Editorial: Economic diversity is key

·3 min read

In early 2020, the economic forecast for Hampton Roads called for clear skies and smooth sailing ahead.

The two storms roiling the region for more than a decade — the housing market collapse, or “Great Recession,” of 2007-2009 and federal budget sequestration that took effect in 2013 — had finally dissipated.

In 2018, the region finally had more civilian jobs than in 2007, before the slowdown. Old Dominion University economists predicted strong economic growth of 2.4%.

At the start of 2020, things looked even better. Professor Vinod Agarwal, director of ODU’s economic forecasting project, saw an uptick in defense spending, a more active Port of Virginia, and increased tourism and hospitality revenue all contributing to economic growth of 2.6%.

At a January 2020 presentation, Agarwal called 2019 “the first year in over a decade that growth in the region approaches, if not eclipses, that of the U.S.” and predicted 2020 would mark the fourth consecutive year of growth for Hampton Roads.

Then came COVID. The illness, hospitalizations and deaths it caused also inflicted widespread economic harm. That wasn’t exclusive to Hampton Roads — the whole nation suffered in the pandemic — but it couldn’t have happened at a worse time, when the regional economy had finally turned a corner.

But after a tumultuous 2020 and a tentative return to normal this year, it’s possible that with thoughtful effort and a little luck — along with a vaccinated population — the Hampton Roads economy may be able to pick up where it left off before the pandemic hit.

The 2021 State of the Region report, released this week by ODU researchers led by Professor Robert M. McNab, the director of the Dragas Center for Economic Analysis and Policy, suggests that Hampton Roads is poised for substantial growth and a strong recovery — depending on conditions.

The report is a valuable production each year, providing a detailed look at the forces affecting the economy and diving into a number of interesting issues bubbling in Hampton Roads. This year’s State of the Region, the 22nd produced by ODU, is no different, and residents should take some time to give it a look. (Read it at ceapodu.com/reports/sor-reports)

This year again finds researchers preaching the folly of overreliance on federal spending to power the region’s economic engine. Defense accounts for 40% of economic activity, which as McNab said in his presentation this week, means “if Congress sneezes, we’re going to the hospital.”

The need for economic diversification has annually been the takeaway from the State of the Region presentation, and that remains true. It’s not a matter of replacing the three pillars of the Hampton Roads economy — defense, tourism and the Port of Virginia — but buttressing them so they don’t have to shoulder so much of the load.

On that point, the report couldn’t be clearer: “The question for us in Hampton Roads is whether we will realize early enough that diversification of the economic base is no longer a luxury but a necessity for the continued vitality of the region.”

The added benefit, of course, is that a more diversified economy would better insulate it from unexpected shocks. That lesson was painfully delivered in the last 18 months, when COVID-19 walloped the hospitality and tourism sector and the pandemic splintered the global supply chain, including port operations.

The port continues to churn ahead, and the report applauds improvements in “facilities and technology” and funding by the commonwealth and the federal government to dredge the channel and accommodate more traffic. These investments continue to pay dividends, though further supply chain disruptions will ripple across Hampton Roads and Virginia.

Exploring opportunities in green energy and resilience. Cultivating entrepreneurism and a business-friendly culture. Investing in education and infrastructure to support the jobs of tomorrow.

These are where the region’s focus must be in the coming weeks, months and years to ensure Hampton Roads can compete with its peers and accelerate its recovery from another ill-timed setback to its economic vitality.

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