2016 Economic Outlook forHampton Roads

Prepared for the Virginia Senate Finance Committee Annual Retreat

November 19, 2015

Larry “Chip” Filer, Ph.D.www.odu.edu/forecasting

• The Hampton Roads economy has been particularly stagnant during the post‐recession time period.

• The overwhelming force behind this is the contraction of federal spending.

• Private sector industries are NOT necessarily private sector.– Ship Repair– Mod/Sim– IT

1

Overview

Virginia US VA Share

FY 2010 $100.4 $2,483.5 4%

FY 2011 $117.7 $3,291.1 4%

FY 2012 $114.4 $3,707.7 3%

FY 2013 $92.8 $2,917.4 3%

FY 2014 $91.8 $2,763.8 3%

FY 2015 $67.2 $2,214.7 3%

FY2012-FY2015 -33% -11%

2

Federal Spending Trends in Virginia(In Billions)

Metro Real GDP Growth

3Source: Bureau of Economic Analysis 

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Richmond, VA Virginia Beach-Norfolk-Newport News, VA-NC

Washington-Arlington-Alexandria, DC-VA-MD-WV US

Real GDP Growth 2014

US 2.42

Richmond 1.61

NOVA 0.27

Hampton Roads -0.14

Post‐Recession Real GDP Growth (2009‐2014)

4

2.36 2.35

2.05

1.401.15 1.06 1.00

0.31 0.280.14

-0.18

-0.50

Source: Bureau of Economic Analysis 

Metro Area Economic Conditions Indexes

5

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

2009-01-01 2009-10-01 2010-07-01 2011-04-01 2012-01-01 2012-10-01 2013-07-01 2014-04-01 2015-01-01

Va Beach/Norfolk Richmond NOVA

Source: St. Louis Federal Reserve Bank 

-15.00%

-10.00%

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

1/1/

2009

4/1/

2009

7/1/

2009

10/1

/200

9

1/1/

2010

4/1/

2010

7/1/

2010

10/1

/201

0

1/1/

2011

4/1/

2011

7/1/

2011

10/1

/201

1

1/1/

2012

4/1/

2012

7/1/

2012

10/1

/201

2

1/1/

2013

4/1/

2013

7/1/

2013

10/1

/201

3

1/1/

2014

4/1/

2014

7/1/

2014

10/1

/201

4

1/1/

2015

4/1/

2015

7/1/

2015

Hampton Roads Local Option Sales Tax RevenuePercentage Change from Year Ago

6Source: Weldon Cooper Center, University of Virginia 

Comparison of Unemployment Rates by Metro

7

7.6

8.7

6.56.9

8.3 8.37.9

6.5

4.74.3

3.6

4.24.6 4.5

4.3 4.3

3.6

4.1

3.0 2.9

4.0

3.5 3.4 3.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Hampton Roads Blacksburg Charlottesville Harrisonburg Lynchburg Richmond Roanoke NOVA

December 2009 August 2015 2000-2007 Avg.

Source: Bureau of Labor Statistics 

2.90%

0.70%

-2.85%

-8%

-6%

-4%

-2%

0%

2%

4%0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 105

Dec

line

from

Pre

-Rec

essi

on P

eak

Month After Pre-Recession Peak

USA VA Hampton Roads

The 2007‐2009 Recession Including Virginia and Hampton Roads% Decline in Total US Non‐farm Payroll Employment from Pre‐Recession Peak

U.S.

Virginia

HamptonRoads

8Source: Bureau of Labor Statistics and ODU Forecasting Project calculations 

9-15000 -12000 -9000 -6000 -3000 0 3000 6000 9000 12000 15000

Recession Recovery NetSource: Bureau of Labor Statistics 

Health Care and Social Assistance

Professional and Business Services

Leisure and Hospitality

Manufacturing

Financial Activities

Educational Services

Retail Trade

Transportation and Warehousing

State Government

Federal Government

Wholesale Trade

Mining, Logging, and Construction

Information

Local Government

Hampton Roads Average Job Gains and Losses (2007‐present) 

1686

636

0

200

400

600

800

1000

1200

1400

1600

1800

10

Ship Repair and Ship BuildingNew Hires

Source: Quarterly Census of Employment and Wages (Bureau of the Census) 

7.30%

1.90%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

11

Ship Repair and Ship BuildingNew Hires as a Percent of Average Employment

Source: Quarterly Census of Employment and Wages (Bureau of the Census) 

2242

614

0

500

1000

1500

2000

2500

12

Ship Repair and Ship BuildingEnd of Quarter Hires (worker started in given quarter and continued to next quarter)

Source: Quarterly Census of Employment and Wages (Bureau of the Census) 

450

500

550

600

650

700

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Bill

ions

of d

olla

rs

BCA 2011 Sequestration BBA 2013 BA 2015

FY16 as proposed will be $28.9 Billion lower than the BCA 2011 levels, but $25 Billion higher thanSequestration levels. 

