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Hampton Roads Economic Monthly

The Numbers and the Narrative:

by Greg Grootendorst, Chief Economist and James Clary, Senior Economist

A point that frequently gets lost when new data becomes available is that data helps to tell/reveal the story, but it is not the actual story; there is no better illustration than some of the most recent changes in the U.S. gross domestic product over the past three quarters.

It is easy to pay attention to only the headline GDP, and see that the nation saw slow growth in the 2nd quarter (+1.7%), sped up in the 3rd quarter (+3.5%), and then slowed down again in the 4th quarter (+2.1%). However, when you break down GDP into its individual components (see the bars in the chart below), the narrative becomes quite a bit more complicated.

There was strong growth in consumption spending in the 2nd quarter, contributing 2.88% points to overall growth, but a decline in investment (more accurately in the volatile inventories category) made the overall growth look quite weak for the quarter.

In the 3rd quarter, consumption spending slowed down (+2.03% to GDP), but a big increase in exports made the 3rd quarter appear much stronger than consumption growth would suggest. Exports then plummeted in the 4th quarter. A failure in the soy bean crops in Brazil and Argentina during the 3rd quarter quickly increased US soybean exports; soy bean  exports then returned to their previous slow growth rates in the 4th quarter, resulting in a large decline between the 3rd and 4th quarters. If you did not know that GDP slowed because of a one-time change in soy bean exports that probably has very little significance in the overall economy, your assessment of the current economic condition might be inaccurate.

This is why HRPDC Economics Staff supplies context to the indicator charts that appear in each Economic Monthly.

To read more click HERE.

U.S. GDP Growth, Percentage Contribution by Category

U.S. GDP Growth, Percentage Contribution by Category

Source: Bureau of Economic Analysis, HRPDC

 

 

 

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Annualized Growth in GDP

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

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. 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

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

Hotel Sales

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.

Employment

Employment

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

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.

Unemployment Rate

Unemployment Rate

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.

Initial Unemployment

Initial Unemployment

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.

Housing Permits

Housing Permits

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

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

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

Foreclosures

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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