Hampton Roads Economic Monthly Interest Rates Greg ... Jan-20_FINAL.pdfHampton Roads Economic...

Hampton Roads Economic Monthly

The last year that Hampton Roads outperformed the national economy was in 2009. That year, the region’s gross product declined by

0.8%, compared with a national decline of 2.5%. The years that have followed the Great Recession have been tough for Hampton Roads.

Since 2003, the region has lost almost 32,000 uniformed military personnel. This significant loss to the region’s military employment base

has been exacerbated by a reduction in defense contracts resulting from cuts to federal expenditures (sequestration) that began in 2011.

Over the past decade, the region’s private sector has been struggling against a consistent outflow of federal resources. When compared

to similar sized metropolitan areas, Hampton Roads’ 10-year growth rate in gross product ranks 37th out of the 39 metropolitan

statistical areas with populations between 1 – 4 million.

Over the past year, economic conditions in Hampton Roads have begun to improve. The steady out-flow of federal resources has

receded, and we are once again beginning to see increases in federal expenditures. Civilian employment grew modestly over the past

year, continuing the slow growth trend that the region has experienced since early in 2010. Employment gains in the Construction,

Leisure & Hospitality, Scientific, and Healthcare industries more than offset employment declines in the Retail Trade, Local Government,

and Administrative sectors.

The region experienced healthy growth in the labor force, adding 12,000 participants over the past year while reducing the number of

unemployed residents by over 2,000. Unfortunately, the healthy labor force figures and the low unemployment rate have not yet resulted

in significant gains in regional wages, though wage rate growth is expected to increase in 2020.

Tourism expenditures continued to grow in the region, notching 10 continuous years of growth for Hampton Roads’ tourism industry.

Hotel revenues, employment in the leisure and hospitality industry, and visitor expenditures have all experienced positive growth in the

past year.

Residential real estate has continued to see a slow but steady climb in home values, as building permit activity remains below long-term

averages. While housing price growth remains tepid, the housing market is healthy and vibrant, with record average home sales prices, a

record number of housing sales, and continued declines in the average length of time it takes to sell a home.

Projected increases in Department of Defense spending, unprecedented transportation infrastructure construction projects, continued

growth at the Port of Virginia, and a healthy regional labor force are expected to push Hampton Roads’ economic growth rate past that

of the Nation for the first time in a decade. 2020 looks to be a good year!

2020: Hampton Roads to Outpace the National Economy

January 2020 Greg Grootendorst, Chief Economist· Katherine Rainone, Regional Economist

2020 HRPDC Regional Economic Forecast 2019 2020

(Year to Date) Forecast

U.S.

Real GDP 2.3% 1.8%

Interest Rates

Short Government Rates 2.1% 1.5%

Long Government Rates 2.2% 1.9%

Hampton Roads

Gross Product 2.3% 2.7%

Civilian Employment 0.5% 1.9%

Unemployment Rate 3.1% 2.8%

Retail Sales 4.0% 1.5%

Value of Single-Family Residential Building Permits -10.5% 2.9%

Retail Sales: Retail sales in Hampton Roads, as measured by

the 1% local option sales tax, serve as an indicator for

consumption in the region. Retail sales have bounced around,

but after a surprisingly weak June, they recovered handily

through to November (seasonally adjusted 3 month M.A.). Sales

increased by 8.2% year-over-year in October, and 5.8% in

November, making it Hampton Roads’ best November for retail

sales in recent years. Much of the recent growth in retail sales

across the Commonwealth has been the result of increases in

the number of online sales that are subject to tax.

Hampton Roads Economic Indicators

GDP: Gross Domestic Product combines consumption,

investment, net exports, and government spending to

determine the size and general health of the economy. Real

GDP grew, albeit slightly, to 2.1% in Q3 2019 (revised from

initial estimates for a Q3 slowdown at the end of Oct). The

growth is driven in part by consumer spending (+2.9% over

Q2), residential investment, which rose 5.1% over Q2 after six

consecutive quarters of declines, and exports (+0.9% over Q2,

following a 5.7% loss compared to Q1). National defense

spending grew for the 8th consecutive quarter (+2.2%).

New Car Sales: Car sales, as a durable good, may be put off

until an individual’s economic prospects improve; thus, the

number of new car sales indicates the level of confidence that

households in Hampton Roads have in their financial future.

Car sales have decreased and stabilized after an unusually

strong September, hovering near the averages that have been

observed over the past few years.

Estimated Hotel Revenue: Hotel sales indicate the

performance of the region’s tourism sector. In Q3 2019,

accommodation sales decreased by 3.5%, settling at $220 billion

for the quarter. This continues a pattern of slowing sales

between second and third quarters in recent years, however,

Q3 accommodation sales in 2019 increased 5.4% over Q3

2018. This shows accommodation sales are still trending

upward from late-2013 lows.

