A common refrain
Annual report urges greater economic diversity in Hampton Roads
Stop us if you’ve heard this before. The Hampton Roads economy is in good shape, but things could be better. An overreliance on federal spending means the region is beholden to Washington’s whims and more vulnerable than other places to federal lawmakers’ penchant for chaos.
Diversifying beyond the traditional pillars of defense, tourism and the Port of Virginia would provide greater stability and insulate the local economy from sudden shocks.
If those all sound familiar, that’s because they seem to be the themes of every “State of the Region” report, the yearly product of economists at Old Dominion University’s Dragas Center for Economic Analysis and Policy. The latest version was released this week.
That’s not a knock at the work, which is always strong and annually delivers compelling insights about Hampton Roads. Rather, it’s a reflection of our collective inability to fulfill its reasoned recommendations, despite years of knowing the challenges facing the region.
This year’s report paints a fairly optimistic picture of economic activity across the region, which is welcome news.
Recovery from the pandemic has been steady, and Hampton Roads posted three consecutive years of growth — 6.5% in 2021, 2.4% in 2022 and an expected 2% in 2023 — for the first time since 2007-09. The region is slowly gaining both population and jobs, and the number of people employed or looking for work is at a record level.
The shine is a little tarnished when compared to other regions in Virginia and our peer areas elsewhere. Places such as Richmond, Charlotte, Raleigh and Charleston, S.C., all far outpace the population growth of Hampton Roads, which is a worrisome trend.
As the report’s authors note, “Jobs attract
people, and people attract jobs.” So positive population growth is good news, but the rate of increase, at only 0.2%, leaves ample room for improvement.
That, in turn, speaks to the need for greater diversification in the regional economy, an annual concern that receives knowing nods from elected office holders, economic development officials, business leaders and, likely, the general public.
Yes, military spending (both direct and indirect), hospitality and tourism, and commerce connected to the Port of Virginia continue to represent the vast majority of economic activity in Hampton Roads. Importantly, since the region accounts for about 20% of Virginia’s population, that means the commonwealth’s economy is reliant on those sectors as well.
Thankfully, all of those areas are humming along.
Defense budgets continue to grow and the array of challenges facing this country and its allies mean that is unlikely to change. As the home of the nation’s most important military facilities, Hampton Roads will continue to rely heavily on Pentagon spending.
Hospitality and tourism took a huge hit during the pandemic but few regions have seen such rapid recovery as has been witnessed here once COVID restrictions ended and people returned to our beaches, historical sites, entertainment attractions and large-scale events.
And the Port of Virginia sets new records seemingly every month, with continued modernization and improvements supported by smart investment using local, state and federal dollars. Continued growth at the port spreads prosperity and opportunity throughout the region.
But as in previous years, the report’s authors warn that, despite the health of those sectors, problems in one area could be deeply problematic for the region, as was seen during federal budget sequestration a decade ago or, more recently, when the pandemic throttled tourism.
That’s the age-old challenge, but there are promising areas ripe for growth — primarily in green-energy development, but also in warehousing and transportation, health care, construction and drone technology.
Expanding those areas through thoughtful investment in workforce development and site-readiness should be the overarching goal across the region, and area leaders should be pleased to see Richmond standing up to help in the budget agreement last month.
But those efforts need more urgency and the support of a unified Hampton Roads legislative delegation. Without which, we can expect to hear these same warnings next year.