Modest private sector growth, less uncertainty to help Hampton Roads economy this year


When it comes to economic uncertainty, 2013 was the worst year for Hampton Roads, the director of Old Dominion University's economic forecasting team said after a Wednesday presentation in Newport News. This year should be better for both business and consumer confidence, though.

When 43 percent of the region's economic activity depends on defense spending, sequestration, a partial federal government shutdown and multiple delays in funding the government most likely took a toll on the Hampton Roads economy last year, Vinod Agarwal told attendees of the quarterly economic update at the City Center Marriott. Defense spending dropped by 1.7 percent and the region shed 1,600 federal, state and local government jobs, according to the ODU report.

Spending cuts and budget uncertainty led to a reduction in travel by military personnel, government employees and contractors throughout the year, resulting in a drop in hotel revenue in the region of 1.3 percent and a drop in the state of 2.2 percent. Both lag behind the national hotel revenue growth of 6.2 percent last year. From September to December, the region saw a 4.7 percent drop in hotel revenue, which coincided with the partial government shutdown in October.

Despite all this, the port, health-care industries and tourism is expected to help the economy expand by 2.2 percent this year, although that's still below the region's half-century annual average of 3.1 percent. The private sector, which the region's economic growth will depend on, added 9,050 jobs from 2012 to 2013, he said. The jobs recovery, while slow, is moving in the right direction. Employment increased by 1 percent, with 7,726 more people finding jobs compared to 2012.

Defense spending in the region should increase this year, as the budget provided for $22.5 billion in sequestration relief in fiscal year 2014 and a 1 percent pay increase to federal civilian workers, Agarwal said. Congress also appropriated money to run the government in January, easing concerns.

"We really don't know what in the world is going to happen in defense spending in 2016 and beyond," Agarwal said.

After the forecast, Greg Garrett of Greg Garrett Realty called sequestration and the partial government shutdown "economic hurricanes" for the region. Yet, he pointed out that the median home sales price still increased 2.7 percent in 2013. He said increasing home prices, albeit gradually, shows the housing market is past the bottom, which could help prospective buyers regain confidence in homes as an investment.

The housing market is moving in the right direction in terms of sales volume and supply, but foreclosures and short sales need to get below 10 percent of home sales for a healthy market, Agarwal said. In March, distressed properties comprised one in four sales. To move them out of the market, Agarwal said it will take about two to three years while Garrett estimated five to six years.

Garrett wanted more information on how underwater homeowners, who owe more on their mortgages than their homes are worth, are affecting the housing market because they can't sell and free up inventory. His firm manages the homes when homeowners choose to rent them out.

Garrett said pent up demand, job confidence and the spring and summer buying season should help.

"The biggest thing is the huge fear is over," Garrett said.

Bozick can be reached by phone at 757-247-4741. Sign up for a free weekday business news email at

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