkey Greece Italy Portugal United States Spain Hungary Poland Luxembourg Norway Slovak Republic Ireland Germany Austria Sweden France Denmark Iceland Czech Republic New Zealand Australia Switzerland Belgium Canada Japan Netherlands Korea Finland OECD Countries OECD Average

10-25 25-Mean Mean +/- standard error Mean-75 75-90

Percentiles of Performance

Distribution of Combined Mathematics Scores of 15-Year Old Students, by Country 2003

100 200 300 400 500 600 700 Brazil Tunisia Indonesia Thailand Uruguay Serbia Russian Federation Latvia Macao-China Liechtenstein Hong Kong-China Partner Countries Mexico Turkey Greece Italy Portugal United States Spain Hungary Poland Luxembourg Norway Slovak Republic Ireland Germany Austria Sweden France Denmark Iceland Czech Republic New Zealand Australia Switzerland Belgium Canada Japan Netherlands Korea Finland OECD Countries OECD Average

10-25 25-Mean Mean +/- standard error Mean-75 75-90

Percentiles of Performance

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+92% 9.4 4.9 India +258% 13.6 3.8 China +15% 15.7 13.7 U.S. Change 2000 1990

Students Enrolled in Postsecondary

(in millions)

International Competition

UNESCO, 2003

New Participants in the World Economy (Supply Side)

• China, India and Russia = 3 billion people
• 10% highly educated = 300 million people
• USA = 300 million people
• 25% highly educated = 75 million
• Competition for jobs = 375 million people
• USA students/adults will face greater

competition in the future than anytime in history

Craig Barrett, INTEL CEO 2004

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Portion of Workforce Needing High- Skilled Jobs Has Increased

Unskilled 60% Skilled 20% Professional 20% Skilled 65% Unskilled 15% Professional 20%

1950 1997

National Summit on 21st Century Skills for 21st Century Jobs

At the Same Time, Educational Attainment in the U.S. is Rising

Source: Katharine Bradbury, “Education and Wages in the 1980s and 1990s: Are All the Groups Moving Together?” Boston Fed.

3 0 % 2 0 %

U.S. Full Time Workers 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 79 82 85 88 91 94 97 00 Less Than High School 10% High School or Some College 20% College Degree or More 30%

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Importance of Education— Regions Grow Faster and Income is Higher

Education Attainment and HH Income

Relationship Betw een Education Attainm ent and COLA Houshold I ncom e ( Correlation Coefficient 0 .4 7 ) 10000 20000 30000 40000 50000 60000 0% 10% 20% 30% 40% 50% 60% 70% % Adults W ith Bachelor Degree

Median Household I ncom e ( Cost of Living Adjusted) Source: 2000 Census and CEA Falls Church Arlington Fairfax Alexandra Covington Dickenson Trend Line Loudon Albemarle

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These Students Will Be Underpinning Growth in 4 to 8 Years . . .

Source: Virginia Dept. of Education.

% of Students Passing 8th Grade Mathematics by School Division, 2004 20 40 60 80 100 HIGHLAND CHESTERFIELD ROCKINGHAM FAUQUIER POWHATAN SMYTH WISE KING GEORGE CHARLES CITY

Top 10

These Students Will Be Underpinning Growth in 4 to 8 Years . . .

Source: Virginia Dept. of Education.

% of Students Passing 8th Grade Mathematics by School Division, 2004 20 40 60 80 100 HIGHLAND CHESTERFIELD ROCKINGHAM FAUQUIER POWHATAN SMYTH WISE KING GEORGE CHARLES CITY

Bottom 10

PORTSMOUTH CITY TAZEWELL SUSSEX LEE BUCKINGHAM SCOTT CHARLOTTESVILLE COVINGTON CITY BUCHANAN PETERSBURG CITY 60.1 56.5 54.9 54.4 54.0 50.6 47.1 43.3 40.8 40.5

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Higher Skills Needed for Fast Growing Services than Declining Mfg Industries

