Last year economist Bob McNab used the word “challenging” to describe the local economy. This year, the word is “contradictions.”
And the Hampton Roads economy is riddled with them, according to Old Dominion University’s latest State of the Region report.
“We can see the Hampton Roads economy has grown, and in fact, we project growth of approximately 1.6% this year, down slightly, but still positive,” McNab said at Tuesday’s event rolling out the annual study. “It's the first time the Hampton Roads economy has strung together six years of growth since the turn of the century.”
But that’s not the whole story, he said.
ODU’s latest State of the Region report shows that unemployment is higher than a year ago, and there are fewer jobs. Cuts to federal jobs hit the region especially hard, he said.
“The average federal employee in Hampton Roads earned more than the average private sector employee,” he said. “So, for every job you lose in the federal government civilian employment sector, you need at least one, if not two, jobs in the private sector to make up for the lost compensation.”
And the private sector hasn’t added new high-paying jobs to replace the ones lost. The report called for the region to diversify its economy to attract more private employers and decrease dependence on the federal government — a drum previous State of the Region reports have been beating for years.
McNab said the decisions from the federal government define the local economy, which isn’t a good thing. The three primary legs of the regional economy — defense, trade and tourism — are being hamstrung by conflicting economic policies, some more than others.
He said defense spending likely will increase, but that funding won’t spur as much growth in the region as it did in the past. Trade has increased in terms of containers and dollar value, but that growth has been held back by tariffs. And he said inflation is taking its toll on tourism, which he estimates accounts for around 10% of the local economy.
“Inflation is a tax,” McNab said. “It's a tax on businesses as well, because you feel it because the cost of wages goes up, the cost of supplies goes up, that erodes your ability to make money over time.”
McNab said policies from the federal and state levels are out of the region’s control.
“We don't control trade policy,” he said. “We don't control immigration policy. We don't control federal spending policy. We don't control national security policy. We don't control the minimum wage.”
The one thing local cities can control, he said, is housing. And not even just affordable housing.
“Build more at any price point,” he said.
Increasing the housing supply will lower housing costs and attract more employers to the region, he argues, a position many housing advocates have been pushing in recent years. It could also help lower the costs of other critical services like childcare.
Barbara Blake, a senior research fellow with ODU’s Dragas Center for Economic Analysis and Policy, said the region’s lack of childcare — and especially the lack of childcare that people can afford — inhibits growth and turns away potential employers.
“Unfortunately, parents, families in Hampton Roads would have to have at least a household income of $152,000 to find affordable childcare,” she said.
The report echoed calls for greater regional collaboration to make housing a priority.
ODU economist Vinod Agarwal said he’s pushed for more regional cooperation since 1995. He noted one example of success: the Hampton Roads Sanitation District’s Sustainable Water Initiative for Tomorrow, or SWIFT. He noted the region saved more than $5 billion dollars over 30 years by collaborating on a shared system to provide drinking water and treat wastewater, all while replenishing the aquifer underneath Hampton Roads.
“It was amazing how we can, as a group, as a large group of localities, connect together and be able to do things in a much more efficient manner,” he said.
If the region applied a similar idea to housing, things would get better, McNab said.
“It doesn't matter if you build houses and apartments in Chesapeake or Norfolk or Suffolk or Isle of Wight,” he said. “When regions decide as a part of a regional strategy that housing is one of the most important elements of economic development and that we need to increase the supply of housing, everybody in the region wins.”
