Dr. James V. Koch, President Emeritus of ODU, shares an outlook on interconnections of the Hampton Roads and Eastern North Carolina regional economy, highlighting several local issues, and tieing these items to national and global economic trends.
Dr. James V. Koch's Economic Outlook for Eastern North Carolina
1. North Carolina
The Economic Outlook for Currituck County
and Eastern North Carolina
James V. Koch
April 12, 2016
2. The Strome College of Business and the University continue to
provide important support for this report. However, it would
not appear without the vital backing of these donors, who
believe in the power of rational discourse to improve our
circumstances.
Anonymous Donor
The Aimee and Frank Batten, Jr. Foundation
Jane Batten Thomas Lyons
Richard F. Barry, III Patricia W. and J. Douglas Perry
R. Bruce Bradley Dr. Jitendra Swarup
Richard T. Cheng Virginia Chamber of Commerce
Arthur Diamonstein Virginia Department of Commerce
George Dragas, Jr. and Trade
Edward L. Hamm, Jr.
Hampton Roads Chamber of Commerce
3. The views expressed in this
presentation do not represent
official positions on the part of
Old Dominion University, President
John R. Broderick, the Old Dominion
University Board of Visitors, or any of
the generous donors.
4. Here is my plan of attack this morning.
First, we will look at economic conditions in
Currituck County and several nearby counties
and cities.
Second, we’ll look at the wider MSA and then
at the states of North Carolina and Virginia.
Third, we’ll look at several national and
international economic topics.
5. • The best way to get a feel for how well the economy of a
city or county is doing is to examine the change in earned
incomes over a decade or more.
• This irons out factors such as bad weather in a particular
year, etc.
• One can see in the next graph that since the turn of the
century, the most rapidly growing economy in N.E. North
Carolina has been Currituck County, followed by Elizabeth
City. Gates County and Kill Devil Hills have grown much
more slowly.
6. Personal Income: 2001 to 2014
$518,413,000
$968,064,000
$1,249,324
$2,253,449,000
$229,396,000
$374,406,000
$1,034,619
$1,679,946,000
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Currituck Elizabeth City Gates Kill Devil Hills
80.4%
62.4%
86.9%
63.3%
EC
KDH
C
G
7. Where People Live and Work
• The U.S. Census has an “On the Map” feature that allows
anyone to see where people live and where they work.
• One can infer commuting patterns from these data.
• It turns out that more than 60% of workers in Hampton
Roads live in one city or county, but commute to work in
another city or county.
• The next graph provides data for N.E. North Carolina.
8. Where People Live and Work
Where People Live
Currituck
County
Gates
County
Elizabeth
City
Kill Devil
Hills
Live
Outside
Working
in Area
JobLocation
Currituck
County
1,989 54 994 899 1,476 5,412
Gates County 17 666 90 52 385 1,210
Elizabeth City 664 334 10,992 689 4,310 16,989
Kill Devil Hills 1,281 143 1,038 9,190 3,503 15,155
Work Outside 5,154 2,949 11,061 4,862
Living in Area 9,105 4,146 24,175 15,692
Source: Census, On the Map. Latest available data: 2013.
9. Currituck County
Employment Inflow/ Outflow
1,989 individuals live in
Currituck and work there
3,423 individuals live
outside of Currituck,
but work in Currituck
7,116 individuals live in
Currituck, but work
outside of Currituck
10. Elizabeth City
Employment Inflow/ Outflow
13,183 individuals
living in Elizabeth City
work elsewhere.
10,992 individuals live
in Elizabeth City and
work there.
5,997 individuals live
outside of Elizabeth
City, but work there
11. Gates County
Employment Inflow/ Outflow
3,480 individuals
live in Gates, but
work elsewhere
544 individuals live
outside of Gates,
but work there
666 individuals live in
Gates and work there
12. Kill Devil Hills
Employment Inflow/ Outflow
6,502 individuals live
in Kill Devil Hills, but
work elsewhere
9,190 individuals live
in Kill Devil Hills and
work there
5,960 individuals live
elsewhere, but work
In Kill Devil Hills
13. • Besides income, one can look at the number of individuals
employed in order to measure economic growth.
• The next graph illustrates that the total numbers of
individuals employed in the four major N.E. North Carolina
counties and cities typically peaked between 2005 and
2010.
• This isn’t necessarily a bad thing---more can be done with
less. But, it does underline the reality that N.E. North
Carolina has not been a hot spot for economic growth.
14. N.E. North Carolina Labor Forces
Peaked in Size Between 2006 and 2010
17,682
29,567
20,557
9,125
13,137
12,454
4,608
5,540
5,266
22,880
28,761
26,879
0
5000
10000
15000
20000
25000
30000
35000
Persons
Recession Kill Devil Hills Currituck County Gates County Elizabeth City
15. • The rate of unemployment that receives nearly all of the
attention in newspapers and on television is the “U3” rate.
It tells us the percentage of individuals who are actively
seeking a job, but can’t find one.
• Probably more relevant, however, is the “U6” rate because
it also includes individuals who are working part-time, but
would like to be full-time, and individuals who have
stopped looking because they can’t find a job
(“discouraged workers”).
• U6 typically is about twice U3.
16. N.E. North Carolina Unemployment Rates (U3)
4.8
13.5
7.7
2.7
8.9
5.8
3.4
8.3
5.53.8
10.1
7.1
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Percent
Kill Devil Hills Currituck County Gates County Elizabeth City
12-month moving average
19. • The next slide examines various measures of the
economic health of the hotel industry in N.E. North
Carolina. It is generally good, e.g., the occupancy
rate has increased over the past 20 years
• The most important measure, REVPAR, measures
revenue earned per available room and
incorporates both supply and demand influences.
