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Defense reductions holding back region’s growth

Job growth in the Fredericksburg region is lagging due to a decrease in defense dollars spent in the state, according to a new economic report.

Chmura Economics recently released its “Defense Spending Impact: Virginia” report for 2013. The feature, which began this year with 2012’s numbers and was updated in May, will become an annual report for the firm, said company President and Chief Economist Christine Chmura.

With a job growth rate of 0.6 percent in the first quarter of 2014, the Fredericksburg region trailed the national average of 1.7 percent, which it normally outpaces.

According to Chmura, the Department of Defense spent a total of $41.4 billion on direct operations and contracts in Virginia in 2013, down from $54.8 billion in 2012.

The Fredericksburg area is part of the Northern Virginia metropolitan area, which received $28.2 billion in defense spending in 2013 and has a risk factor of 11.9 percent. The risk factor reflects how much of the region’s economy is dependent on defense spending.

In comparison, the Richmond metropolitan area garnered $640.1 million from the Department of Defense in 2013 and has a risk factor of 0.7 percent.

Locally, King George County is the most dependent on defense dollars. With $489.8 million in defense spending last year, it has a risk factor of 10.9 percent.

That is followed by Stafford, with a total of $151.6 million in defense work and a 2.5 percent risk factor; and Spotsylvania, with $135.3 million and a 1.7 percent risk factor.

Though Caroline County received less defense money, $65.5 million last year, those funds made up a larger percentage of its economy at 3.1 percent. Fredericksburg had the lowest risk associated with defense spending in 2013, with the $15.3 million coming in from the Pentagon, for a factor of 0.4 percent.

The drop in defense funds come from the nation starting to return to peacetime levels of spending, Chmura said. She said that while the boom in government contracts for Virginia fueled economic development through 2011, the slowdown of those contracts is likely to slow future growth.

Chmura estimates that could translate into a direct loss of 11,300 jobs in Virginia this calendar year, and even more in 2015.

Her advice for the region’s contractors is to diversify.

“Those enterprises dependent on the Department of Defense need to look into the private sector for opportunities,” she said.

According to her estimates, all but one sector of defense spending will decrease between 15 and 60 percent over the next five years. The exception is non-nuclear ship repair, a service not currently represented in the area.

Professional, scientific and technical services; manufacturing; and information are the three sectors the Pentagon spends the most on in Virginia, and are the ones that Chmura envisions will be hit hardest by spending cuts.

Occupations expected to feel the crunch in the future will be aircraft assembling, health care, teaching and manufacturing, according to the firm’s report.

Chmura also ranked the top 20 contractors in Virginia, in terms of defense dollars. Of those, six have operations in the Fredericksburg area: SAIC Inc. (King George and Stafford), Lockheed Martin (Fredericksburg), Computer Sciences Corp. (King George), Mitre Corp. (Stafford), Raytheon (King George) and Harris Corp. (Stafford).

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