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Albemarle County, Virginia

October 31 , 2010     

Quarterly Economic Indicators

Special points of interest:
  • Unemployment slightly increases; stays below U.S. and Virginia levels.
  • Total employment drops, but the finance & insurance and real estate sectors gain.
  • Unsold housing inventory increases in Albemarle; prices remain under downward pressure.
  • New residential and commercial building permits jump; but the spike is misleading.
  • Sales tax revenues rise sharply; hotel/motel tax revenues drop sharply.
  • U.S. consumer confidence dips; U.S. leading economic indicators grow at steady pace.
 UNEMPLOYMENT RATE BLIPS UP

Albemarle’s quarterly non seasonally-adjusted unemployment rate rose from 5.3% in FY 10 Q1 to 5.4% in FY 11 Q1, but remained below the state and U.S. rates. 
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Unemployment

 TAX REVENUES MIXED

From FY 10 Q1 to FY 11 Q1, the County’s sales tax revenue rose by about 8.2%, while hotel/motel tax revenue fell by 9.7% during this period.  
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Tax Revenues

 HOUSING PRICES UNDER PRESSURE

The County’s housing market has had an oversupply of unsold inventory in recent years. This oversupply has grown by about 27% between FY 10 Q1 and FY 11 Q1, reflecting the expiration of the homebuyer tax credit in FY 10 Q4. Note that home prices in the region fell by about 5% between FY 09 Q4 and FY 10 Q4.  
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 U.S. GDP EXPANDS

U.S. Gross Domestic Product (GDP) represents the total dollar value of all the goods and services produced within the United States. Between FY 10 Q1 and FY 11 Q1, U.S. GDP grew from about $14.115 trillion to roughly $14.730 trillion, or by about 4.36%. The National Bureau of Economic Research (NBER), that organization that tracks and reports changes in the country’s business cycle, has made the official determination that the “Great Recession” ended in FY 09 Q4


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 CONSUMER CONFIDENCE & LEI’S MIXED
The Conference Board, a nonprofit organization that tracks business and economic trends, publishes a U.S. Consumer Confidence Index, as well as a set of U.S. Leading Economics Indicators (LEI’s). The numbers in these data sets offer a general idea about the direction of U.S. macroeconomic trends and, by extension, Albemarle County’s economic prospects. Between FY 10 Q1 and FY 11 Q1, U.S. consumer confidence dipped by about 2%, while the U.S. Leading Economic Indicators rose by roughly 7%. Taken together, these two pieces of data highlight the mixed nature of the current recovery.  
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 TOTAL EMPLOYMENT FALLS
Between FY 09 Q3 and FY 10 Q3, the total number of jobs in Albemarle fell from 48,446 to 47,033 for a net loss of 1,413 positions, or just about 3% of the employment base. Interestingly, the finance & insurance and real estate sectors, which were at the root of the recession, managed to eke out modest gains in employment during this time period.
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 U.S. PRICE INDICES RISE LITTLE
Between FY 10 Q1 and FY 11 Q1, the U.S. Consumer Price Index (CPI) rose by 1.18%, while the Implicit Price Deflator (IPD) for state and local governments increased 1.85%. Although CPI and the IPD both measure changes in prices, the two indices track price changes in two different market baskets of goods and services. The Consumer Price Index pertains to goods and services that households are likely to purchase, while the Implicit Price Deflator pertains to goods and services that state and local governments are likely to purchase.
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 WEEKLY WAGE RISES SLIGHTLY
The weighted average weekly wage gives a rough idea about changes in the earnings of the “typical” worker in Albemarle. The most relevant comparison involves the same quarter between years, since the weighted average weekly wage can be influenced by changes in seasonal employment. Between FY 09 Q3 and FY 10 Q3, the weighted average weekly wage rose by 1.18% in nominal terms, but this growth could have resulted from job losses in low-paying sectors, such as construction, rather than an improvement in wages. Given the fact that the County’s unemployment rate remains elevated, Albemarle should not expect to see strong growth in the weighted average weekly wage in quarters to come.
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 BUILDING PERMITS POST DECEPTIVE JUMP
The number of residential building permits issued between FY 10 Q1 and FY 11 Q1 jumped 376%; the total dollar value of these permits issued also rose, by roughly 17%. On the non-residential side, the dollar value of permits issued by the County jumped 111%. These spikes in number and dollar value reflect highly unusual circumstances.
 
