by Greg Grootendorst, Chief Economist and Katherine Rainone, Regional Economist
For the feature article in our monthly economic report at the very start of the COVID-19 pandemic, we reported on the unprecedented number of weekly initial unemployment claims in the U.S. – which was nearly 3.5 million for the week ending March 21. Since then, the weekly initial and continued unemployment claims statistics have been one of the most reliable and frequently available indicators to help make sense of the impact of COVID-19 on the economy of Hampton Roads.
According to the Virginia Employment Commission (VEC), for the week ending August 15, 2020, continued unemployment claims picked up in Hampton Roads after five straight weeks of steady declines, while initial claims also rose after two weeks of declines. This increase was mirrored across the rest of the Commonwealth for both continued and initial claims, as well as for initial claims nationally. This increase in initial unemployment claims in Hampton Roads followed a steep decline the prior week coinciding with the expiration of the CARES Act, which was providing unemployment recipients with an extra $600 per week in benefits. The weeks ending August 22 and 29 saw initial and continued claims in Hampton Roads trend downward once again, a move in the right direction.
The White House issued an executive order in the beginning of August to extend the additional benefits, but at a lower rate of $400 per week, $300 of which would be federal funding and $100 to be paid by individual states. The federal funding for this extension is to be provided by the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund at a cost of $44 billion, called the Lost Wages Assistance program. A major difference with this program is that each state has to apply and be approved to receive the funding, and as of August 26, Virginia has been approved by FEMA to receive these extra federal funds, but as of this report it is unclear when Virginians can expect to begin receiving these benefits.
The chart below shows the weekly initial and continued unemployment claims as a percentage of population for both Hampton Roads (purple) and the U.S. (orange) from the middle of March through the end of August. In general, the pattern of the region’s claims mirrors that of the rest of the nation: a steep rise at the start of the pandemic and a gradual decline once businesses were allowed to reopen. Businesses in Virginia began opening slightly later than other states, helping to explain the longer plateau of continued claims in Hampton Roads throughout May and June, and a summer spike in regional cases which led to increased restrictions on bars and restaurants in the 757, which may have contributed to the increase in initial claims throughout July.
Over 53,000 people in Hampton Roads are currently receiving some form of unemployment benefit, which is more than 12 times the number of people receiving benefits in March. This display of volatility indicates definite uncertainty as Hampton Roads begins inching towards recovery.
To view September’s full economic monthly report, click HERE.
Source: Hampton Roads Planning District Commission, Virginia Employment Commission, U.S. Employment and Training Administration
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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