The good news: the region finally has more jobs than it did before the recession.
There’s a more optimistic outlook on job growth this year with a projected increase of around 6,300 jobs, according to Old Dominion University economists, who released their annual economic forecast on Wednesday. The addition of 6,000 jobs last year caused civilian jobs to exceed the peak level in 2007 for the first time in a decade.
Additional job growth this year is expected be in manufacturing and in firms providing professional and business services, hospitality and health care services.
Although the region has gained back the jobs it lost during the recession and in years after, data shows that the jobs that have replaced those losses are relatively lower-paying occupations, which caused an average weekly wage to increase by only 1.8 percent between the first quarters of 2017 and 2018. The region remains behind Richmond and northern Virginia on job creation.
Unemployment is expected to fall to 3.1 percent from 3.34 percent in 2018, continuing a decline since 2010. The divide has resumed to narrow between unemployment rates in the U.S. and Hampton Roads, which has historically remained much lower.
The bad news: the Hampton Roads economy is expected to still lag behind the nation and uncertainty is wrapped around the economy with the effects of the government shutdown still in play and another potential shutdown around the corner next month.
Even though it remains behind the nation, the region’s real gross domestic product is anticipated to grow at a slightly higher rate of 2.4 percent this year compared to last year’s rate of 2.2 percent — a significant improvement since 2017’s projected rate of 1.4 percent — but it still hasn’t recovered from the Great Recession, reduction of federal defense spending since 2012 and the private sector’s meager job growth.
In comparison, the region’s real gross domestic product grew by an annual average of 4.55 percent between 2003 and 2006, but dropped by 0.15 percent between 2007 and 2016.
What won’t change this year? The region’s reliance on Department of Defense spending.
It still makes up about 40 percent of the local economy, down from its peak of 46 percent in 2011. Thanks to national defense spending caps being raised by $165 billion over fiscal years 2018 and 2019, Hampton Roads is in a position to benefit from increased national defense spending this year. This could change once the Bipartisan Budget Act of 2018 expires.
Direct federal defense spending in Hampton Roads is projected to be 11 percent higher than in 2017 and is expected to grow by $85 billion during this fiscal year.
Other areas of the Hampton Roads economy are expected to grow as well.
Hotel nominal revenue saw an increase of 4.7 percent over each of 2017 and 2018, in part due to moderate increases in federal travel, higher per diem rates and relatively low gasoline prices, national economic growth, and decreased growth in hotel rooms.
But competition is brewing in the form of Airbnb, Flip Key, VRBO and other online short-term rental companies that allow residents to rent their homes or apartments to visitors. Airbnb, in particular, has experienced significant monthly revenue growth from $420,000 in July 2015 to more than $7 million in July 2018 — 5.9 percent of the region’s hotel revenue.
Retail sales are anticipated to increase by another 3.3 percent in 2019 after experienced growth of 3.4 percent in 2018 and 2.8 percent in 2017.
The Port of Virginia experienced no significant growth in tonnage or the number of loaded 20-foot equivalent units (TEUs) passing through the port in 2018. Cargo tonnage was “basically flat” and TEUs increased by only a half percent, according to WHO, according to ODU economist Vinod Agarwal.
He said the meager growth could be attributed several factors: construction activities the Virginia International Gateway and the Norfolk International Terminals at the port, the completion of the Bayonne Bridge resulting in increased volume of cargo to the port of New York/New Jersey, and the loss of one first-in service and two last-out services.
Hampton Roads’ residential construction industry is projected to experience moderate growth of 2 percent.
Agarwal said construction of new homes should be stimulated by the relatively small inventory of existing homes in the market, low mortgage rates and continued moderate prices. That’s good news since measures of supply and demand indicate that it would take about 3.4 months to clear existing available homes.
Agarwal’s concern lies with the number of distressed — short sales and bank-owned — homes in the region, which make up nearly a tenth of residential market activity. Bank-owned homes usually sell at prices that are scarcely more than one-half of non-distressed homes, Agarwal said.
Meanwhile, the U.S. and Virginia economies are projected to experience slow growth during the nation’s second-longest economic expansion since World War II, according to ODU economist Bob McNab. If it continues through the summer, it will become the longest.
Although fourth-quarter data for U.S. Gross Domestic Product was unavailable because of the partial government shutdown, McNab estimated that the real GDP, adjusted for inflation, grew at an annual rate of 3 percent in 2018.
He expects that the real GDP will increase at an annual rate of 2.5 percent this year, while Virginia will increase at a rate of 2.6 percent because of federal discretionary spending increases.
McNab believes concerns lie in the policies and practices of the federal government, which have already resulted in a partial government shutdown and trade conflicts with China and could upend economic expectations. At the center of that federal spending vulnerability is Virginia and Hampton Roads.
