Ten years ago, Hampton Roads non-farm civilian employment peaked with 781,600 people on the region’s payrolls. A decade later the nation has long-since recovered, but our region is still languishing in its attempt to replace the jobs lost during the Great Recession. The closure of the Ford plant coupled with a national economy showing signs of strain from the housing correction, drove Hampton Roads into recession half a year earlier than the rest of the nation. Typically, national defense spending insulates the region from the full effects of a recession, however, declines in defense spending due to reduced operations in the Middle East, followed by national budget issues resulting in sequestration, caused the region to experience recession as severe as the rest of the nation.
While Virginia and the nation both attained their pre-recession levels of civilian employment in 2013, July 2017 estimates indicate regional employment lags its prerecession peak by 16,600 jobs, a 2.1% decline. This decline can be attributed to variations in defense spending, as growth from spending increases in 2003 to 2007 became hampered by rapid declines in the following years, weakening the economic recovery. The region’s rapid expansion from 2003-2007 fed into a housing bubble, with regional home prices 119% above 2000 levels by 2007, while national prices only stood at 65% above their levels in 2007 compared with 2000. The subsequent correction from the Great Recession led to lower levels of employment in construction (-12,600) and in local government (-7,300) in Hampton Roads.
Unfortunately, economic silver bullets do not exist. The path forward requires us to work towards increasing educational attainment in the region, and enhancing Hampton Roads competitiveness with other regions.
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Source: Bureau of Labor Statistics, HRPDC
Annualized Growth in GDP
Gross Domestic Product combines consumption, investment, net exports, and government spending to determine the size and general health of the economy. GDP growth slowed at the end of 2016, growing at an annualized rate of 1.9%. The weaker growth was a result of both declining exports and increasing imports in the 4th quarter; both consumption and investment grew strongly.
Retail Sales in Hampton Roads, as measured by the 1% local option sales tax, serve as an indicator for consumption in the region. Hampton Roads monthly sales continued to grow in December 2016 increasing to $1.90 billion for the month, a 1.4% increase from December 2015. While this did not equal the growth in November, Hampton Roads’ retail sales are now 6.5% above their prerecession peak.
New Car Sales
Car sales, as a durable good, may be put off until such time as an individual’s economic prospects improve; thus, the number of new car sales indicate the level of confidence that households in Hampton Roads have in their financial future. Car sales in the region declined to 6,100 in January 2017, showing some signs of weakness despite remaining above the long-term average of 6,000.
Hotel sales indicate the performance of the region’s tourism sector. Tourism significantly contracted during the Great Recession and has been following a slow steady growth trend ever since. Seasonally adjusted hotel sales were at $190M and $195M in the third and fourth quarters of 2016, respectively. Sales for both quarters were 20% above their 2013 levels when tourism dipped as a result of decreases in government spending.
Non-agricultural civilian employment figures are considered the best estimate of labor market activity by the National Bureau of Economic Research. Hampton Roads employment showed significant growth in January, increasing by 5,300 positions to 777,000. Added to the positive revisions released with the employment report, regional employment is only 4,600 jobs below its prerecession peak.
Employment Growth by Industry
Even as the job market grows or declines, there will be some industries whose experience does not resemble the regional trend. While many industries have shown strong gains recently, manufacturing (-900) and scientific & technical (-1,100) have been noteworthy exceptions. Healthcare continues to add jobs in Hampton Roads, increasing by 1,700 year-over-year, and 20,900 over the past decade.
The unemployment rate is the percentage of the population actively seeking work, but unable to obtain a position. Hampton Roads’ unemployment rate improved for the second straight month, decreasing to 4.33% in January 2017, below the national rate of 4.68%. This represents real growth in the regional economy, as it has coincided with both an 8,000 person increase in the labor force, as well as a 10,400 increase in the number of residents who say they are employed.
The number of Initial Unemployment Claims is a leading economic indicator, reflecting those who are forced to leave work unexpectedly, and thus revealing the strength of the job market with little lag time. The region’s initial unemployment claims fell to 2,980 in February 2017, below the long-term average (4,367) while elevated over recent levels. This continues to reflect strength in the local labor market.
Permit data signals the level of construction employment and confidence regarding the future trajectory of the local economy. Regional permitting activity continued to be strong, with 438 permits issued in January 2017, down slightly from December (453), but significantly above the levels after the housing correction. It is important to note that this higher level of single family permitting has not coincided with an uptick in construction employment.
Home Price Index
The home price index measures the value of homes by evaluating changing price levels through repeated sales of properties. The index provides the highest quality data available on the trends in the real estate market. Hampton Roads’ home price index slipped slightly in the fourth quarter of 2016, but still is in line with that of the state and the nation.
Settled Home Sales
Settled home sales measure the level of transactions on the real estate market over time, and a healthy real estate market should have a consistent level of activity. Hampton Roads’ real estate transactions were unnaturally elevated during the boom and dropped substantially during the housing correction. Existing home sales slipped slightly in February 2017, falling to 1,843. This is slightly below 2016 levels, but could be driven by fewer units on the market as compared to a similar time period last year.
Foreclosures have a significant impact on the real estate market and the community, and depress home values on both a neighborhood and regional level. Distressed homes’ share of total sales has particularly been shown to have an impact on the sale price of existing homes. During the housing boom, foreclosures were a negligible part of the local real estate market, but rose to 5.0% of all sales in July 2011. Distressed sales constituted 3.3% of all Hampton Roads existing home sales in January 2017 (6-month M.A.).
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