Despite Labor Market, Inflation Worries, ODU Economic Forecast Predicts a Solid 2022 Economy
There are still worrying signs, but also strong signals the Hampton Roads economy has weathered the worst of the COVID-19 pandemic.
The annual Economic Forecast, delivered Jan. 26 by economists from ODU's Dragas Center for Economic Analysis and Policy, pointed to areas of strength in the local economy - balanced by the sobering reality that our local workforce is not growing, working against our region's economic recovery.
Following a quick rebound from the sudden loss of jobs in the first wave of COVID-19, total employment in Hampton Roads has been stagnant since August 2020, leaving the region nearly 40,000 jobs short of the pre-pandemic peak.
"The million-dollar question is will our recovery be like the Great Recession" following the 2007-09 housing crisis, said Economic Forecasting Project Director Vinod Agarwal, an ODU professor of economics. "It took our region a decade to recover everything we lost."
At the same time, Agarwal showed indicators of real strength in the Hampton Roads economy in 2021. The Port of Virginia is seeing dividends from its infrastructure investments of the previous decades. The hotel economy in this region - not as burdened by the continued lag in business travel - saw the strongest growth among comparable metro regions in the country.
ODU economists are predicting real GDP growth in the region of 2.4% in 2022, buoyed by defense, the port, hotels and sustainable increases in the local housing market. "We're quite positive for the Hampton Roads economy for 2022," Agarwal told the audience of more than 100 community and business leaders at the annual luncheon presentation.
However, Dragas Center Director Robert M. McNab, who led off the Economic Forecast with a look at the national and Virginia economies, suggested any economic discussion - even a forecast - would be incomplete without examining inflation, supply chain and worker shortage challenges, which he showed are linked strongly.
McNab said the unprecedented steps the federal government took to support workers who lost jobs due to COVID-19 and provide economic stimulus for the broader economy resulted in unusual behavior. "Instead of spending less during a recession, people spent more," he said. This has resulted in pressures on the supply chain to keep up with consumer demand.
"And when you have a lot of money changing hands, you end up with this thing called inflation."
In addition, the personal toll of the pandemic, as well as financial incentives in and out of the workplace, has caused a lot of employees to leave their jobs, either to stop working early or simply utilize their once-in-a-generation bargaining power to seek more for the work that they do.
"We're seeing the Great Resignation concentrated in baby boomers. For younger workers, we are seeing the Great Renegotiation as they seek better opportunities," McNab said.
The Dragas Center for Economic Analysis and Policy in the Strome College of Business at Old Dominion University undertakes a wide range of economic, demographic, transportation and defense-oriented studies. Since 1999, the Dragas Center has produced influential State of the Region Reports for Hampton Roads.
The Center also conducts forecasts for the U.S., Virginia and Hampton Roads and produces the State of the Commonwealth Report. For more information, including previous State of the Region and Commonwealth Reports, as well as Economic Forecasts, visit the Dragas Center Website.
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