A comprehensive new paper prepared for the Census Bureau’s Center for Economic Studies offers a sobering look at what happened to places most affected by the Chinese trade pressures in the early 2000s.  During this period, manufacturing communities around the US saw massive job losses and plant closures, and, unfortunately, the adjustment process has been a struggle. 

The new report takes a deep dive into how workers, businesses, and communities responded, and the findings can make for depressing reading. While most regions do end up replacing the lost jobs, the quality of jobs declines precipitously as manufacturing employment is replaced by jobs in lower-paying service sector positions.  Few of the displaced manufacturing workers take these new jobs or move to other regions with better job opportunities. Instead, they tend to age in place.  Most of the new jobs are taken by young workers and immigrant workers who move to the region for their first jobs. These changing employment and demographic patterns transform the region into a much different place, creating adjustment challenges for long-time residents and new workers as well.  And, significant economic hardships persist.  As the authors note, “after the China trade shock, local labor markets in these (former manufacturing) regions specialize in low-wage, regionally traded services, supported by income transfers—whether public, private, or non-profit.”  While these findings will not surprise those who work or live in these former manufacturing communities, they should be a wake-up call for even further rethinking of how we support trade-impacted places. 

Many of the communities where we work, especially here in Northern Virginia, are facing big issues with electricity demands sparked by the AI-driven boom in data centers.  Northern Virginia is the world’s largest data center location, so the pressures here are especially intense.   What’s happening here offers many useful lessons—and warnings—for the rest of the US.   

If you’re looking to understand new directions for the data center sector, I recommend starting with the new study from our state’s Joint Legislative Audit and Review Commission.  The JLARC assessment offers a deep dive into the current and future states of the data center industry, and it’s a sobering read.  Today, data centers contribute around $9.1 billion to Virginia’s state GDP, and support around 74,000 jobs.  However, most of these jobs are linked to data center construction as the typical data center employs less than 50 people in its regular operations. Data centers are big revenue generators. Loudoun County VA, which is ground zero for data centers, gets 31% of its tax revenues from this source.

The report’s scary headlines relate to future demand, finding that meeting projected demand (and even half of this demand) will be nearly impossible.  As our local utilities strive to meet demand, impacts on typical utility customers will be significant.  JLARC estimates that residential customers could see monthly bills rise by between $14 and $37, with others costs also rising.  In addition, impacts on water resources and other inputs will also skyrocket.

The report concludes with some smart and doable recommendations for how to address these issues before they become unsustainable.  They are worth reading for non-Virginians who may just be beginning to deal with these challenges around data center development.