Sonya Ravindranath WaddellVice President and Economist, Regional and Community AnalysisResearch Department

U.S. and Virginia Economic OutlookVirginia Local Government Management AssociationFebruary 13, 2020

The views and opinions expressed herein are those of the author. They do not represent an official position of the Federal Reserve Bank of Richmond or the Federal Reserve System.

What is the Story?On the one hand….• U.S. economic growth by the numbers looks solid

– GDP is growing as anticipated—buoyed by consumer spending and residential investment

– Labor markets are tight– Sentiment indices have steadied

On the other hand….• Business investment remains soft• Reports of lingering uncertaintyAnd• The Virginia economy is growing, but continues to trail that of

the U.S. (and neighbors to the south)

2

National Economic Trends

3

U.S. Gross Domestic Product: A decade of fairly steady GDP growth continues

Source: Bureau of Economic Analysis, Federal Reserve Board /Haver Analytics

4

Q4: 2019US: 2.1%

-6

-4

-2

0

2

4

6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

% Change, SAAR

Employment: The economy continues to add jobs

Monthly ChangeJanuary: 225

December: 147November: 261

Source: Bureau of Labor Statistics/Haver Analytics

5

The unemployment rate continues at historic lows

Source: Bureau of Labor Statistics, Federal Reserve Board of Governors/Haver Analytics

0

1

2

3

4

5

6

7

8

9

10

11

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

UnemploymentRate (Percent)

January 2020US: 3.6%

6

University of Michigan Consumer Expectations

Source: University of Michigan via Haver Analytics

40

50

60

70

80

90

100

2009 2011 2013 2015 2017 2019

Index, Q1 1966=100

Dec

7

National Federation of Independent Business

80

85

90

95

100

105

110

80

85

90

95

100

105

110

2009 2011 2013 2015 2017 2019

Index, 1986=100

Dec

Source: NFIB via Haver Analytics

8

Duke/CFO Survey

50

55

60

65

70

75

80

50

55

60

65

70

75

2009 2011 2013 2015 2017 2019

Index, 100 = Most Optimistic

Q4

Source: Duke/CFO via Haver Analytics

9

Regional Economic Trends

10

30

35

40

45

50

55

60

65

70

-40

-30

-20

-10

0

10

20

30

40

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

3-m

onth

ave

rage

Manufacturing Composite Index (Left Axis)

ISM Manufacturing (Right Axis)

Richmond Manufacturing Survey and ISM Manufacturing Survey

Our Fifth District manufacturing index has seen some rebound…

Source: The Federal Reserve Bank of Richmond/Institute of Supply Management

11

…and our service sector index remains solid

30

35

40

45

50

55

60

65

70

-40

-30

-20

-10

0

10

20

30

40

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

3-m

onth

ave

rage

Services Revenue Index (Left Axis)

ISM Nonmanufacturing (Right Axis)

Richmond Service Sector Survey and ISM Nonmanufacturing Survey

Source: The Federal Reserve Bank of Richmond/Institute of Supply Management

12

Payroll Employment

-6

-5

-4

-3

-2

-1

0

1

2

3

4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

YoY % Chg (SA) U.S.Virginia

December 2019US: 1.4%VA: 1.1%

Source: Bureau of Labor Statistics/Haver Analytics

13

Virginia Industry Structure

Source: Bureau of Labor Statistics/Haver Analytics

0.5

4.9

8.4

18.7

1.9

5.7

14.2

16.1

10.8

3.9

15.0

0.2

4.8

6.1

16.6

1.6

5.2

18.7

13.8

10.2

4.9

17.9

0 2 4 6 8 10 12 14 16 18 20

Natural Resources & Mining

Construction

Manufacturing

Trade, Transportation & Utilities

Information

Financial Activities

Professional & Business Services

Education & Health Services

Leisure & Hospitality

Other Services

Government

Employment Share (Percent)

