While it remains unclear how quickly the U.S. economy will recover, Virginia should bounce back from the economic storm faster than most. Even as projections vary as to when the COVID-19 virus will peak in the commonwealth, time could be on the state’s side.
In recent days the virus peak infection and death models have widely differed on when the peak will occur in Virginia. One respected model estimated late May or even early June. More recently that same model predicted a peak in late April. One sounds horrible – six more weeks just to get to the top, or apex, of the curve, the other sounds almost soothing – just a few days. This same model or another one may move the peak many times before it actually arrives. Good news will be spread widely, bad news not so much.
However, many experts will tell you that all models are specifically wrong, but the best models are generally useful. Either outcome, two weeks or six-plus, that delays or reduces the peak it’s actually a good thing. The total number of people sickened by the virus notwithstanding, the delay of this peak is exactly what the doctor – Dr. Anthony Fauci that is – ordered. Virginia is not only doing what it needs to in the near-term to weather the viral storm, but because of the demographics of its citizens and the structure of its economy Virginia should also be in a good position to weather the associated economic crisis.
The governor’s decision to lock-down the state when we had only 900 diagnosed cases was correct if not popular. With its ports, military installations, proximity to the Nation’s capital, and heavily trafficked roads with interstate commerce, the alternative for Virginia could have been really bad. I’m no virologist, but the decision should save lives. It should reduce the spread. It should keep our healthcare system from becoming overwhelmed like those of New York City, Detroit, and New Orleans. But it will also allow the Virginia economy to self-isolate with mild symptoms rather than face an economic ER visit or worse. Longer isn’t always better, but less severe is certainly always better. That is great news and reason number one of why Virginia should fare better than some states.
Another reason is the demography of the state. We are generally richer, healthier, and have better health insurance. First, Virginia’s median age is only 38.5 years, which is only 0.2 years older than the US median; therefore, we don’t have the outsized older population like “hot spots” Michigan or New Jersey (almost 40 years old) or Florida (over 42 years old).
Next, based on median household income, Virginia is the 7th highest and nearly 71 percent higher than the U.S. median. Yes, there is a large difference in this statistic from the Urban Crescent to the southwest Virginia coal fields, but it still bodes well for the state.
Third, according to America’s Health Rankings by the United Health Foundation, Virginia is the 20th healthiest state in the country receiving high marks for our behaviors, community, and environment – all very important factors with the pandemic. Virginia is slightly above the national average with nearly 91 percent of Virginians having health insurance coverage. It is also one of the best 10 states with over 75 percent of citizens having private health insurance, and is in the best 5 states with having just over 10 percent of citizens needing coverage from Medicaid. While not the best in any category, at least Virginia, just like the economy as a whole, was in a much better than average starting position going into the viral shutdown.
The final reason the Virginia economy should be more resistant to the economic decline is the composition of employment. Virginia’s employment structure, according to data from the Bureau of Labor Statistics, is much less sensitive to the economic cycle. With nearly 1 in 8 (12 percent) persons working in a government or public administration position, Virginia has nearly 3 times the national average employment in this sector. Virginia also has 4 times the national average employment in agriculture and forestry, another more economically stable sector.
On the flip-side, Virginia has lower than average employment in some of the more economically-cyclical areas. Only 5.5 percent of Virginians are employed in the manufacturing sector. This rate is just a little more than half the national average of 10%. Virginia also has only 65 percent of the national average jobs in the construction sector and only 70 percent of the average jobs in financial services. Virginia won’t likely receive an economic boost from the virus, as little more than 12 percent of the state’s workforce is employed in healthcare compared to nearly 14 percent nationally.
While this message may offer little solace to the groups and individuals adversely affected by the virus itself or the loss of work, the case can still be made that Virginia is in a position many states would envy. So whether by luck or design, Virginia’s economy and thereby its citizens looks good to weather the storm.
Derek Klock is a professor of practice of finance in the Virginia Tech Pamplin College of Business.