Gas, credit woes hurt, but region still adding jobs

Tighter credit and higher gasoline prices restrained Hampton Roads' economic growth during the first half of the year, and expansion will remain subdued for the balance, a team of Old Dominion University economists predicted.

The declining equity in homes and reduced availability of home-equity lines of credit are forcing many of the region's home-owners to realign their spending habits, Vinod Agarwal, an ODU economics professor and a member of the university's Economic Forecasting Project, said Tuesday.

In contrast with the environment three years ago when home-owners could easily tap their equity and step up their spending, "credit is hard to come by," Agarwal said.

Meanwhile, the average household in Hampton Roads spent $80 more per month for gasoline than it did during last year's first half, the ODU forecasting team estimated. The greater cost of motor fuel has prompted households to cut back their purchases of durable goods, especially furniture and electronics, Agarwal noted.

Tighter credit and more cautious spending also put a significant dent in the region's sales of new cars. For the six months through June, sales tumbled almost 24 percent from the comparable period last year, the team of economists said in its forecast for the current quarter.

Still, "the economy is not doing as badly as some might think," because the region continues to add jobs, Agarwal said. Employment during the July-through-September quarter will grow by almost 7,000 jobs - or 0.9 percent - from the year-earlier period, the forecasting team predicted. The region's jobless rate for the current quarter will climb to 4.2 percent from 3.3 percent last summer but remain well below the national rate of 5.7 percent in July, it said.

A combination of forces, including the tax rebates distributed earlier this year and expansion of the region's educational and health-service sectors, will keep retail sales on par with what they were during last year's third quarter, the ODU economists said.

The weakest sector of Hampton Roads' economy continues to be construction of single-family homes, the economists said. The value of single-family building permits taken out during the current quarter will be down more than 29 percent from the year-earlier period, the team predicted. That comes in the wake of a decline of more than 29 percent for the first half.

The pressure on household budgets elsewhere in the country is showing up in Hampton Roads' tourism sector, where hotel-room revenues were down more than 4 percent during the January-through-June period. However, the changes in revenues varied widely from one municipality to another, Agarwal noted. In Williamsburg, they were down 13.7 percent, but they were up 0.6 percent in Virginia Beach, he said.

For the current quarter, the region's hotel-room revenues will fall 2.9 percent from what they were in last year's July-through-September period, the forecasting team predicted.

One bright spot in the Hampton Roads economy is the continued growth in maritime traffic. General cargo tonnage handled by Hampton Roads' ocean terminals during the current quarter will climb 4.2 percent from last year's third quarter, partly because of greater export traffic, the ODU forecasting team said. That would be less robust than the 7.1 percent increase for the first half but still on par with the team's forecast in January of a 4.1 percent increase in tonnage for 2008.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com