Here in Hampton Roads, it seems like the response to the Coronavirus pandemic has things changing daily. Local coffee shops,
breweries, restaurants, and so much more that make the 757 special are open one day, taking to-go orders only the next, and
completely closed for the foreseeable future days later. Hotel reservations are being cancelled, music festivals and large events
have been called off, and earlier this week Governor Northam announced that all schools in the Commonwealth would remain
closed for the remainder of the academic year.
This is an unprecedented global event, and the lack of a solid comparable occurrence is a key reason the global stock markets are experiencing such panic. All of the information normally summarized in this monthly report are on a one- to three month lag, which means the impacts of this pandemic will not become apparent in reliable regional data for a couple of months.
The Hampton Roads economy has been described as a three-legged stool: Defense, Port, and Tourism. Defense funding and
federal employment is least likely to be immediately impacted by COVID-19, which serves as a bright spot in the potential
economic impacts to our region. On the opposite end of the spectrum, the tourism industry stands to be severely impacted. Data from STR, a company providing data analysis on the hospitality sector, shows Hampton Roads revenue per available hotel room (RevPAR) decreased by over 50% from March 3 to March 14. The segmented data for this 10-day timeframe shows a roughly 50% decrease in group bookings, indicating conferences, large meetings, and events being cancelled, along with a 25% decrease in transient bookings, indicating individual vacations are being cancelled as well. As for the third leg, the impacts on the Port are becoming apparent. Coupled with the residual impact of trade tariffs, the Coronavirus already resulted in a 9% drop in cargo volumes at the Port. As this economic shock hits both the supply (production of goods and services) and the demand (consumption of goods and services) sides of the economy at the same time, it is clear that the Port, and port-related
employment, will be impacted.
From the limited weekly data that is available, it is clear the coming months will show a significant impact. It appears likely there will be a one- or two-quarter hit to GDP, the size of which is not yet apparent, and depends on how long businesses are closed and travel is restricted. While the Virginia Employment Commission does not release weekly initial unemployment claims numbers, the U.S. government does. Figure 1 shows the unprecedented increase in claims nationwide (over three million); this trend will likely be experienced in Hampton Roads as the majority of businesses are either closed or working with skeleton crews.
Staff at the HRPDC are following this economic shock very closely, and will continue to include insights on the impact in each
monthly report. As Governor Northam recently stated, “We have a health crisis and an economic crisis, but the sooner that we
can get the health crisis under control, the sooner our economy will recover.” If you have any questions or comments, please feel free to contact us at firstname.lastname@example.org or email@example.com.
To view March’s full economic monthly report, click HERE.
|Source: U.S. Employment and Training Administration, 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. Real GDP increased 2.1% in Q4 2019 (GDP also grew by 2.1% in Q3 2019). The growth is driven in part by consumer spending, government spending, housing investment, and exports, while imports decreased. There was a decrease in inventory investment (-1.09%) as well as a reduction in business investment reflecting a decrease in structures and equipment.
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 continue to recover handily through to December (seasonally adjusted 3 month M.A.). Sales increased by 7.4% in December, making it Hampton Roads’ best December for total 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.
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.
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.
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 third month in a row since a recent high in June, to 796,600 positions in December of 2019. This figure represents a 1.05% growth from the same month in the previous year.
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.
The unemployment rate is the percentage of the population actively seeking work but unable to obtain a position. Hampton Roads’ unemployment rate plateaued in December 2019 at 2.93%, the same rate it was in November. Comparatively, the national unemployment rate decreased again in December from the previous month to 3.5%, hovering at record lows.
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 January 2020 to 2,438 claims, a decrease from December of 2019 but still above November’s recent low. This January number of claims represents a 17.6% decrease from the same month in 2018.
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 December decreased to 352 permits, but when seasonally adjusted represents a slight increase relative to November. As the market continues to respond to the recently lowered federal interest rates, this indicator will be interesting to watch closely.
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.
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. 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 January saw a slight dip from December, continuing to represent roughly 11% of all sales.
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 4.2% of all home resales in December of 2019, down from a recent high of 8.1% in April of 2016 (12-month average).
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