Koch, Wagner Deliver 15th Annual State of the Region Report

October 07, 2014

James V. Koch

The economy in Southeastern Virginia is recovering, albeit slowly, according to the 15th Annual State of the Region report for Hampton Roads.

The report, delivered this morning at an event in downtown Norfolk by James V. Koch, Old Dominion University Board of Visitors Professor of Economics and President Emeritus, and Gary A. Wagner, Professor of Economics, included an intense focus on pocketbook issues, because of the significant economic slowdown, whose effects are still being felt nationwide.

"The bottom line is that economic development is a long-term process," Koch said, to an audience of more than 1,000 at the Norfolk Marriott Waterside. "We look for the quick fix, we look to something that is flashy."

Instead, Koch told the audience that rebuilding the area's economy battered by the Great Recession and then the military spending reductions mandated by sequestration will take longer term investments in things like K-12 education, infrastructure, and research. "We delude ourselves if we think we can take a short-term approach."

The Great Recession caused unemployment in Hampton Roads to more than double, from 3.4 percent in April 2008 to 8.2 percent in January 2010. Department of Defense (DOD) spending cushioned the blow felt by the region, compared to other areas of the United States. Direct DOD spending for 2014 is below 2012 levels, and that doesn't even factor in inflation.

And without two major defense contracts won by the Newport News Shipyard in the past two years, Hampton Roads would be in a recession, Wagner said.

Wagner, a member of Old Dominion University's Economic Forecasting Team and co-author of the State of the Region report, said the specter of further military spending reductions means the region is far from free of economic challenges today, despite the improving national economy.

"I think the Hampton Roads region is just starting to feel the effects of sequestration," Wagner said in his presentation, which led off the breakfast event. "And as bad as things are (because of forecast freezes in DOD spending for the next two years) it could get worse. It's a bumpy couple of years ahead for Hampton Roads."

This year's State of the Region report, published by ODU's Regional Studies Institute, examines a wide array of Hampton Roads issues, ranging from economic challenges to the probable effects of vehicle tolls on area residents.

The report notes that despite the challenges the region faces, there are bright spots in the regional economic picture, including significant job growth in the health care sector, and a busier-than-ever Port of Virginia.

In the past two years, the Port of Virginia came out of the Great Recession at a rapid pace, gaining market share from other ports on the East Coast. Better management of logistics, including the opening of the Portsmouth Marine terminal and software efficiencies, helped make the Hampton Roads region more competitive for cargo. In addition, the natural deepwater Port of Virginia is well-positioned to take advantage of the larger ships that will transport cargo through the expanded Panama Canal, when it opens in 2015, Wagner said.

In his presentation, Koch focused on a handful of topics in the 2014 State of the Region report, including the growth of megachurches in Hampton Roads, homeless children in the region, the impact of tolls on the regional economy, and the potential problems faced when communities within Hampton Roads compete with each other for jobs and investment.

Because the economic model has changed, Koch said, the region would be better served on "gardening" the region, investing in things such as high-speed Internet, and research and innovation, cultivating existing firms and encouraging entrepreneurs to invest in start-ups in Hampton Roads.

Old Dominion University has made its own investment in entrepreneurship through the creation of its Strome Entrepreneurial Center, which helps support and nurture entrepreneurs through the entire life-cycle of business start-ups.

The State of the Region report delves in-depth into specific economic topic areas each year, and this year's 15th edition is no different. The 149-page State of the Region report, which received financial support from Old Dominion and a number of local organizations and individuals, Koch and Wagner note that the report does not constitute an official viewpoint of the university.

All 15 of the State of the Region reports may be found at www.odu.edu/forecasting and www.jamesvkoch.com. Single paper copies may be purchased for $25. For more information contact Koch at 757-683-3458 or jkoch@odu.edu.