Hampton Roads Economy Grows for the Third Year

Hampton Roads Economy Grows for the Third Year

The Bureau of Economic Analysis estimates for the Gross Metropolitan Area Product (GMP) indicate that Hampton Roads experienced its third consecutive year of real growth in 2012. GMP rose to a nominal $84.8 billion, an inflation adjusted increase of two percent. The Hampton Roads economy grew by 0.5% in 2011 and 1.2% in 2010.

The GMP, also called gross regional product, describes the size of a regional economy by calculating the market value of all goods and services that
are produced within a region in a given year. It is comparable to the Gross Domestic Product (GDP) on the national level. Using the GMP allows for comparing the size of competing metropolitan areas’ economies, the relative growth rates, and underlying productivity of the region’s economy.

Hampton Roads had the 39th largest economy in the U.S. in 2012, behind Milwaukee and Bridgeport, CT, and ahead of Hartford and New Orleans.
This region has moved between being the 37th and the 40th largest region economically since the BEA began to estimate GMP in 2001. Unfortunately, when ranked by Per Capita Real GMP, Hampton Roads has a markedly lower rank of 83rd largest per capita gross product. This reflects a lower per capita level of productivity in this region, and a lower overall level of income. This is partly a result of this region’s industry mix, as many of the regions with high per capita GMP feature either energy extraction, finance, center of governance, or high tech startups as some of their major industries. Additionally, several regions that have large tourism industries are lower in the ranking of per capita GMP, includingOrlando(92nd) and Las Vegas(101st).

While individuals often fall in to the trap of focusing on the ranking of GMP, the most important data revolves around the growth in GMP, both for the overall economy, and particularly in terms of per capita GMP. It is the growth in output which indicates how the economic situation in the region is changing for its residents.

Hampton Roads’ GMP grew by 21.1% over the period from 2001 to 2012, versus the 22.0% growth experienced by the nation overall. As can be seen in the graphic below, while the region out performed the nation during the depths of the recession in 2009, Hampton Roads’ recovery proved to be slower than that of the nation.

The story of Hampton Roads GMP growth remains tightly correlated with national levels of defense spending. The region outperformed the nation during the weak economies of 2002 and 2003 as defense spending increased. Defense spending, which tends to be independent of economic cycles, also prevented the region from experiencing the recession as deeply as the nation. However, as the U.S. economy engages on its slow recovery, the decline in military spending has caused the regional economy to underperform.

Per capita incomes in the region have been closely tied to national defense expenditures as well, going back to 1970 (the data for regional incomes begins in 1969, so there is only limited regional data prior to 1969). The region typically experiences very stable population growth, and so the per capita GMP follows a similar growth pattern to total GMP. These growth rates only diverge where you see rapid shifts in the population (an influx of new workers would cause the gross metro product to expand rapidly, while the per capita gross metro product might fall if the workers were less skilled than those already in the region).

Long-term growth in GMP will be driven significantly by how defense spending changes both nationally and within the region, as well as this region’s ability to transition its economy to other economic drivers. While Hampton Roads possesses two other major basic sector industries in tourism and port-related industries, both are mature and do not present the opportunity for rapid growth in the economy. The Hampton Roads tourism industry has engaged on a steady project to move upmarket (attracting a higher spending level of tourist), but this is a gradual process. Individuals in port-related industries have expressed optimism of increased traffic with the Panama Canal widening, but increased efficiency would prevent rapid cargo growth from having a large direct local impact.

Read More at: The Hampton Roads Economic Quarterly

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