ODU ECONOMISTS: DON’T EXPECT SWIFT RECOVERY
Annual State of the Region report documents drastic changes brought by the pandemic
This was supposed to be Hampton Roads’ year — the year its economy grew faster than the nation’s.
Instead, the global coronavirus pandemic cost the region its rosy future and exposed systemic economic inequality, according to the annual State of the Region report by Old Dominion University economists released Tuesday.
“We are witnessing an economic, social and public health shock the likes of which has not been seen in this country since the Great Depression,” said the report’s authors. “To expect a smooth and swift recovery is to ignore the evidence.”
There was a glimmer of hope among the downtrodden facts and figures, though, that this cataclysmic event could offer a bit of a clean slate to craft policy that could forge a more equal economic future.
“We must reimagine what recovery will look like in a changed world. This is a time to question assumptions and old ways of doing things,” the report’s authors said.
Even the event held to announce the report wasn’t the norm. Presented by the Hampton Roads Chamber, the annual presentation usually attracts several hundred people to a ballroom at the Norfolk Waterside Marriott. This year there were about 120 people all wearing masks sitting far apart at spaced tables of five seats each. Several, despite being sponsored, were empty. Another 170 people were watching a livestream from home, according to the chamber.
“We’re here, which is sort of a testament to the resiliency of the region,” said ODU economist and Dragas Center Director Robert McNab, as he began his presentation with Dragas Center Chief Administrative Officer Barbara Blake.
The report, filled with charts and graphs and data points, leads with a quote from revolutionary philosopher Thomas Paine from late December 1776, as 13 colonies fought for political independence:
“Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.”
How bad has it been?
It took Hampton Roads 10 years, from the deepest point of recessionary job loss in February 2010 to February 2020, to add 65,100 jobs as it recovered from the Great Recession and sequestration. It took just one month for it to all be lost again.
An unemployment rate for the region that had hovered between 2.7% and 3.8% for all of 2019 and the first three months of this year, spiked to 12.1% in April before dropping to 10% in May and 9.2% in June and July, according to the U.S. Bureau of Labor Statistics.
During the Great Recession of 2007-2009, the worst figure for first-time unemployment compensation claims in Hampton Roads, 10,660, came in August 2010. In April of this year, there were 76,723, according to the report.
The report estimates that 1 in 10 Hampton Roads workers received some form of unemployment compensation at the height of the pandemic’s effects.
The pandemic has had unequal consequences. The report notes that Black residents in Hampton Roads comprise about 30% of the population, but accounted for about half of all COVID-19 infections through July. And by the end of June, nearly half of the jobless workers in Hampton Roads receiving unemployment benefits on a weekly basis were Black workers.
Women, who account for 50.9% of the population, have also been disproportionately affected by layoffs, accounting for 58.9% of continued unemployment claims in June.
The report said the region’s economy — reliant largely on the performance of the military, tourism and the port — has normally weathered recessions better than other regions because of Department of Defense spending. This time, though, tourism and the port suffered more than usual.
“A return to growth in the region rests on the ability of these sectors to recover, and that is to come only with universal masking, more testing, quicker test results, more therapeutics and, finally, effective vaccines,” the report said.
The percentage of booked hotel rooms in the region took steep falls compared to the year prior, even though Hampton Roads was among the highest occupancy levels of 25 large tourist destinations observed by data tracking firm STR during the pandemic.
In March, hotel occupancy was 40.1% compared with more than 60% the year before. In April, the rate fell to 31% compared with nearly 70% in 2019. While it picked up in May (39.3%) and June (54.9%) the numbers were a far cry from the previous year. Occupancy reached 77.7% in June 2019.
Hotel revenue dropped precipitously from June of last year to June of this year: $107.8 million to $58.4 million.
As for the Port of Virginia, it faced a global trade war first and then a pandemic that stymied worldwide commerce. It has lost a bit of market share to other East Coast ports, according to the report, dropping from 16.5% in 2019 to 16.2% in the first five months of 2020.
Import container tonnage peaked at 1.03 million in April 2019, and had dropped to 853,421 in April 2020. In the same month, export container tonnage dropped from 939,488 last year to 801,749 this year. It has been down in both categories each month, year over year, from March through August.
The report, citing a U.S. Census Bureau Small Business Pulse Survey, said one in seven small business owners in Hampton Roads had to close their operations for at least one day a week even after some of Virginia’s coronavirus restrictions had been lifted. Of those owners surveyed in May and June, 35% said the pandemic had had a large negative impact. By August, the percentage had dropped to 29%.
One of the few industries to see better days amid the pandemic has been residential real estate, which has seen few foreclosures and an increase in homes sold (2,754 in June 2020 versus 2,660 in June 2019) and median sale price ($254,900 in June 2020 versus $245,000 in June 2019). The report’s authors attribute much of that to historically low interest rates encouraging home purchases even amid so much uncertainty, extra weekly unemployment benefits that allowed people to keep paying mortgages, and the disparate effects of layoffs that have largely affected lowwage workers versus homeowners who may have been able to work remotely.
The report is blunt in its warning that the region as a whole will not bounce back swiftly.
“We should avoid wishful thinking about the coronavirus and the region’s economic recovery,” according to the report. “We must temper our expectations and accept that a recovery will not be quick or smooth. In all likelihood, we should not expect a full recovery until at least 2022, although we would be happy to be proven wrong on this point.”
Asked later for a best-case scenario for economic recovery — if vaccines were widely available, if everyone took a vaccine and if everyone kept wearing masks — McNab said it could happen by mid-to-late 2021. But that’s a lot of “ifs.”
He said there will need to be a reset on what everyone perceives as normal.
“Trying to impose normality doesn’t work,” he said. The virus, he reminded, is apolitical and “gets the ultimate vote.”
Bryan Stephens, the Hampton Roads Chamber’s president and CEO, attempted to end the event on an optimistic note — relaying a story about how someone had told them they canceled a faraway vacation during the pandemic to instead vacation closer to home and reminding attendees that they live in a place where other people vacation.
“Sometimes we’re blinded by the trees because we live in the forest,” he said. He noted ongoing work behind the scenes by regional groups to attempt to lessen the pandemic’s effects, too.
“Things are happening that most people don’t see,” he said.
Don’t despair, Hampton Roads’ economy will recover, “if we work together,” he said.
McNab, too, left open the possibility for hope.
“The light at the end of the tunnel is not a train,” he told the masked crowd.