According to Old Dominion University’s State of the Commonwealth Report, 2022 was the year the Virginia economy couldn’t make up its mind.
The first half of last year saw the economy contract, while at the same time labor markets boomed. Inflation reduced consumers’ buying power, particularly at the grocery store and gas station, yet homeowners saw their property values continue to rise, and their consumer spending accelerated.
Robert M. McNab, director of ’s Dragas Center for Economic Analysis & Policy and lead author of the State of the Commonwealth Report, said 2022 was a difficult year to categorize for economists.
“One could be forgiven for concluding the economy of Virginia was muddling through, neither in a robust recovery or recession,” McNab said.
The State of the Commonwealth Report, released Dec. 18 by the , highlights trouble spots in the Virginia and national economy – such as the highest inflation rate in a generation.
“While the prospects for a recession in 2023 continue to increase, especially if Congress fails to pass appropriations bills or an increase in the debt limit in a timely fashion, a recession is likely to be relatively short,” especially compared to the Great Recession of 2007-09, McNab said.
The report points to sectors where the Virginia economy is performing strongly, including tourism and the Port of Virginia. A boost in federal spending, particularly through the Department of Defense, has injected money into the Hampton Roads and Northern Virginia economies.
The report notes that the coronavirus pandemic has a lingering effect. A recent Ipsos survey found that 88% of respondents agreed that COVID-19 has changed Americans’ lives forever, yet nearly two-thirds of respondents felt there was little or no risk in returning to their normal, pre-pandemic lives.
Data from the U.S. Centers for Disease Control and Prevention and Virginia Department of Health suggest that it continues to change the lives of Virginians. With a total of 53,000 hospital admissions and more than 18,000 deaths, the effects of COVID-19 continue to be felt in labor markets, household wealth (particularly in communities of color) and strain on health care resources, the report notes.
Commonwealth residents continue to face an array of threats to their economic well-being. They range from inflationary pressures caused by budget deficits and the war in Ukraine, to high costs and low vacancy rates increasing the burden of housing, to gridlock or even conflict posed by political polarization.
“We can choose to fall apart or come together and work to improve the lives of all Virginians,” McNab said. “Now, in the face of a looming recession, is the time to set aside our arguments and act.”
The 2022 State of the Commonwealth Report has five chapters:
Virginia’s Economy – Rising inflation and interest rates dominated the economic narrative of 2022. Now, with the possibility of a recession in 2023, what are the prospects for future growth?
Another Year in Recovery: Virginia’s Metropolitan Areas – If Virginia is to continue its recovery from the pandemic economic shock of 2022, this growth will largely come from Virginia’s metropolitan areas.
Who’s at the Bedside? Does Virginia Have Enough Nurses? – As more nurses report symptoms of burnout and some quit the profession, the State of the Commonwealth Report explores the coming shortage of nurses in Virginia and the United States and asks what factors limit the supply of nurses in the region.
Virginia’s Lawyers Confront Tougher Times – This chapter explores the supply of lawyers in Virginia and whether we are producing too many lawyers. What does the future hold for the legal profession in Virginia and the nation?
A Deeper Dive into the Blacksburg-Christiansburg Metropolitan Area – The final chapter of the 2022 State of the Commonwealth Report explores how the western Virginia metro region has fared over the last decade and discusses prospects for future growth.
For more than two decades, the Dragas Center for Economic Analysis & Policy of ’s Strome College of Business has produced research reports as a service to decision-makers and thought leaders in Hampton Roads, inserting data into discussions that affect residents’ daily lives.