• Real, inflation-adjusted REVPAR has increased over
the past few years. This is a good sign. By contrast,
it has declined in most areas of Hampton Roads.
20. Hotel Market Indicators: Coastal North Carolina
60.85% 65.49%
$35.82
$42.10
100
102.49
0
20
40
60
80
100
120
140
1990 1995 2000 2005 2010 2015 2020
Occupancy Rate REVPAR Real REVPAR Room Supply Index
Room Supply Index
Occupancy Rate
REVPAR
Real REVPAR
21. Defense Spending by State: FY 2014
Defense Spending as Percent of State GDP
1 Virginia (11.8%)
2 Hawaii
3 Alabama
4 D.C.
5 Alaska
6 Maryland
7 Mississippi
8 Kentucky
9 Maine
10 Arizona
28
North Carolina
(2.1%)
Total Defense Spending in Dollars
1 Virginia ($54.7 b.)
2 California
3 Texas
4 Maryland
5 Florida
6 Pennsylvania
7 Washington
8 Georgia
9 Massachusetts
10 Alabama
13
North Carolina
($10.1 b.)
22. • The next several slides examine defense spending
in North Carolina and Virginia. Defense spending is
the single most important economic engine in our
region. However, it has been stagnant or declining
and the future outlook is not good.
27. •Let’s shift gears now and talk about a major,
but often ignored “issue”---the phenomenon
of falling labor force participation rates in
North Carolina and the U.S.
•In any age or demographic category, you are
considered to be in the labor force if either
you have a job, or you are looking for one.
But---if you aren’t looking, then you’re not in
the labor force and will never be counted as
unemployed.
28. • Why should we care? Large costs are imposed
upon society because of the falling labor force
participation rates.
• One way or another, society ends up supporting
individuals who have dropped out of the labor
force: unemployment compensation, social safety
net costs, a reduction in the standard of living of
family members and friends who support such
individuals, lower educational achievement by
connected children, increased crime, law
enforcement and penal costs, etc.
29.
30.
31. Labor Force Participation Rates, 2013
58.0%
59.0%
60.0%
61.0%
62.0%
63.0%
64.0%
65.0%
66.0%
67.0%
All White African-American Asian Hispanic
63.5%
61.2%
64.2%
63.2%
66.0%
32. Why? We don’t know for sure.
1) Discouraged workers---individuals can’t find a job,
become frustrated, and stop looking. Sometimes, jobs
may exist, but they aren’t qualified to fill them.
2) Demography---our population is aging and hence more
people are retired compared to the past. Thus, they’re
not in the labor force.
3) Social Safety Net---it’s possible to survive without
working because of unemployment compensation, food
stamps, etc. In some situations, our attempts to help in
introduce disincentives that discourage work.
33. 4) Rising Disability---Larger proportions of
individuals are successfully claiming disability and
drop out of the labor force.
5) More Individuals Are Going to College---
therefore, they are not in the labor force.
34. The Bottom Line
• The five hypotheses are primarily complementary, not
competing explanations. All could be true.
• Empirically, the most important cause appears to be the
“discouraged worker effect,” but it can’t explain more
than 30% to 40% of the decline in labor force participation.
• Increasingly, it appears that culture also may play a role
and that it has become socially more acceptable for some
individuals not to hold a job or to look for a job. The
apparent stigma has declined.
35. Let’s segue and talk about
commodity markets and prices
• Dramatic declines in the prices of most major commodities
(ranging from oil and copper to beef and cotton) have had
very negative effects on economies worldwide.
• These effects are particularly noticeable in Latin America
and the Middle East, but also in the “oil patch” in the U.S.
• Further, major U.S. companies such as Caterpillar have lost
25%-50% of their sales because of declining construction
and resource activity.
37. • The tremendous decline in commodity prices
reflects both supply and demand influences.
• On the supply side, overproduction led to large
inventories. Producers have begun to scale back
because their production no longer is profitable
and they have accumulated too much inventory.
• On the demand side, the slowing of the Chinese
economy is the major world factor, though laggard
growth in Europe and elsewhere (for example in
Europe and Latin America) also has been
important.
38. The PRC is the Major Player in Commodity Markets
40. • OPEC, which once possessed lots of market power,
now is ineffective and no one pays attention when
it declares that everyone will stop pumping so
much oil.
41. • Lower oil and gasoline prices supply consumers
with more money to spend, and reduce producer
costs, but they have not really done so. Further,
sustained lower prices (e.g., below $40 per barrel)
make it difficult for 80%+ of oil suppliers to make
any money. The negative impact on oil suppliers
has begun to outweigh the positive stimulus that
comes from lower prices and more spending
money.
• We see the effects of this now in the U.S. in Texas,
Oklahoma and North Dakota, though some shale
oil producers can produce an additional barrel of oil
at a marginal cost of only $20. Most, however, are
less efficient than this.
42. •The bottom line is that the U.S.
economy, which has been performing
surprisingly well, now is swimming
upstream against some powerful
negative worldwide influences.
43. Let’s finish up by talking about overall
economic conditions and the future.
6+ consecutive years of positive economic growth.
This is a long expansion as these things go.
e.g.: Currituck County: Of 5412 workers, 1989 live in Currituck County, 54 Gates, 994 Elizabeth City, 899 Kill Devil Hill, 1476 outside of the 4 regions.