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GDP, Annualized Growth Rate United States, 2005Q1 – 2019Q3, Quarterly

Hampton Roads Retail Sales, Seasonally Adjusted

Hampton Roads, Jan 2005– Nov 2019, Monthly

New Car Sales, Seasonally Adjusted

Hampton Roads, Mar 2007 – Dec 2019, Monthly

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Estimated Hotel Revenue, Seasonally Adjusted

Hampton Roads, 2009Q1 – 2019Q3, Quarterly

-10%

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Employment Growth by Industry: As the job market grows

or declines, there will be some industries whose experience

does not resemble the regional trend. Several industries have

seen significant decline year-over-year using BLS data, including

Administrative & Support and Local government. The

Construction and Leisure & Hospitality industries continue to

see the largest increases in jobs when compared to the previous

year, signs of strength due to their key role in the regional

economy.

Employment: Non-agricultural civilian employment figures

are considered the best estimate of labor market activity by

the National Bureau of Economic Research. According to data

from the Bureau of Labor Statistics, Hampton Roads

employment increased for the second month in a row since a

recent high in June, to 795,500 positions in November of

2019. These trends will be important to watch as growth in

U.S. employment figures has begun to slow down.

Unemployment Rate: The unemployment rate is the

percentage of the population actively seeking work but unable

to obtain a position. Hampton Roads’ unemployment rate

decreased yet again in November 2019 to 2.93%, making it the

lowest unemployment rate recorded in the region since spring

of 2007, before the Great Recession. Comparatively, the

national unemployment rate decreased again in November

from the previous month, hovering at record lows.

Initial Unemployment Claims: The number of initial

unemployment claims is a leading economic indicator reflecting

those who are forced to leave work unexpectedly, thus

revealing the strength of the job market with little lag time.

Seasonal adjusted unemployment claims decreased in

November of 2019 to 2,140 claims, yet increased to 2,900

claims in December of 2019. This December increase in claims

represents a 10.4% increase from the same month in 2018.

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Civilian Employment, Seasonally Adjusted

Hampton Roads, Jan 2005 – Nov 2019, Monthly

Employment Growth by Industry

Hampton Roads, Oct 2018 – Nov 2019, Year-over-Year

Unemployment Rate, Seasonally Adjusted

U.S. & Hampton Roads, Jan 2005 – Nov 2019, Monthly

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Initial Unemployment Claims, Seasonally Adjusted

Hampton Roads, Jan 2005 – Dec 2019, Monthly


710

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Jan

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Jan

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Jan

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Jan

-16

Jan

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Jan

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Jan

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781.6K

731.8K

795.5K

Administrative & SupportLocal Government

Retail TradeTransportation & Utilities

InformationWholesale Trade

ManagementEducation ServicesState Government

Finance & InsuranceOther Services

Real Estate & LeasingFederal Government

ManufacturingHealthcare & Social

Scientific & TechnicalLeisure & Hospitality

Construction

0%

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6%

8%

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Jan

-05

Jan

-06

Jan

-07

Jan

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Jan

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Jan

-10

Jan

-11

Jan

-12

Jan

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Jan

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Jan

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Jan

-10

Jan

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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 prices increased, yet again, by 4.2% over the previous year

in Q3 2019, remaining below both the state and the nation.

Regional housing values remain 4.3% below those seen during the

peak of the housing boom.


Single Family Housing Permits: Permit data signals the

level of construction employment and confidence regarding the future trajectory of the local economy. The level of new

construction permitting for single family homes in November

increased significantly to 592 permits, well above the numbers

for the first half of 2019. As the market continues to respond

to the recently lowered federal interest rates, this indicator

will be interesting to watch closely.

Foreclosures: Foreclosures have a significant impact on the real

estate market and community, depressing home values on a

neighborhood and regional level. Distressed homes’ share of total

sales has particularly been shown to impact the sale price of

existing homes. The foreclosure level is still elevated from the

housing boom, but has been steadily declining, showing some of

the lowest rates since 2009. Foreclosures constituted 4.3% of all

home resales in November of 2019, down from a recent high of

8.1% in April of 2016 (12-month average).

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Single Family Housing Permits, Seasonally Adjusted


Home Price Index, All Transactions

Hampton Roads, 2005Q1 – 2019Q3 Quarterly

Number of Homes Sold, Seasonally Adjusted

Hampton Roads, Jan 2005 – Dec 2019, Monthly

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Foreclosures and Distressed Sales


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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. The levels of existing home sales have been strong

recently, with sales maintaining the same average level as

during the housing boom in 2005. New construction sales in

December saw their highest numbers of 2019, continuing to

represent roughly 11% of all sales.

0

100

200

300

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500

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