Virginia's job losses are accelerating, economic report says. Data center construction may be propping up the economy.
An economic forecast from the Weldon Cooper Center for Public Service at the University of Virginia indicates that Virginia's GDP is growing, but the state continues to face job losses. Much of this modest economic growth is attributed to data center construction, leading to a dilemma for policymakers considering moratoriums and tax break changes. There is growing opposition to data centers due to concerns about their impact on the electric grid and water supply.
The latest quarterly economic forecast from the Weldon Cooper Center for Public Service at the University of Virginia presents a complex picture of Virginia's economy, projecting a 0.5% GDP growth for the year but also two straight years of job losses, estimated at 18,050 this year. João Ferreira, acting director of the Center for Economic and Policy Studies, noted that GDP growth is likely going more to profits than wages, not broadly benefiting workers.
This modest economic expansion is largely tied to data center construction, which the report cites as a key driver of increased artificial intelligence-related investment. This connection creates a challenging situation for state policymakers, as any slowdown in data center development, including through piecemeal moratoriums already occurring in various localities, could further weaken Virginia's economic growth.
The report also highlights growing bipartisan opposition to data centers, fueled by concerns over their strain on the electric grid and water supply. State Sen. Louise Lucas, D-Portsmouth, has campaigned to eliminate tax breaks for data centers. The forecast's findings suggest that such measures could inadvertently slow the state's economy, as data center construction is currently a primary source of economic activity. Furthermore, declining labor force participation rates, with approximately 113,000 people having exited the workforce in the past two and a half years, indicate a deeper labor market weakness not fully captured by the unemployment rate.