13

Caps on Department of Defense Discretionary SpendingFY 2012 to FY 2021

Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report  and the Old Dominion University Economic Forecasting Project. 

Estimated Direct DOD Spending in Hampton Roads

Source: U.S. Department of Defense and the Old Dominion University Economic Forecasting Project. *Includes Federal Civilian and Military Personnel and Procurement

Billion

s of $

10.00

19.27 19.3218.35

18.8018.70

0

5

10

15

20

252000 to 2015 

14

15

Hampton Roads Gross Regional Product Attributable to DOD Spending

39.3%40.3%

44.9%48.8%49.5%

32.8%

0%

10%

20%

30%

40%

50%

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010 2011

2012

2013

2014

e20

15f

1984‐2015 

Source: ODU Forecasting Project Estimates 

Net Operating Income for the Port of Virginia

16

‐25

‐20

‐15

‐10

‐5

0

5

10

15

20

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015YTD

-$15.4 m.

+$16.1 m.

Port of Virginia TEUs

17

2,1282,393

0

500

1,000

1,500

2,000

2,500

3,000

Thou

sand

s

TEUs increased by 7.6% in 2014.  Loaded TEUs increased by 6.2%, but empty TEUs increased by 17.2%. 

Number of Existing Short Sale and REOs Residential Homes Sold

Hampton Roads: 2006‐ 2015*

18Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed. 

* Data for 2015 is through September 2015. 

Year All Sales

2006 22,405

2007 19,152

2008 15,047

2009 15,849

2010 14,696

2011 15,817

2012 16,856

2013 18,791

2014 18,700

2015* 15,731

Short Sales Percent Short Sales

3 <1%

40 <1%

217 1.4

598 3.8

784 5.3

1,127 7.1

1,644 9.8

1,769 9.4

1,347 7.2

959 6.1

REO Sales Percent REO Sales

56 <1%

223 1.2

833 5.5

2,271 14.3

3,021 20.6

4,213 26.6

3,337 19.8

3,178 16.9

2,744 14.7

1,970 12.5

19

Median Sale Price of Existing Residential Homes

Hampton Roads: 2002‐2015*

Year Median Price Percent change year to year

2002 $116,900  7.3%

2003 $130,000  11.2%

2004 $156,500  20.4%

2005 $192,000  22.7%

2006 $214,900 11.9%

2007 $223,000 3.8%

2008 $219,000 ‐1.8%

2009 $207,000 ‐5.5%

2010 $203,900 ‐1.5%

2011  $180,000 ‐11.7%

2012 $185,000 +2.78%

2013 $190,000 +2.70%

2014 $193,205 +1.70%

2015* $204,900 +5.13%*

Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed. 

* Data for 2015 are through September 2015 and are compared to median price ($194,900) through September 2014

90% increase from 2002‐07

19% decreaseFrom 2007‐11

Performance of the Hampton Roads Economy

20

YTD Sep2014

YTD Sep2015

% Change

Civilian Labor Force 847,542 841,042 ‐0.77

Employment 798,191 797,099 ‐0.14

Unemployment 49,351 43,942 ‐10.96

Unemployment Rate 5.82% 5.22%

‐Civilian Non Farm Jobs 752,089 757,956 +0.78

Number of Jobs added since previous December

1,600 2,900

New Auto Registrations (Aug‐Aug) 55,106 57,709 +4.72

Taxable Sales (Aug‐Aug) $13.72B $14.22B +3.60

YTD September 2014 and YTD September 2015

Performance of the Hampton Roads Economy

21

YTD Sep2014

YTD Sep2015

% Change

Hotel Revenue $572.30M $606.72M +6.01

General Cargo Tonnage 13.75M 15.12M +9.93

TEU Containers 1,759,894 1,915,293 +8.83

Number of 1 Unit Housing Permits 2,949 3,198 +8.44

Value of 1 Unit Housing Permits $612.44M $678.49M +10.79

Number of Existing Homes Sold 14,077 15,733 +11.76

Distressed Homes as a percentage of all Existing Homes Sold 

22.31 18.62

Median Price of Existing Homes Sold $194,900 $204,900 +5.13

YTD September 2014 and YTD September 2015

2015 Forecast 2016 Forecast

US VA HR US VA HR

Real GDP Growth 2.39% 1.33% 1.10% 2.98% 1.98% 1.27%

National and State Forecast for Real GDP Growth 2015 and 2016

22Source: Old Dominion University Economic Forecasting Project. 

23