There has been a lot in the news of late on how Virginia ranks against other states in terms of its attractiveness to new and expanding businesses. But, what really matters is not what someone says about your attractiveness to business, but rather what businesses reveal through their actions – and the best measures of that are employment and demographic trends. So, we decided to take a look at the actual numbers.
In the past, Virginia typically entered a recession later, bottomed out sooner, and recovered faster than the national average. Although the first two of those held true during the Great Recession, the last did not. Soon after the recovery began in earnest in 2011, Virginia began to significantly trail the national economy and even briefly experienced declining employment in 2014.
Although that gap between Virginia’s economic performance and the national norm narrowed in recent years, it generally persisted through February 2020 – the eve of the pandemic-related crash. As a result, Virginia Ranked 17th among the states in employment growth over the one-year period between February 2019 and February 2020, and 16th over the five-year period between February 2015 and February 2020.
That pattern is now repeating with the pandemic. Between April and May of 2020, Virginia experienced a 10.7% loss in total employment – 1 out of every 9 jobs lost in a single month. As bad as that was, it was worse at the national level where 1 out of every 7 jobs were lost. However, once again we appear to be trailing the national norm in the recovery with Virginia ranking 41st among the states in year-over-year employment growth in April of this year, 32nd in May, 30th in June, and 39th in July.
One Consequence of Virginia’s prolonged economic underperformance is that we are beginning to look much more like our neighbors to the north (e.g., Maryland, New Jersey, New York, and Pennsylvania) that are generally characterized by less favorable business tax climates and anemic employment growth, and much less like our neighbors to the south (e.g., Florida, Georgia, North Carolina, and South Carolina) that are generally characterized by more favorable business tax climates and robust employment growth.
Another important indicator of how a state is doing is net migration – how people are voting with their feet. Based on available data, prior to 2013 Virginia had not experienced a net out-migration of population. However, since 2013 net out-migration has become a somewhat common occurrence for Virginia.
In 2019, the most recent year for which data are available, almost 12,000 more people moved out of Virginia than moved into it. In contrast, Florida had a net in-migration of 144,000 people. Texas 107,000, Arizona 80,000, North Carolina 60,000, and South Carolina 47,000.
While Virginia may have just been selected by CNBC as America’s Top State for Business in 2021, the evidence shows that it is in fact not the top state for attracting and retaining businesses and residents, as demonstrated by the hard numbers on employment growth and net migration of population. Drilling down into CNBC’s 2021 rankings sheds some light on that disconnect.
North Carolina, the state that was #2 in the CNBC rankings, scored higher than Virginia on seven of the ten individual metrics that make up the index, with the largest differences in Cost of Doing Business, Cost of Living, Economy, and Technology and Innovation. Of the three metrics where Virginia scored higher than North Carolina, the largest difference was in Life, Health, and Inclusion – a new and rather hazy metric that CNBC introduced this year and which appears to be much more important to CNBC than it is to real-life businesses and residents.