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 NUMBER OF BUSINESSES FLAT
Between FY 09 Q3 and FY 10 Q3, the number of businesses in Albemarle rose by under 1%; this increase represents net growth of only 28 new businesses.  
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 SUMMARY & ANALYSIS
The U.S. economy has begun to recover from the severe recession that started in FY 08 Q2, and the incipient recovery bodes well for Albemarle. The National Bureau of Economic Research (NBER), the organization that designates the official beginning and end of business cycles, has determined that the “Great Recession” ended in FY 09 Q4. Since that time, U.S. Gross Domestic Product (GDP) has expanded each quarter.

It is worth noting that, in terms of GDP at least, the U.S. economy already has fully recovered from the recession. (The term “recovery” means that economic conditions are improving, while “full recovery” means that the economic activity has returned to the level that existed prior to the beginning of the recession). In FY 08 Q2, at the official beginning of the recession, total U.S. GDP stood at $14.291 trillion. By FY 09 Q4, at the depth of the recession, GDP had contracted to $14.035 trillion but, by FY 11 Q1, the U.S. economy had grown to $14.730 trillion, a gain of $439 billion over the level that existed at the start of the recession. As impressive as this performance has been, however, several challenges exist that the U.S. economy must overcome before the expansion begins to have the look and feel of a true recovery for most people and businesses. In the case of individuals, the biggest hurdle involves the job market. Workers in the U.S. will be disinclined to purchase goods and services if the national unemployment rate remains elevated. For businesses, particularly small enterprises, the recovery will not feel authentic until the availability and terms of credit improve, and orders for goods and services increase at a sustained, robust rate.

Locally, Albemarle’s quarterly indicators offer some glimmers of hope that the County’s economy is recovering but, as might be expected during the course of a weak expansion, the signals remain mixed. Sales tax revenues grew robustly Q1-to-Q1 but, at the same time, hotel/motel tax revenues dropped substantially from their year-ago level. This situation offers conflicting evidence that consumption, which is thought to be a major portion of the County’s economy, is making a rebound. The unemployment rate, likewise, offers mixed signals. The rate did not increase substantially between FY 10 Q1 and FY 11 Q1 but unemployment remains high.

The County’s housing market for single family detached dwelling units, meanwhile, remains problematic, but two new multifamily residential projects did result in a spike in the issuance of new building permits during the course of FY 11 Q1. On the non-residential side of the real estate market, the County in recent quarters has experienced strong construction activity, but this strength was the result of three major projects at the University of Virginia Medical Center and Martha Jefferson Hospital. These projects now either are finished or are nearing completion, and rising capitalization rates for non-residential properties, suggest that there will be weakness in the County’s non-residential real estate market in the coming year.

The County’s economic picture, in general, remains mixed. This situation does not come as surprise, since the U.S. economy continues to struggle to find its footing, and the success of the U.S. Federal Reserve System’s recent efforts to avoid deflation and stimulate growth via quantitative easing remains to be seen. A reasonable forecast for the next several quarters would be that the County’s economy will grow slowly, as businesses and consumers maintain a cautious outlook and behave accordingly.


Albemarle County is a community of 94,000 people, located 116 miles southwest of Washington, DC, and 72 miles northwest of Richmond. Founded in 1744, Albemarle surrounds the City of Charlottesville, and is the home of the University of Virginia, the University of Virginia Medical Center, and Thomas Jefferson’s Monticello. The County’s resident labor force of 52,000 is well-educated; 53% of the population aged 25 or older has at least a bachelor’s degree. Industries that have expanded in Albemarle in recent years include biotechnology and national defense intelligence.

The County’s location at the intersection of Interstate 64 and U.S. Highway 29, the availability of air service to several major hubs from the Charlottesville/Albemarle Airport, and AMTRAK passenger rail service to the northeast corridor help support Albemarle’s role as a transportation hub in Central Virginia. The County’s natural beauty and historical importance, additionally, continue to attract visitors from around the world. 


The Albemarle Quarterly Economic Indicators is published in the middle of February, May, August, and November by the Albemarle County Office of the County Executive, 401 McIntire Road, 4th Floor, Charlottesville, VA 22902.  For additional information about this newsletter, please contact Steven A. Allshouse, Coordinator of Research and Analysis at (434) 296-5841 or at sallshouse@albemarle.org.



 
 
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