A sellout crowd gathered in the Big Blue Room of Old Dominion's Ted Constant Convocation Center heard good news from University economists about a national economic expansion that has lasted more than a decade.
Hampton Roads business leaders also heard an optimistic picture of a local economy growing faster than its national counterpart for the first time since that expansion started.
ODU's Dragas Center for Economic Analysis and Policy delivered the annual forecasts of the Hampton Roads economy, as well as snapshots of the Virginia and national economies, during a Jan. 29 event hosted on the Old Dominion campus for the first time.
Vinod Agarwal, professor of economics and founder of the University's Economic Forecasting Project, said the good news is likely to continue into 2020.
"We forecast that real GDP in Hampton Roads will rise by 2.6% in 2020. Not only will 2020 be the fourth consecutive year of economic growth in the region, growth locally will surpass that of Virginia and the United States," Agarwal said.
This is largely due to a surge in Department of Defense spending, something which is poised to increase even more if the United States engages in a competitive military buildup with its geopolitical rivals Russia and China.
The gains in the local economy are also due to increased spending in the hospitality and tourism industry, as well as sustained traffic through the Port of Virginia, the other two "legs" of the three-legged stool supporting the Hampton Roads economy.
Agarwal said threats to continued expansion exist, including a shortage of trained workers in professional and skilled manufacturing job sectors. "If you have workers, someone is looking at your workers, saying, 'We want you,'" Agarwal said.
Other threats exist outside of the region's borders, such as a prolonged trade dispute with China and the ballooning federal deficit.
Bob McNab, professor of economics and director of the Dragas Center, delivered the Virginia and national forecasts. He said that economic growth nationally and statewide in Virginia are likely to slow, but that modest expansion is poised to continue for 2020. "All in all, the expansion has been very good news for the overall economy," he said.
"We are concerned, however, that the gains of the last decade have left a number of Americans behind," McNab said, noting that real median earnings increased by only 1.6% in 2019, despite a generationally low national unemployment rate of 3.7%.
Gains in equities markets resulted in significant wealth generation for the half of Americans with investments, but "the Federal Reserve reported in May 2019 that 39% of Americans could not weather a $400 unexpected expense and that 25% of adults avoided necessary medical care in 2018 because they were unable to afford the expense."
At the same time, simultaneous tax cuts and increased federal spending have driven the deficit to more than $1 trillion, an unsustainable strategy in the long term. "Ultimately, there will be a financial reckoning," McNab said.
The report called for Virginia to continue to resist the lure of expansion through government spending. "The Commonwealth has wisely increased its Revenue Stabilization Fund, and we believe it would be prudent to continue to prepare for the next economic downturn, whenever it comes," the Economic Forecast noted.
Old Dominion's annual Economic Forecast, now under the University's Dragas Center for Economic Analysis and Policy, is seen as an influential harbinger of the year ahead, both nationally and in Hampton Roads.
For more information on the 2020 Economic Forecast, visit Old Dominion's Dragas Center Website.
Economic Forecast Hampton Roads predictions
ODU economists made the following predictions about the Hampton Roads economy in 2020:
- Real GDP will grow by 2.6%.
- Hotel revenue will grow by 2.7%.
- Civilian nonfarm payrolls (jobs) will grow by 0.7% and the annual average unemployment rate will be 3% in 2020.
- The Port of Virginia will see a 1% increase in total cargo tonnage and a 3.9% increase in TEUs (20-foot equivalent units).
- The value of single-family housing permits in Hampton Roads will increase by 2%.
- Retail sales in the region will grow by 4.2%.
Economic Forecast National and Virginia predictions
ODU economists made the following predictions about the Virginia and national economy in 2020:
- U.S. real GDP will increase at an annual rate of 2.2%. The Virginia real GDP will increase at an annual rate of 2%.
- Nationally, the unemployment rate will average 3.7% in 2020 while Virginia's unemployment rate will average 2.7%.
- The federal government will have $1.1 trillion annual deficit in Fiscal Year 2020 and a continued $1 trillion or greater annual deficits for the foreseeable future.