Hampton Roads’ employment has painted a bleak picture recently, with non-farm employment declining by 8,300 jobs over the past three months, the region’s first three month period of losing employment since 2010. While the budget picture had been improving according to headline figures, defense spending has been declining over the past year nationally, and the echoes of the declining spending are likely affecting Hampton Roads’ employment.
What is interesting about the weak employment estimates is the contrast they provide with the other indicators, which have generally been either steady or improving. The region is experiencing relatively strong growth in retail sales and initial unemployment claims continue at historically low levels. Car sales have been declining from a recent peak, but the most recent housing data does not suggest cause for concern, and sales of both new and existing homes were strong in May.
It is important to put the weakness of the Hampton Roads’ employment report in context; only four of Hampton Roads’ reference MSAs (those with populations between 1 and 3 million) have had declines in year-over-year employment. Additionally, only four MSAs with populations between 1 and 3 million have seen employment declines over a ten year period, with Hampton Roads and Tucson, AZ being the only two regions that have experienced both long-term and recent declines.
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Source: Bureau of Economic Analysis, 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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