From the President: Regional Growth Opportunity Awaits
The opportunity for significant regional growth and prosperity awaits Hampton Roads in the near future; Hampton Roads, in the same respect, awaits the right adjustments to achieve the success it hopes to see. According to Moody’s Analytics, Hampton Roads’ business cycle is in a “recovery” status, rating the forecast risk positively for the short term.
The analysis noted that Hampton Roads strengthened through 2016, and payroll employment for early 2017 rose modestly from the previous year. It is the current volatility of Hampton Roads’ employment market since that point, that requires attention; 8,300 civilian non-farm jobs were shed from March through May 2017. These reductions represent the first period of three-month employment loss since the second half of 2010, where the region lost 1,700 jobs from July to September. This is intriguing considering the average monthly job loss during that consecutive three-month period was -.08% compared to the average monthly job loss of -.36% recently from March to May 2017. What’s even more intriguing is that this current rate of monthly reduction mirrors the major employment declines witnessed August to October 2008 during the Great Recession, when non-farm employment reductions averaged -.38% per month.
We must be wary of the considerable influence of external forces. Although there isn't a presence of a recession on the national stage, the region is still experiencing similar effects to that time period. Overall staggered growth and recent volatility is perhaps connected via downward economic ripple effects tied to decreases in national defense spending over the past year. Projected increases in defense spending under the Trump administration stand to be a boost for the defense industry and send positive ripple effects back through the region. This is positive news. If we couple this with diversification, where government spending causes regional economic ripples to a lesser degree, it would make for a more hopeful and more reliable strategy for the long term.
As it relates to economic indications, non-farm payroll employment, shown in the chart below, is considered the best estimate of current labor market activity. To further assess the market environment, leading economic indicators are important to consider. The indicators of particular importance are: initial unemployment claims, single family housing permits, retail sales, and new car sales. For Hampton Roads, these indicators maintained a steady or improving trend as it relates to long-term averages, although only one of the four moved significantly enough in accordance with an improving market through the most recently reported month. These indicators will require further monitoring.
The uptick in non-farm payroll from the end 2016 is what gave overall employment at least some meaningful growth for the year, which now paired with early increases in 2017, has the region showing “tentative signs of reacceleration” according to Moody’s. Moody’s cites the main regional economic drivers to a positive regional outlook as: logistics, tourism, and defense, and even forecasts a return to positive net migration by 2018.
To provide context around the recent labor growth volatility, we provide the following. The chart below shows employment momentum in comparison with other selected MSAs as well as the Commonwealth of Virginia. The horizontal axis shows the 12-month percent change in employment. The vertical axis shows the 3-month moving average annualized as a percent change. The size of each plot displays current employment, (May 2017, seasonally adjusted), to compare market size. The 12-month change across the horizontal axis shows longer term job growth, and the 3-month moving average on the vertical axis shows short term employment momentum. You can see that the Hampton Roads region currently trails comparison regions both in annual growth and short-term momentum, nevertheless, autonomously we are making progress.
The opportunity for future regional economic growth is set in the heart of industries we build out today, and consist of members who are not yet here but will want to be when that future comes. Now more than ever, new-to-market attraction is needed, and is fundamentally necessary, as one of the pillars of economic development. It is fundamentally necessary to Hampton Roads to properly scale and improve overall market conditions. Join us and help build our regional industry clusters to fully realize the regional growth opportunities that await.