THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Monday, January 20, 1997 TAG: 9701200220
SECTION: BUSINESS WEEKLY PAGE: 16 EDITION: FINAL
SERIES: 1997 FORECAST
SOURCE: BY LON WAGNER, STAFF WRITER
LENGTH: 106 lines
The Hampton Roads economy has entered its sixth year of growth, and it's starting to perform like a six-year-old car.
It's getting up there in miles. There's a squeak somewhere in the dashboard. It uses a little more oil than it used to.
But while it may not be able to tool along with the shiny new cars on Interstate 64, it can still stay with the flow of traffic.
And what the heck, it's paid for. In Hampton Roads' case, the growth of the past five years was paid for through defense budget downsizings and the recession of 1990-1991.
If economic growth is expected to be moderate to slow this year, as most regional economists predict, at least it's growth.
To understand the obstacles Hampton Roads' economy faces in posting a good 1997, it's necessary to grasp what kind of momentum it had coming out of last year. The short answer: not much.
The shutdown at NADEP last fall wiped some of the region's highest-paying jobs off the books. The region countered by adding jobs in retail and parts of the service sector in which wages are much lower than for federal civilian employees.
The region's population grew by just 5,000 people, rather than the 17,000 to 18,000 it usually adds, said John Whaley, director of economic services at the Hampton Roads Planning District Commission.
Basically, 1996 wasn't as good as most experts thought at the time. Ironically, that may be something that works in 1997's favor.
``We're coming off some very unfavorable numbers in 1996,'' Whaley said, ``so whatever numbers we get in 1997 are going to look good.''
The region's economy in 1997 should get a turbo-charge from personnel moving into the Oceana Naval Air Station in Virginia Beach. It is uncertain when they will arrive, but at least 900 personnel are expected to take on assignments at Oceana this year.
Again, no one will predict how long it will take for the purchases of those personnel to ripple into the economy, but the impact will be significant.
Oceana now has 181 aircraft and 8,069 personnel because of draw downs mandated by Congress since 1990. Over the next two years, the base will grow to 374 aircraft and 13,003 personnel. For context, that's slightly larger than it was in 1989 before the toppling of the Berlin Wall.
``Virtually all those people are being brought in from outside and they're bringing their families with them, so that's really a net increase in population,'' Whaley said.
Whaley thinks last year's lackluster population growth will speed up in 1997 and ``that will put people in stores.''
That should help retail sales. Marshall Booker, professor of economics and finance at Christopher Newport University, predicts retail sales growth will be ``sluggish, but with some modest growth.'' Booker forecasts growth of up to 2 percent ``despite attempts of consumers to reduce their debt levels overall and increase their rates of savings.''
It is unlikely the influx of personnel at Oceana will hit the economy fast enough to generate new home sales this year. Sales of single-family homes are not expected to grow as much as in 1996, but that in itself is not bad news.
Last year saw a boom in the housing market in Hampton Roads that few forecasters predicted. It was not that the number of new homes being built increased, but that the value of those homes shot up. In fact, the average value of a new single-family home in Hampton Roads has risen by 27 percent since 1992, according to Old Dominion University.
``We saw something in the second quarter of 1996 that you just don't see,'' said Gilbert Yochum, chairman of the economics department at ODU. ``Interest rates spiked up, but housing just blew right through it.''
Hampton Roads, it seems, benefited from a national demographic phenomenon: the Baby Boomers are aging, their earning power is increasing and they're moving into bigger, more expensive homes.
So the housing industry this year is expected to be strong - though not quite as powerful as in 1996. ODU predicts a 6 percent decline from last year.
With the housing boom declining, Crestar Bank economist Russel Deemer expects another area to follow. Furniture sales usually lag increases in housing, Deemer said. Last year, for instance, lumber sales increased 29 percent while furniture sales dropped 19 percent.
Deemer expects that to turn around this year. Likewise, Deemer forecasts that hiring may show some decent gains.
``The big announcements like the expansion at Gateway 2000 and Lillian Vernon, those are the ones the media picks up and publicizes, but many small businesses are doing the same thing,'' Deemer said.
``If these big companies decide a region is good to expand into, many small business do the same thing.''
Hampton Roads is expected to post employment growth of between 1 percent and 2 percent, according to William F. Mezger, senior economist at the Virginia Employment Commission.
Most economists, Mezger included, think the region's and Virginia's unemployment may inch up from their current rates of 4.4 percent and 3.8 percent, respectively.
Overall, the forecast is ``not real exciting,'' said Roy Pearson, director of the Bureau of Business Research at the College of William and Mary. ``We're talking about kind of plugging along with some growth but not booming growth,'' Pearson said.
Like that aging car, it's an economy that most think is worth hanging onto - at least for another year. ILLUSTRATION: [Cover, Color illustration]
MICHAEL HALL
The Virginian-Pilot
[Color Photo]
HUY NGUYEN
The Virginian-Pilot file
The region's economy will get its biggestt boost in 1997 from the
arrival of at least 900 personnel at Oceana Naval Air Station, led
by these F-14s from Miramar, Calif.
KEYWORDS: 1997 FORECAST ECONOMY