Report finds positive economic news, but challenges remain
The 24th annual State of the Region report examines the performance of the Hampton Roads economy and asks how we can lean into our strengths to sustain our recently improved economic performance.
First, the good news. In 2021, real (inflation-adjusted) gross domestic product in Hampton Roads increased by 6.1%, moving the region into the top third of metropolitan areas in terms of economic performance. We estimate the regional economy grew by 2.4% in 2022 and project 2% growth in 2023. If we are correct, this will mark the first time the regional economy has grown in three consecutive years since before the Great Recession of 2007-09.
In August, a record 878,411 individuals in Hampton Roads reported they were working or actively looking for work. Among this group, 852,602 reported they were employed, another record for the region. The regional unemployment rate In August was 2.9%, only slightly higher than the 2.8% rate in February 2020.
Defense spending in the region increased in 2021 and 2022, and we estimate that the Department of Defense will spend more than $26 billion here in 2023. If defense spending continues to grow at the projected rate of inflation, we forecast that DoD spending in Hampton Roads could top $30 billion by 2026.
In 2022, the Port of Virginia moved a record 3.7 million twenty-foot equivalent container units (TEUs), and average TEUs per container vessel call reached a record of 2,600. In 2023, ports across the United States experienced a downturn in the number of loaded TEUs moving through their facilities. While the number of loaded TEUs through the Port of Virginia declined (so far) in 2023 when compared to 2022, these declines were less for the Port of Virginia than many other ports across the United States.
In 2022, hotel revenues in the region exceeded $1.1 billion and
we expect another record year in 2023. If we compare year-todate hotel revenues for August 2019 and August 2023, Hampton Roads hoteliers outperformed the commonwealth and the nation. Year-to-date rooms sold in the region were up by 1.3% in August relative to August 2019 while rooms sold declined in Virginia and nationally.
We cannot, however, brush aside data that highlights challenges we face. Even though monthly inflation moderated to 3.7% in August and should decline further in coming months, the spike in prices reduced the purchasing power of residents throughout the region.
Hampton Roads occupies a distinctive position among large metropolitan areas in the United States in that about $4 out of every $10 of economic activity can be traced back to federal government spending. If Congress does not pass appropriations bills in a timely manner, the economic impact will be proportionally higher here than in Richmond, Raleigh or Charlotte.
Lastly, we should be aware of the total number of jobs in the region but also recognize that it may be harder to move the needle in Hampton Roads than other regions because of our relationship with the federal government. Economic diversification can
insulate the region (somewhat) from the politics inside the halls of Congress.
Hampton Roads should lean into our strengths in the maritime industry, health care and sciences professions; advanced manufacturing; and efforts in renewable energy and unmanned systems. These industry clusters grew over the last decade faster than the regional economy. Average wages in these clusters were also $20,000-40,000 higher than the regional average. As these industry clusters grow, wages and employment will rise, boosting the economic fortunes of the region and its residents.
Each new year brings new
challenges, and we applaud efforts by local leaders to work together to attract jobs, raise incomes and improve economic growth in the region. With clear eyes on the data, we can move forward to a future that improves the lives of all the residents of Hampton Roads.
Robert M. McNab is director of
Old Dominion University’s Dragas Center for Economic Analysis and Policy and chair of the Department of Economics. Vinod Agarwal is the director of Old Dominion University’s Economic Forecasting Project. The 2023 State of the Region Report is available online at ceapodu.com.