Local economy much slower in '08, ODU report says

Hampton Roads' economy will slow to its weakest growth rate in more than a decade as the impact of the nation's sluggish economy and crippled housing market ripple through the region, according to a report released by Old Dominion University economists.

The university's State of the Region report forecast a 1.7 percent growth rate for 2008. Things haven't looked this bad since 1995, when the region's economy grew less than 1 percent.

The region's average annual growth rate in the past 35 years has been 3.4 percent, according to the report.

"It's a very solid base rate for the region," said James Koch, an ODU economist who helped write the report. "We're expecting to grow, and other metropolitan areas in the country are going to contract this year."

And 2009 might not look any stronger. The economists predicted lower regional job growth, an even slower growth rate and falling housing values through the first half of the year.

Much of this year's growth will come from military spending, which is expected to account for nearly 45 percent of the region's gross regional product, or the total value of all goods and services produced within the area, the report said.

"Sometimes it appears that we are overly dependent on the military and some people wring their hands over it," Koch said.

However, increases in military spending are largely insulating the region from what may end up as a national downturn, he said.

The Defense Department is expected to spend $18.3 billion in Hampton Roads this year. That's up about 78 percent from 2000. Much of the growth came in the form of compensation for military personnel.

Annually, Defense Department spending has increased, on average, by 5 percent.

Despite declines in median home values and an everincreasing inventory of unsold homes, the region's foreclosure rate of 0.4 percent last year remained well below the national average of 1.3 percent.

The ODU economists also expect the region's normally robust tourism industry to falter this year, with hotel revenues declining by 1 percent, in part because of rising gasoline prices and housing, market problems. The connection between the housing market and tourism is largely related to declining consumer spending as home values fall.

Koch also expects expenditures by the state government to drop, which may exacerbate the region's slowing economy.

"We're going to see institutions like ODU spending less money," he said.

The report also examined the region's TV news programs and their use of stories about crime and violence to lead broadcasts, gender pay disparity in Hampton Roads and the prominence of German companies in the area.

Josh Brown, (757) 446-2318, josh.brown@pilotonline.com