Whether it’s oyster stuffing at the Thanksgiving table, an oyster roast outside as the weather starts to cool down, or good old oysters on the half shell in a month ending with “R,” if it’s at a Hampton Roads restaurant, it is almost certainly an Eastern Oyster. The species was once so ubiquitous in the Chesapeake Bay that the Latin name for the shellfish is actually Crassostrea Virginica.
Hampton Roads’ identity is closely tied with its waterways – could its economy be connected as well?
According to the National Oceanic and Atmospheric Administration (NOAA), harvests of oysters are now at 1% or less of historical levels due to harvesting, disease and changes in water quality, among other factors. When oyster harvests began to collapse in Virginia (and nationwide) in the 1960’s through 80’s, the value of those landed (brought to shore to be sold) did not change drastically. However, as oysters begin to recover, their associated values are skyrocketing.
Louisiana, once the largest oyster producing state in the nation, faced major disruptions in oyster harvests after Hurricane Katrina in 2005, the Deepwater Horizon oil spill in 2010, and the record rain and snow in the Midwest, inundating the Gulf of Mexico with freshwater. Because oysters need salty water to survive, this has led to shortages and soaring prices. The below chart shows NOAA data through 2017 only, comparing Louisiana oyster prices with Virginia and Maryland – Chesapeake Bay states.
If there are shortages of oysters landed in the region, local businesses could be affected in several ways. Watermen will turn less of a profit if they are unable to harvest as many bushels as in previous years, and may in turn need to increase their prices per bushel, which will trickle its way down to the consumer, who may pay a higher market price at the oyster bar.
Here in Hampton Roads, seafood wholesaler George’s of Norfolk reported similar prices to the 2018 season for oysters from the eastern shore, and a slight increase in those from the James River. Interestingly, heavy rainfall doesn’t affect the eastern shore harvest, but the high tides and northerly winds the region has been experiencing this season has made it more difficult for oystermen to reach the beds. In contrast, those higher tides have pushed salty water further into the James River this season, improving its harvest – likely one of the most important oyster producing areas in the world according to Virginia Marine Resources Commission. In 2018, oysters harvested in the James River alone accounted for nearly 40% of Virginia’s market value.
What was once an affordable food for the masses is now becoming more expensive. But as areas like Louisiana struggle with their harvests, could Hampton Roads step in?
To view December’s full economic monthly report, click HERE.
Source: NOAA, Virginia Marine Resources Commission, 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 slowed to 2.0% in Q2 2019, with that growth driven by a strong rebound in consumer spending (+4.7% over the previous quarter). Investment decreased by 6.1%, though this was largely driven by changes to inventories. Significant regionally, national defense spending grew for the 7th consecutive quarter (+3.1%).
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 have recovered again in July, increasing to $2.07B (seasonally adjusted 3 month M.A.). Sales increased by 7.9% year-over-year in July, which was even higher growth than seen in May (7.3%); May in particular has seen strong growth over the past several years.
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. While the industry saw a decline in national car sales in September due to Labor Day sales counting in August, Hampton Roads numbers tell a different story. Car sales in the region increased significantly compared to both last month and September of 2018. This continues the trend of strong summer sales, and will be interesting to see if it continues.
Hotel sales indicate the performance of the region’s tourism sector. In Q2 2019, accommodation sales increased by 6.8%, growing to $231.7 million. This continues a pattern of strong growth stretching back to the third quarter of 2014. The tourism industry continues to play a significant role in the regional economy as one of Hampton Roads’ basic sector industries.
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 BLS, Hampton Roads employment continues to decline for the third month in a row, to 792,400 positions in September of 2019. While the lower estimates of August were revised upwards slightly, the downward trend is something to keep an eye on; especially as U.S. employment continues to grow, albeit slower than the previous three months.
Employment Growth by Industry
As the job market grows or declines, there will be some industries that do not resemble the regional trend. Several industries have seen significant decline year-over-year using BLS data, including Administrative & Support industries, Local Government, and Transportation. Manufacturing jobs in the region, an important indicator of economic health in the current political climate, continue to show positive growth over the previous year, although it should be noted that the rate of increase each month is shrinking (with a loss from August to September both regionally and nationally).
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 to 3.07% in August 2019, making it the lowest unemployment rate recorded in the region since spring of 2007, before the Great Recession.
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 increased in August of 2019 to 2,601 claims. While this is still below the long term average, it has risen above the average levels of the past twelve months. As employment in the region continues its slight downward trend, initial unemployment claims may respond accordingly.
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 September decreased from August’s 2019 high of 435 permits to 362, yet still rising compared to earlier this year. As the market responds to the Federal Reserve lowering interest rates in August and September, 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 by 3.1% in Q2 2019, remaining below both the state and the nation. Regional housing values remain 6.2% 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. While the new construction segment of the market continues to lag, notable is a 16% year-over-year increase in existing home sales from September of 2018 to 2019.
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. Foreclosures constituted 4.8% of all home resales in August of 2019, down from a high of 8.1% in April of 2016 (12-month average).
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