University Economists Warn of Potential Problems in Annual Report
January 31, 2019
With a decade of lackluster economic growth behind the region, Hampton Roads is poised to have a solid 2019, according to Old Dominion University economists.
However, the ODU Dragas Center for Economic Analysis and Policy's annual Economic Forecast warns of persistent issues causing a less-sunny view the local and state economy, and possible storm clouds ahead nationally.
The influential annual forecast was delivered Wednesday to leaders of the local business community at the Sheraton Norfolk Waterside.
Economics Professor Vinod Agarwal, who has been involved with ODU's Economic Forecasting Project since its inception, pointed to funded commitments for federal Department of Defense spending in the year ahead, which will inject money into the local economy in 2019. "This is the reason we're somewhat bullish on the Hampton Roads economy," Agarwal said.
At the same time, for the decade from 2007 to 2016, the Hampton Roads economy actually shrunk by an average of .15 percent per year, buffeted first by the global economic slowdown, then by mandated reductions in federal spending through initiatives such as sequestration. This continues to place Hampton Roads at risk, Agarwal said. "We still continue to be largely dependent on federal spending," he added.
Risk was also a theme of the talk by Robert McNab, director of the Dragas Center. His look at the national and state economy borrowed from the movie "The Good, the Bad, and the Ugly" - pointing out not only where the economy has flourished, but also its challenges today and in the future.
While the national economy has not grown at the rate of previous booms, it is experiencing the second-longest expansion in post-World War II history.
"Maybe slow and steady kind of wins the day this time," McNab said.
However, the recent partial government shutdown, which has resulted in only a temporary deal in a partisan Washington, is an example of how a positive forecast for economic growth can be upended, McNab said. He pointed to several potential obstacles, from the upcoming debt-ceiling negotiations, to the increased deficit, to the end of tax breaks contained in the Affordable Care Act, as examples of things that could hobble the economy if not handled deftly by lawmakers.
"The fiscal position of the federal government is much worse than at any point during the last 20 years. There is not a lot of wiggle room," McNab said.
Hampton Roads Forecast
The Dragas Center predicts the Hampton Roads economy will grow by 2.4 percent in 2019. With approximately 40 percent of the gross regional product of Hampton Roads stemming from Defense spending, an increase in DOD spending of 11 percent since 2017 is good news for the region. Other data predictions by the Dragas Center:
- Civilian jobs in the region will increase by about 6,300 in 2019, driving the unemployment rate down to 3.1 percent.
- Retail taxable sales are forecast to increase by 3.3 percent.
- Hotel room revenue is predicted to increase by 3.8 percent.
- The Port is forecast to see a 2 percent increase in tonnage, and a 3.6 percent increase in 20-foot equivalent container units.
- Average housing prices, which in only recently returned to their 2007 pre-recession peak, are forecast to grow by 2 percent in 2019.
National and Virginia Forecast
Dragas Center economists predict real GDP in the United States will increase by an annual rate of 2.5 percent in 2019. Virginia's real GDP is forecast to grow at a slightly faster rate of 2.6 percent annually, largely due to increases in federal discretionary spending. Other data forecasts by the Dragas Center include:
- The national unemployment rate will fall to 3.7 percent by the end of 2019, while Virginia's unemployment rate is forecast to be 2.7 percent.
- The fiscal year 2019 deficit is pegged at $1 trillion, a figure that is projected not to drop for the foreseeable future.
- The risk of an economic correction has a one-in-three chance of occurring because of increases in federal and household debt, partisan politics and a volatile stock market.
For more information on the 2019 Hampton Roads Economic Forecast, visit Old Dominion's Dragas Center Website.