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Posted at 6:00 PM ET, 11/22/2010

Recovery continues but challenges remain, economic advisers tell McDonnell

By Anita Kumar

Gov. Bob McDonnell (R) said Monday that though Virginia's economy appears to be recovering, state lawmakers should be cautious about committing the state to any spending next year while the economy is still unsettled.

McDonnell met behind closed doors Monday with his economic advisers, who are helping him revise the revenue estimates for the state.

"I think there's broad agreement that while Virginia is doing much better than most states in terms of unemployment and revenue coming in, that we still have a lot of challenges,'' McDonnell told reporters. "There's so much uncertainty."

The state is largely on track to hit forecasted revenue growth of 4.2 percent, but McDonnell will revisit that number before he releases his budget amendments Dec. 17. It remains possible that he will have to revise the forecast down slightly. "Everyone is urging caution,'' he said.

As McDonnell's economic advisers discuss the pace of the economic recovery, a new report from the left-leaning Commonwealth Institute shows that state workers are struggling to recover from the recession, which formally ended in June 2009.

The report shows that while Virginia has, overall, weathered the recession better than many other states, the state has striking inequalities between rich and poor, a gap that appears to exceed that of other states.

For instance, Virginia in 2009 saw the nation's third-highest gap between the pay of its top and bottom wage earners, behind only the District and New Jersey. In 2009, top wage earners brought in 5.22 times more than low-wage workers, the largest gap on record in the state.

Additionally, Virginia has experienced the largest drop in labor force participation of those with less than a high school diploma of any state in the country. Labor force participation refers to those who are either employed or actively looking for work. The number suggests that Virginia's least-educated workers have lost jobs at a higher rate than the rest of the state and that they also believe the prospects of getting rehired in the recovery are bleak.

"The recession disproportionately hit those who were already struggling," said Institute Director Michael Cassidy.

He said statistics often cited by state leaders such as McDonnell to show that Virginia's economy is stable -- like the state's relatively low unemployment rate -- provide "little consolation to those workers who have been caught underneath the economic rubble."

The report also showed that, since the recovery began, the state has regained a fraction of the jobs lost during the recession and that family median income has dropped since the recession began.

By Anita Kumar  | November 22, 2010; 6:00 PM ET
Categories:  Anita Kumar, Robert F. McDonnell, Rosalind Helderman  
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