December 2019 U.S.Virginia

14

Virginia Industry Growth

Source: Bureau of Labor Statistics/Haver Analytics

1.4

-2.8

2.0

0.4

0.4

0.4

1.4

1.9

2.7

2.3

1.4

0.7

1.1

5.1

0.5

1.4

-0.6

-2.5

3.6

1.3

3.1

4.2

0.0

-0.7-4 -3 -2 -1 0 1 2 3 4 5 6

Total

Natural Resources & Mining

Construction

Manufacturing

Trade, Transportation & Utilities

Information

Financial Activities

Professional & Business Services

Education & Health Services

Leisure & Hospitality

Other Services

Government

YoY % Chg (SA)

December 2019 U.S.Virginia

15

Virginia Industry Growth

Source: Bureau of Labor Statistics/Haver Analytics16

70

80

90

100

110

120

130

140

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Education & HealthServices

Leisure &Hospitality

Professional &Business Services

Financial Activities

Other Services

Total

Government

Trade,Transportation &UtilitiesConstruction

Manufacturing

Mining & Logging

Information

IndexDecember 2007 = 100

17

MSA Employment Growth

Source: Bureau of Labor Statistics/Haver Analytics

2.2

2.1

1.8

1.5

1.4

1.4

1.3

1.3

1.1

1.1

-0.1

-1 0 1 2 3

Winchester

Roanoke

Richmond

Harrisonburg

Charlottesville

U.S

Northern Virginia

Blacksburg

Virginia

Virginia Beach

Lynchburg

YoY% Change (SA)

December 2019

18

Virginia MSA Total Employment

19

Source: Bureau of Labor Statistics/Haver Analytics

Charlottesville

HarrisonburgBlacksburg

Northern VirginiaRichmond

Roanoke

Staunton

Virginia Beach

Winchester

0.0

0.5

1.0

1.5

2.0

2.5

0.0 0.5 1.0 1.5 2.0 2.5

10-y

ear A

vera

ge A

nnua

l %

Cha

nge

YoY % Change

Bubble size: Total Employment - December 2019

Virginia Unemployment Rate

0

1

2

3

4

5

6

7

8

9

10

11

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

PercentU.S.Virginia

Source: Bureau of Labor Statistics/Haver Analytics

December 2019US: 3.5%VA: 2.6%

20

Unemployment in Virginia Counties

21

Source: U.S Census Bureau

Employment to Population

Source: U.S Census Bureau

22

Population growth is slower (or even negative!)

Source: U.S Census Bureau

-1.0

0.0

1.0

2.0

2011 2012 2013 2014 2015 2016 2017

YoY Population Chg

Rural (U.S)Urban (U.S)Rural (VA)Urban (VA)

23

Job growth is slower too…

Source: Bureau of Labor Statistics

-1.0

0.0

1.0

2.0

3.0

4.0

2015 2016 2017 2018

YoY Employment Chg Rural (U.S)

Urban (U.S)

Rural (VA)

Urban (VA)

24

Summary• The national picture continues to look good with growth in

GDP, tight labor markets, rebound in residential investment, and steadying of consumer sentiment.

• However, business investment remains weak, sentiment among manufacturers is still less upbeat than that of service providers, and uncertainty remains on the horizon.

• The Virginia economy continues to grow, but more slowly than that of the U.S.

• Economic opportunity is not distributed evenly across the Commonwealth or the country. Understanding what underlies those differences will enable us to develop a strategy to maximize our potential as an economy, which is a critical function of the Federal Reserve System.

25

5th District Business Conditions Surveys

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Each month we ask for feedback from business executives located in our District. Respondents provide information on current business activity and expected changes for the next six months.

These data paint a picture of industry trends and help the Federal Reserve Bank of Richmond to be better informed about business conditions in our District. (Washington, D.C., Maryland, W.Virginia, Virginia, N. Carolina, and S.Carolina)

Your business is an integral part of our Fifth District community and we hope you will contribute.

If you would like to sign up please contact:Roisin.McCord@rich.frb.org

804-697-8702

View our survey data and reports online:https://www.richmondfed.org/research/regional_econo

my/surveys_of_business_conditions

The views and opinions expressed herein are those of the author. They do not represent an official position of the Federal Reserve Bank of Richmond or the Federal Reserve System.

Questions?

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