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Defense spending and COVID-19 will drive Hampton Roads economy in 2021

ODU forecasters offer cautious optimism about the coming year, predicting that Gross Domestic Product and jobs will increase and unemployment will drop.

NORFOLK, Va. — The coronavirus pandemic has dominated virtually every aspect of life in America these past 10 months, and it will frame the Virginia and Hampton Roads economic forecast for 2021.

That was the word Wednesday from the Old Dominion University Dragas Center for Economic Analysis and Policy.

"I think the most immediate impact is the pandemic," said Bob McNab, the Dragas Center's director and a professor of economics. "We will feel shockwaves from this for years to come."

"If you look at the mortality caused by COVID-19, they're approaching roughly 450,000. Substantial. However, it has not led to... the structure of the economy has not faltered," said Deputy Director Vinod Agarwal, who is also a  professor of economics.

From a year ago, before the crisis began, until now, in Virginia there are 164,000 more people who are not in the labor force and there are 374,000 fewer people who are employed.

Unemployment claims are currently at 63,000 in the state. That's way down from the 403,000 claims at the height of the outbreak in May, but it's still up from the 21,000 prior to the crisis.

But, Hampton Roads' ace in the hole is the region's large military presence.

"Our fortunes rise and fall with DoD," said Agarwal.

ODU's economists predict defense spending will increase locally in 2021 to $24.5 billion, up from $23.3 billion in 2020. The ODU team predicts if the daily COVID cases and deaths decline as vaccine distribution improves, the local economy will improve.

They forecast that Hampton Roads' Gross Domestic Product in 2021 will increase by 4.4 percent, civilian job growth will increase by 4.7 percent, and unemployment will drop to 4.8 percent.

Still, they warn a complete recovery will not occur until the second half of the decade.