NORFOLK, Va. — A new report from Old Dominion University (ODU) is predicting the United States economy will continue to slow down in the second half of 2022 amid fears of a recession.
ODU's Dragas Center for Economic Analysis and Policy released the report Friday morning, hours after the Department of Labor announced inflation rates hit a four-decade high. It's the center's mid-year report, following one released in January.
The report states that continued inflation, rising interest rates and fears of a recession will hamper economic growth in the U.S., Virginia and Hampton Roads in the long run.
"Inflation, increased in part by continued supply-chain shocks and Russia’s invasion of Ukraine, will slow but inflationary expectations continue to harden," ODU economists wrote. "The lingering and continuing impacts of the COVID-19 pandemic will continue to disrupt the efficient operation of global markets."
The report's findings contrast what ODU economists predicted in January: a solid 2022 economy that weathered the worst of the COVID-19 pandemic, despite concerns about inflation, supply chain issues and workforce shortages at the time.
What does this look like for people in Hampton Roads and across Virginia?
Virginia, Hampton Roads GDP could increase this year
According to the report, ODU economists predict the U.S. gross domestic product (GDP) will increase at an annual rate of 2.2% in 2022. That's the measurement of the value of the finished goods and services produced in the U.S.
Virginia's GDP growth is looking even brighter with an annual rate increase of 2.4% in 2022, largely due to increases in federal discretionary spending.
Hampton Roads’ GDP is forecasted to be the same as Virginia's, 2.4% in 2022, due primarily to anticipated increases in defense spending.
Long-term outlook for Hampton Roads' labor market lags
According to the report, Hampton Roads' civilian labor force and individual employment in the region declined by about 45,000 and 50,000 people, respectively, since February 2020.
While the official unemployment rate declined to 3.3% in April 2022, it was primarily driven by people exiting the labor force instead of a robust recovery in employment.
The report also found there were 3.0% fewer jobs in Hampton Roads than before the pandemic, measured in April 2022. For comparison, in Richmond and Northern Virginia, there were 2.5% and 1.0% fewer jobs, respectively.
ODU economists predict job growth could pick up in Hampton Roads later this year as more defense spending pours into the region, but right now, the region continues to lag.
"Unless concerted regional action is taken to lift economic growth, Hampton Roads will underperform its peers in the coming years," ODU economists wrote.
Beyond Hampton Roads, ODU economists believe labor market conditions will continue to improve nationwide and in Virginia. Across the country, the civilian labor force (those working or looking for work) and individual employment will exceed pre-pandemic levels in the second half of 2022.
The unemployment rate will continue to drop in the second half of 2022, reflecting increasing competition for labor. But slowing economic growth will lead to slower growth in individual employment and jobs in the second half of 2022.
Hotel revenue, cargo tonnage on the rise. Housing demand could slow down.
ODU economists said the region's hotel industry not only recovered all its losses observed in 2020, but nominal revenue was also approximately 9% higher in 2021 compared to 2019.
In 2020, nominal hotel revenue declined by over $300 million (approximately 35% year-over-year).
"Hotels in the region continue to outperform their peers across the Commonwealth and nation due primarily to its dependence on leisure travelers," the report said.
In 2021, the Port of Virginia handled more than 3 million twenty-foot equivalents of cargo. While other ports had issues with congestion, the Port of Virginia had fluid and congestion-free operations last year.
"The increasing demand for imports by American consumers and businesses will likely fuel another record year in 2022 by the Port of Virginia," ODU economists wrote.
After 2020 and 2021 were banner years for Hampton Roads' housing market, rising interest rates are likely to dampen demand somewhat in 2022 and into 2023.
During the pandemic, the demand for residential housing has outstripped supply, leading to significant increases in home values and median sales prices.