by Greg Grootendorst, Chief Economist and Katherine Rainone, Regional Economist
Figure 1: Hampton Roads Employment revisions, seasonally adjusted.
Monthly estimates for overall and industry employment are derived from the Current Employment Statistics (CES) program. Also known as the payroll survey, the CES is a federal and state cooperative program that provides timely estimates of civilian payroll employment by sampling the population of employers. These estimates are subject to both sampling and non-sampling error, so each year they are benchmarked to employment counts from a census of the employer population, derived primarily from data provided by companies in their unemployment insurance reports. They use this data to revise prior estimates and improve the quality of future estimates and are released each March.
Unlike the massive employment revisions released in 2019, the recently released revisions do not change the overall narrative of job growth in Hampton Roads over the past few years – slowly but steadily increasing, with a dramatic drop in April, followed by a steep recovery. As shown in figure 1, the seasonally adjusted employment numbers for the second half of 2019 and first few months of 2020 were revised upward, implying that there were more jobs in the Hampton Roads economy than previously reported. From April through December 2020, the figures were revised downward by roughly 1.5% each month (some months higher, some lower), implying that the pandemic had a greater impact on overall employment levels than previously reported. With pre-pandemic employment levels nudged upwards and current levels adjusted downward, the overall recovery has been slower than previous estimates showed. Pre-revision, the Hampton Roads adjusted employment levels from January 2020 to December 2020 show a 3.4% decrease, while the revised data from the same period shows a 5.1% decrease.
Estimates for industry employment were also adjusted. The most dramatic adjustments were in the Administrative & Support and Leisure & Hospitality industries. While nearly all industries still maintained a loss of employment from December 2019 to 2020, the Administrative & Support industry was adjusted heavily upwards (by 7,500 jobs in December 2020), minimizing some of the loss caused by the pandemic. On the complete opposite end, Leisure & Hospitality industry employment was adjusted down (by nearly 8,000 jobs in December 2020), implying that this sector was hit even harder than previously thought.
(February 2021 industry employment with December 2020 revision applied)
Figure 2: Hampton Roads Industry Employment revisions. Source: BLS, HRPDC.
To view April's full economic monthly report, click HERE.
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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