The Hampton Roads economy seems to be stuck in neutral.
That’s essentially what Old Dominion University economists told about 700 people during the 16th annual State of the Region address hosted by LEAD Hampton Roads at the Norfolk Waterside Marriott Tuesday morning. The event coincided with the release of the annual report.
“We’re not doing badly but we’re not doing very well,” Old Dominion University economist and President Emeritus James V. Koch said. “We’re sort of putt-putting along.”
Last year, Hampton Roads’ inflation-adjusted gross regional product actually shrank 0.14 percent. Economic output last contracted in 2010 with a 0.08 percent decline, according to the latest figures released in Tuesday’s presentation. Regional economic growth has been hovering around 1 percent and below since 2008.
And again for 2015, ODU economists predict an economic growth rate of just 1.1 percent. This compares to 2.28 percent in 2007 and 4 percent in 2005.
Why? Jobs.
Hampton Roads has yet to recover 22,000 of the jobs lost in the economic recession, said ODU economist Vinod Agarwal. This compares to Charlotte, N.C., gaining 42,700 jobs while Raleigh, N.C., added 37,400 jobs from 2007 to 2014, according to the report.
In August, Hampton Roads unemployment dropped to its lowest rate in nearly seven years.
The region’s unemployment rate dropped from 5.2 percent in July to 4.8 percent in August, according to the latest Virginia Employment Commission data. That’s the lowest rate since it was 4.6 percent in November…
In August, Hampton Roads unemployment dropped to its lowest rate in nearly seven years.
The region’s unemployment rate dropped from 5.2 percent in July to 4.8 percent in August, according to the latest Virginia Employment Commission data. That’s the lowest rate since it was 4.6 percent in November…
(Tara Bozick)
Additionally, decreased defense spending, including reduced personnel compensation, has forced the economy to diversify. Just 39 percent of the economy in 2014 was dependent on defense spending, down from 45 percent in 2011.
Yet, the private sector hasn’t stepped up to fill in the economic gaps left by defense-related spending, Agarwal said. Hampton Roads created only 1,100 jobs in 2014, the report indicates. Regional median income growth has stalled and was lower in 2014 than in 2008.
“We’re losing higher-paying jobs and creating lower-paying jobs,” Agarwal said. “That is a problem.”
Still, there are bright spots in the region’s economic future.
Agarwal said that 2015 should be the first year that the hotel industry surpasses its 2007 peak revenue.
Virginia Beach has become the region’s tourism engine with 41 percent hotel revenue market share in 2014, up from 33 percent in 1999. Williamsburg used to have nearly a third of the market 16 years ago, but declining demand dropped its share to 17.6 percent.
While home prices aren’t what they were during the housing boom, owning a home in Hampton Roads has become almost as affordable as it’s been in 40 years, according to the report. Still, the housing market won’t recover until there’s improvement in distressed homes, as bank-owned and short sales accounted for 1 in 5 existing home sales in 2014.
Nonprofits economic boost
While Hampton Roads works to jump-start private sector job growth, nonprofits — the third economic sector — continue contributing to local economic health.
More than 2,000 organizations in the region filed IRS tax returns totaling more than $9.6 billion in revenue in 2012 with health care organizations earning the highest, according to the report. These nonprofits also received more than $1.5 billion in gifts and grants and paid more than $2.6 billion in wages and benefits to their employees in 2012.
In 2012, Hampton Roads residents gave 3.41 percent of their income on average to charity, which is higher than 2.85 percent statewide but lagging behind the U.S. at 3.7 percent, according to the report. Hampton in particular gives generously at 4.2 percent.
The United Way of the Virginia Peninsula distributed $2.5 million for 64 programs through 34 partners in 2014 to help with basic needs, school success and community heath, President and CEO Ty Joubert said. Additionally, agencies received about $2 million donor-designated gifts through the local United Way.
Since the recession in 2008, total contributions fell from $4.8 million to $4 million and local combined federal campaign contributions fell from $2 million to $1.3 million, he said.
The Peninsula Community Foundation distributed more than $1.8 million in grants last year, CEO Mike Monteith said, estimating the Peninsula had about 500 active and viable not-for-profits. Additionally, the foundation focuses on reducing poverty and revitalizing older communities in Newport News and Hampton to attract and retain higher income workers and families.
“If you’re trying to improve the quality of life in a community, it starts with really focusing on the people who currently live here and are going to live here,” Monteith said.
Bozick can be reached by phone at 757-247-4741. Sign up for a free weekday business news email at TidewaterBiz.com.
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