Economic indicators for Hampton Roads continue to provide a positive account regarding the state of the regional economy. Employment has increased, while unemployment has fallen to almost unsustainably low levels. Additionally, the retail sales, car sales, and accommodation sales all indicate both local optimism in the economy and continued development in the tourism sector. Housing permits remain the only indicator that significantly undercuts this strength, but given the nature of the housing correction, the region’s home price increase during the boom, and the fact that housing starts will likely lag the economic recovery, low levels of residential construction are understandable.
Unfortunately, a recent estimate for regional gross product in 2017 was not as positive for Hampton Roads. 2017 was not a strong year for employment growth, with employment increasing by only 1,000 positions. Comparably, in 2016, employment increased by 6,200 positions. This led staff to believe either the 2016 estimate for Gross Product would be revised higher (to reflect employment growth), or that the 2017 estimate would be significantly higher; however, the 2017 Gross Product estimate remained below the 2015 level despite growth in both the regional population and employment over the past two years. At this time it is difficult to estimate the source of this inconsistency, but the Bureau of Economic Analysis largely bases its estimates of gross product on changes in levels of regional incomes, suggesting that the yet-to-be released estimates of regional income in 2017 will be relatively modest.
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Billions of 2009 $s
Source: 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 increased in the second quarter to 3.0%, from 1.7% in the first quarter of 2017. The most important news for Hampton Roads results from a 4.7% expansion in national defense expenditures between the first and second quarter. Additionally, personal consumption expenditures continued to strongly expand.
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’ taxable monthly sales totaled $1.92B in August of 2017 (seasonally adjusted), the third consecutive month at this level. August sales were 2.2% above 2016 sales, and if this growth continues into the fall and winter, would provide an excellent catalyst for regional expansion.
New Car Sales
Car sales, as a durable good, may be put off until individuals’ 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 declined slightly in September, falling by 200 vehicles per month, but remain slightly above the region’s long-term average.
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 increased significantly in the third quarter of 2017, reaching $202M (3.9%).
Non-agricultural civilian employment figures are considered the best estimate of labor market activity by the National Bureau of Economic Research. Regional civilian employment fell to 765,600 in September 2017 from 768,800 in August, and a decline of 11,700 jobs since September 2016 (-1.2%). Over the same time period, the state added 42,400 jobs, an increase of 1.1%.
Employment Growth by Industry
As the job market grows or declines, there will be some industries whose experience does not resemble the regional trend. Regional employment in retail trade and leisure & hospitality have declined precipitously year-over-year according to the employment data released by the Bureau of Labor Statistics; however, these lower levels of employment do not align with strong retail sales seen over the summer.
The unemployment rate is the percentage of the population actively seeking work, but unable to obtain a position. Hampton Roads’ unemployment rate came in at 4.20% in August 2017, the third consecutive month at this level. Over the past six months there has not been sustained change in either the size of the regional labor force or in the number indicating that 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 inched down to 2,789 in September 2017. Regional Claims have fallen to their lowest level since Dec 2016, and fourth lowest in the history of the region.
Permit data signals the level of construction employment and confidence regarding the future trajectory of the local economy. Single family permits popped up to 336 in August 2017, after declining to 260 in July (seasonally adjusted). The region continues to lag below the long-term average of 453 single family permits per month.
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 in the second quarter of 2017, and are 2.86% above the price levels last year, though this growth rate was below that of the nation and the state.
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. Existing home sales decreased to 2,005 in September 2017, in line with the recent trend of approximately 2,000 per month. New home sales edged down to 263 per month from 278 in August, in line with the recent trend of 250-260 sales per month.
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 increased to 4.7% of all Hampton Roads existing home sales in August 2017 from 3.3% in March.
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