Economist: Hampton Roads could feel Trump effect in 2018

Jan. 26--Any changes ushered in this year under President Donald Trump's leadership shouldn't significantly affect the Hampton Roads economy until 2018, Old Dominion University Economic Forecasting Director Vinod Agarwal said Wednesday.

While it's anyone's guess as to how federal defense spending, potential infrastructure spending and tax reform shakes out, ODU's Economic Forecasting Project came up with three likely scenarios that could affect Hampton Roads:

--In the first, "good times are here again" scenario, Trump and Congress could agree to raise national defense spending by 5 percent annually with the potential of expanding shipbuilding for a fleet of 350 ships, Agarwal said. That scenario could include returning Army and Marine Corps staffing to 2007 levels.

--In the second, expanded defense and infrastructure spending combined with tax cuts could increase the federal budget deficit, leading to inflation and a rapid increase in interest rates, increasing the cost of the government debt, Agarwal said. So after a year of "good times" spending, the money dries up, leading to another base closure process.

--In the third scenario, the region could see more of the same with Congress deciding on defense spending caps every two years, causing uncertainty long-term and another base closure process is possible, Agarwal said.

The regional economy depends heavily on defense spending, which accounts for about 37 percent of the region's economic output, according to the presentation hosted by the Economics Club of Hampton Roads at the Norfolk Waterside Marriott. ODU economists expect defense spending to be about 1 percent lower in 2017 than its peak in 2012.

While the region should add about 3,800 jobs this year primarily in hospitality, health care and professional and business services, the region has yet to recover about 6,500 of the 38,000 jobs it lost during the recession, Agarwal said.

The private sector has yet to fill in the void left by defense cuts and Trump imposing a federal hiring freeze won't help, particularly as federal civilian government jobs are high paying, he said.

A repeal of the Affordable Care Act is likely this year but changes to the Dodd-Frank financial reform law isn't happening this year with so much on the agenda, said ODU economics department chairman Larry "Chip" Filer.

Filer said during a panel discussion in Newport News on Tuesday that he will be watching to see how various policy proposals could affect the federal deficit and how any replacement for the Affordable Care Act would be paid for.

"It's very uncertain what may happen with Hampton Roads," Filer said.

Bozick can be reached by phone at 757-247-4741. Sign up for a free weekday business news email at TidewaterBiz.com.

2017 ODU economic forecast for Hampton Roads:

Regional gross product: + 1.41 %

Employment: + 0.5 %

Unemployment rate: 4.4 %

Retail sales: +2.6 %

Hotel revenue: +4.2 %

Port general cargo tonnage: +2.7 %

Housing permit value: + 2.6 %

Source: ODU Economic Forecasting Project

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