Tourism plays an important role in the Hampton Roads’ economy, not only forming a large percentage of employment and income in the region, but also serving as one of the region’s basic sector industries that bring in outside dollars which allow local businesses and services to grow. The Virginia Tourism Corporation indicates that June and July are the most important months for tourism in Hampton Roads, and thus this is a good time to check in on the progress of the industry.
Regional leisure and hospitality employment was 95,600 in June of 2017, representing 12.3% of regional civilian employment. While this represents a decline of 2,800 jobs in the industry from the previous year, June 2016 registered an abnormally high month for tourism employment. In the summer months, leisure and hospitality employment comprises the largest share of employment, though the industry is highly cyclical, and employment falls from the summer peaks.
Unfortunately, even as employment in leisure and hospitality (+2.2%) and tourism expenditures (+17.1% to $4.48B in 2015) have exceeded pre-recession highs, tax revenue from tourism has not kept up. Adjusting for inflation, tax revenues associated with tourism have declined by 3.7% from the pre-recession peak, with regional hotel occupancy tax collections down by 10.1% from the pre-recession peak. While Hampton Roads’ room revenues and revenue-per-available-room (RevPAR) increased in 2016, the increase was realized due to a 3.29% decline in the region’s supply of rooms.
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Source: Virginia Department of Taxation, 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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