ODU's economic forecast: Hits and Misses

Approximately 250 attended the Old Dominion University Regional Economic Forecast held on January 14th in downtown Norfolk. ODU Professors of Economics Dr. Gilbert R. Yochum and Dr. Vinod B. Agarwal and Professor of Finance Dr. Mohammad Najand shared their hits and misses from last year’s and shared their forecast for 2009.

For 2008, the forecasters hit the mark on predictions in the Hampton Roads economy, including job growth, retail sales and the port's cargo traffic. In their forecast for 2008, they failed to foresee the declines in taxable sales and hotel revenues in the region.

Highlighted projections:

• Despite a national recession, Hampton Roads isn't expected to land in a recession in 2009. National relief won't come until late 2010.
• Residential home building, the port and the tourism industry will hinder growth in 2009.
• Increased defense spending will stimulate growth in Hampton Roads' economy, including higher pay for service members.
• Home prices for single-family homes are expected to drop 5%. After a drop of almost 30% in 2008, housing permit value will drop another 21.4%. On the bright side, the region's housing is becoming more affordable.
• Unemployment rate to rise from a projected 4.3% in 2008 to 5.6% in 2009. In contrast to rampant job losses occurring elsewhere, Hampton Roads will add about 1,600 jobs this year, largely at companies that provide professional and business services and health care services
• Taxable retail sales in Hampton Roads will drop 3.1% after a 4.1% decline in 2008.
• Hotel revenue to drop 2.7%.
• General cargo tonnage will drop 4.3% until the nation's retail sales begin to recover.
• The region's inflation-adjusted output of goods and services will expand by a lackluster 0.6 %, well below the average annual growth rate of 3.3% for Hampton Roads during the past 45 years but compares favorably with the 1.8% decline predicted for gross domestic product nationwide.

For several years, ODU's forecasting team has been able to predict major trends in the Hampton Roads economy, including job growth, retail sales and the port's cargo traffic. In their forecast for 2008, they failed to foresee the declines in taxable sales and hotel revenues in the region.

However, the team accurately predicted that the cost of oil at $100 a barrel or higher would push the country into a recession. The team also forecast that credit defaults would hamper the nation's economic growth, which would prompt aggressive cuts in interest rates by the Federal Reserve and government efforts to stimulate the economy.

As you can see, the unforeseen current state of the economy has already taken its toll on some of ODU's forecast for 2009.