For all the talk we hear about Virginia being a good place to do business, the fact is that the Commonwealth is more dependent on government for jobs than virtually every other state.
According to a report released on November 25 by the Mercatus Center at George Mason University, a free-market think tank, Virginia ranks first in the nation in “Federal Contract–Funded Private-Sector Jobs as a Percentage of Total Nonfarm Payroll Jobs” with 10.7 percent.
Virginia ranks second (after New Mexico) in “Public-Sector and Federal-Contract Jobs as a Percentage of Total Nonfarm Payroll Jobs,” with 29.8 percent.
Note authors Keith Hall and Robert Greene:
The combined total of federal contract-funded jobs and public-sector employment serves as a more accurate indicator of each state’s labor market’s reliance on government spending than direct public-sector employment alone… In seven states (Alabama, Alaska, Maryland, Mississippi, New Mexico, Virginia, and Wyoming), government-financed jobs account for more than 25 percent of nonfarm payroll jobs. On the other hand, six states (Delaware, Indiana, Nevada, Pennsylvania, Rhode Island, and Wisconsin) have labor markets in which less than 16 percent of nonfarm payroll jobs are directly or indirectly financed by the federal government.
By contrast, Virginia ranks 49th (followed only by New Mexico) in “Real Private-Sector Jobs as a Percentage of Total Nonfarm Payroll Jobs,” with 70.2 percent. Leading the nation in this category is Rhode Island with 85.7 percent.
As explained by Hall and Greene,
Larger public-sector and federal contract-funded job markets lead to smaller real private-sector labor markets. For the purposes of this analysis, we defined real private-sector jobs as private-sector employment minus our estimate of private-sector jobs financed by the federal government.
Virginia actually falls near the middle of the pack when it comes to private-sector job growth. According to the Mercatus study, the Commonwealth ranks 21st because it lost 2.8 percent of its real private-sector jobs between 2007 and 2012. By comparison, the national average was a loss of 3.0 percent, with North Dakota at the top (leading with job growth of 24.6 percent) and Nevada dragging at the bottom (with job losses of 13.1 percent).
These figures are at odds with the gains claimed by the McDonnell administration. In an oped in the Richmond Times-Dispatch on November 10, McDonnell wrote:
Virginia’s unemployment rate has declined from 7.4 percent in February 2010 to 5.8 percent today, the lowest rate in the Southeast. In three and a half years, the private sector has created more than 155,000 net new jobs.
Now, McDonnell may have been including private-sector jobs that rely on public-sector funding when he claimed that net increase. So both he and the Mercatus Center can be correct.
It may be a good idea for the next governor to make distinctions among public-sector jobs, real private-sector jobs, and government-funded private-sector jobs when making claims about success in job creation over the next four years. I would not, however, count on that to become a standard in measuring progress.
