COVID-19 Colors Midyear National and Regional Economic Forecasts
August 13, 2020
Old Dominion University economists delivered their midyear forecast for an unprecedented year on Aug. 12. This fact was dramatically illustrated by the fact the annual event was two months late, and delivered via Zoom, to an audience of nearly 200 local business leaders.
"It is fair to say that 2020 represents an unprecedented situation" because of the global COVID-19 pandemic, said Robert M. McNab, director of ODU's Dragas Center for Economic Analysis and Policy. "For example, we are speaking to all of you today through tiny boxes on a computer."
McNab, who delivered the national and Virginia midyear forecast update, devoted several slides at the beginning of his presentation COVID-19 and its devastating effect on the worldwide economy. McNab noted that he had mentioned the possibility of a global pandemic during his annual economic forecast presentation in January because of news that was beginning to emerge from China.
The ODU economists predicted the national economy's real GDP would grow at 2.2%, provided the threat of this new disease to the global economy could be controlled. "Obviously, that did not happen," McNab said in his presentation.
Instead, almost all of the 28 million jobs created in the U.S. since the bottom of the Great Recession of 2007-09 vanished in four months. The Dragas Center is now projecting the national economy to contract by more than $1 trillion in 2020 and not fully recover from COVID-19 until 2022.
However, when turning to the Hampton Roads economy, interesting data emerge.
This region's recovery from the Great Recession of 2007-09 has lagged behind just about every major metro area in the United States. While the COVID-19 pandemic crushed the national economy, the data indicate the impact has not been as devastating here.
Vinod Agarwal, chair of ODU's Economic Forecasting Project, said 8.1% of civilian jobs in the Hampton Roads economy were lost between February and June of this year. That is by no means good news, but at the national level, 9.6% of civilian jobs disappeared.
The large share of the local economy comprised of direct federal spending, namely on defense, has acted as a "buffer" to the worst effects of COVID-19, Agarwal said. A planned increase in spending on defense in 2021 will also help fuel this region's economic recovery, he added.
There have been sectors of the local economy hit particularly hard by COVID-19, Agarwal said, especially tourism and the local hotel industry, with room revenue declining by 80% at the beginning of May, and still 30% lower than 2019 at the beginning of August.
The Port of Virginia has seen a decline in container traffic of between 10% and 20% from 2019 in the past two months, the most recent data available.
The presentations by the ODU economists are available on the Dragas Center website.
ODU's Dragas Center for Economic Analysis and Policy has for more than 20 years been an independent explainer and forecaster of economic data here, in the Commonwealth and nationally.