By Jared Council
With a federal budget in place and some federal spending cuts restored, the Hampton Roads economy is expected to grow by 2.2 percent in 2014, according to projections made last week by Old Dominion University's economic forecasting team.
That figure is slower than the historical average of 3.1 percent and lags behind national growth, but it's faster than the gross regional product growth rate of 1.73 percent in 2013.
Professors Vinod Agarwal and Gary Wagner, who lead the forecast team, predicted a 1.68 local growth rate in 2013. Gross regional product, the broadest measure of a local economy, is the market value of all goods and services produced in a region.
The professors forecast a brighter picture for the local economy in 2014 with unemployment falling from 5.9 percent to 5.3 percent; home values jumping 7.9 percent; port tonnage increasing 4.8 percent; retail sales growing 3.6 percent; and hotel room revenue growing 2.4 percent.
Still, some of the projected growth in these sectors falls short in returning to pre-recession levels. For instance, of the 40,000 local jobs lost from 2007 to 2010, the region has only been able to recover 23,500.
The hotel industry suffered last year, with revenue declining 1.3 percent after being forecast to grow 3.3 percent. Some business owners cited the unusually cold spring, and Agarwal said substantial decreases in federal travel, especially among military personnel and contractors, had a negative effect on the local hotel industry.
Hampton Roads hotel revenues, which peaked at $710.5 million in 2007, have declined somewhat and remain fairly flat since then. They stood at $661.9 million last year, a slight decrease from 2012.
Williamsburg hotels were collectively a bright spot in the data, as it was the only city to experience revenue growth last year at a 1.4 percent annual rate. All other segments, which include one or two cities, declined.
Port activity continued its upward trend, as it saw about 18.8 million tons of port cargo pass through, surpassing the previous peak of 17.8 million tons. Agarwal said that after four years of declines in market share among East Coast ports, Virginia's port increased to 16.1 percent in 2012 and to 16.9 percent in 2013.
In a small sign of economic diversification, local gross regional product attributable to Department of Defense spending fell to 42.9 percent, the second straight year of declines from a 19-year high of 46.6 percent set in 2011. Virginia, however, remains one of the top states in defense procurement.
Employment growth did much better than forecast at 2 percent versus 0.7 percent. That 2 percent beat the state average of 1 percent and was faster than the Richmond, Roanoke, Lynchburg and Northern Virginia metropolitan statistical areas.
Data for the national economy appeared to be a mixed bag of news. Wagner said he expects gross domestic product to increase 2.84 percent in 2014, which is slightly above the 30 -year average rate of 2.7 percent. But the malaise in the labor market appears likely to continue.
Since 1980, Wagner noted, the percentage of people out of work for at least 27 weeks never exceeded 30 percent of the entire unemployed pool. The Great Recession sent that figure to roughly 45 percent in 2010. It's been trending down, but remains above 35 percent.
A more positive development comes in household debt, which was down from a high of $12.6 trillion in the first quarter of 2008 to $11.3 trillion in the third quarter of 2013.
Wagner said the $11.3 trillion figure was a slight increase over the preceding quarter, and that might be a good thing.
"Households were deleveraging: instead of buying goods and services, we were reducing our debt balances," Wagner said.
In the last quarter, he said, "We actually saw households be willing to take on more debt. This has helped, in the last part of 2013, fuel that higher than average growth we saw in the economy."