2.9

2.7

2.0 2.2 2.4 2.6 2.8 3.0 3.2 Skill Measure of Occupations in Industries Average Serv. Skill Average Mfg Skill Occupational Skill of Fastest Growing and Declining Industries, Virginia, 2002-2012 Source: JobsEQ™ 2.6 2.7 2.6 2.6 2.5 2.3 2.7 2.6 2.8 2.9 2.7 2.0 2.2 2.4 2.6 2.8 3.0 3.2 Skill Measure of Occupations in Industries Mining Beverage/Tobacco Prod. Mfg. Textile Mills Textile Prod. Mills Apparel Mfg. Leather/Allied Prod. Mfg. Paper Mfg. Petro./Coal Prod. Mfg. Chemical Mfg. Computer/Electronic Prod. Mfg. Average Mfg Skill Occupational Skill of Fastest Growing and Declining Industries, Virginia, 2002-2012 Job Loss

Higher Skills Needed for Fast Growing Services than Declining Mfg Industries

Source: JobsEQ™

2.9

Average Serv. Skill

2.9

Biggest Job Loss

36

3.1 3.0 2.9 3.1 3.0 3.1 2.9 2.9 2.7 2.6 2.9 2.6 2.7 2.6 2.6 2.5 2.3 2.7 2.6 2.8 2.9 2.7 2.0 2.2 2.4 2.6 2.8 3.0 3.2 Skill Measure of Occupations in Industries Internet Serv. /Data Process. Serv. Profess., Scientific, and Tech. Serv. Admin./Support Serv.

• Ed. Serv.

Ambulatory Health Care Serv. Hospitals Nursing/Res. Care Facilities Social Assist. Amusement, Gambling/Recreation Ind. Food Serv./Drinking Places Average Serv. Skill Mining Beverage/Tobacco Prod. Mfg. Textile Mills Textile Prod. Mills Apparel Mfg. Leather/Allied Prod. Mfg. Paper Mfg. Petro./Coal Prod. Mfg. Chemical Mfg. Computer/Electronic Prod. Mfg. Average Mfg Skill Occupational Skill of Fastest Growing and Declining Industries, Virginia, 2002-2012 Job Gain Job Loss

Higher Skills Needed for Fast Growing Services than Declining Mfg Industries

Source: JobsEQ™ 3.1 3.0 2.9 3.1 3.0 3.1 2.9 2.9 2.7 2.6 2.9 2.6 2.7 2.6 2.6 2.5 2.3 2.7 2.6 2.8 2.9 2.7 2.0 2.2 2.4 2.6 2.8 3.0 3.2 Skill Measure of Occupations in Industries Internet Serv. /Data Process. Serv. Profess., Scientific, and Tech. Serv. Admin./Support Serv.

• Ed. Serv.

Ambulatory Health Care Serv. Hospitals Nursing/Res. Care Facilities Social Assist. Amusement, Gambling/Recreation Ind. Food Serv./Drinking Places Average Serv. Skill Mining Beverage/Tobacco Prod. Mfg. Textile Mills Textile Prod. Mills Apparel Mfg. Leather/Allied Prod. Mfg. Paper Mfg. Petro./Coal Prod. Mfg. Chemical Mfg. Computer/Electronic Prod. Mfg. Average Mfg Skill Occupational Skill of Fastest Growing and Declining Industries, Virginia, 2002-2012 Biggest Job Gain Biggest Job Loss

Higher Skills Needed for Fast Growing Services than Declining Mfg Industries

Source: JobsEQ™

37

Take Aways

• National growth is shifting gears…Fed is at the

end of interest rate increases

• The economy’s potential is about 3-3.5% real

GDP

– Faster productivity growth leads to higher wages and the potential for the economy to grow faster

• Weaker dollar giving manufacturers some relief

from low foreign wages

• Productivity and ingenuity need to offset low

labor costs abroad

• People not industries are a region’s and firm’s

most valuable resource . . .education is important