NORFOLK, Va. — All eyes are on the Federal Reserve and what rising interest rates could mean for economic growth.
Retired Tidewater Community College business and economics professor Peter Shaw said we could be on the brink of a recession.
“You have what we call a 'perfect storm' to head towards a recession," Shaw said. "Me personally, I think the recession going into 2023, is a 60-40 shot in favor of it.”
And Regent University assistant professor Dr. Andrew Root agreed.
“It’s about 80% that a recession is already underway. The way they measure recession is they wait for two quarters of negative GDP growth," Root said. "So I think there’s a very high probability we’re in a recession right now.”
So what does this mean for the Hampton Roads economy? Particularly the region’s tourism industry, from the cruise ships in Norfolk to the hotels at the Virginia Beach oceanfront.
Root said people want to travel, so he expects tourist traffic will be up this year, but people will likely spend a little less.
“People will start to trade down from, say, the nicest item on the menu at a restaurant to something a little more middle-tier," Root said. "And maybe they won’t go for the appetizer and the dessert, they’ll start to make choices because there’s a real effect of gas prices on their budget."
He said people in the tourism industry he’s spoken with have noticed less people are spending money.
"It’s very clear that customers have started to trade away from the most premium products from some luxury experiences to some more middle-of-the-road type things," Root said. "So it’s pretty clear that’s happening and it really coincided with gas prices.”
Shaw agreed the skyrocketing prices of fuel has taken a bite out of everyone’s budget, so tourists will be less likely to open their wallets.
“Consistently, like 95% of tourists in Virginia Beach drive," Shaw pointed out. "And if you’re paying $6, $7, $8 a gallon to get here…”
The good news is, although a recession is possible, Shaw said he expects it to be pretty short.
“I’m hoping that it’s a very short-term recession, hopefully six months – hopefully no more than nine," Shaw said.
Root said there are a lot of open jobs out there, so he doesn’t expect this recession to be as bad as the financial crisis of 2008.