Metz: Shrinking defense industry won’t help economy recover

By Fred Metz

James Koch and Gary Wagner, authors of the study and economics professors at Old Dominion University, said regional employment was weak and below national levels. Employment in Hampton Roads is 28,000 jobs below 2007 numbers. The key factor: Reduced defense spending – except in Newport News.

The report provided little reason for optimism about future growth.

But a major factor not addressed is what’s happening at the piers at Norfolk Naval Station and Little Creek: Fewer ships, caused by homeport changes and ship decommissioning.

Last year, defense spending accounted for 46 percent of the gross regional product; this year it dropped to 42 percent. Sadly, that’s not because we’ve diversified and increased private-sector activity.

We don’t know how much sequestration – the automatic, across-the-board budget cuts designed to reduce spending by $1 trillion – hurt our local economy, but the cuts are set to resume with next year’s budget unless Congress repeals the law. It must. Continuing the sequester could significantly hurt the region.

The report also did not address previous actions that have contributed to, and will continue to have a negative economic effect on, the regional economy and prevent future growth.

Hampton Roads is still hurting from the closing of the Ford plant in 2007 and the loss of the Joint Forces Command in 2011. The Navy began downsizing its fleet in the 1990s from 600 ships to the current 289. Locally the steady decline continued with the decommissioning of the carrier Enterprise.

By 2012, only 68 ships were based here, and ship reductions have continued, with ships sent to Spain, Mayport, Fla., and for decommissioning. The losses mean 9,300 sailors and their families have left the region, taking with them the money they’d spend on houses, cars and restaurants. The 17,400 jobs directly or indirectly associated with those ships also go away.

Other ship departures are planned. The Navy announced this year that the carrier Roosevelt will leave on deployment this winter and will return to its new homeport of San Diego.

I remember all the worries when there was talk of a carrier going to Mayport. Now all those concerns of local economic impact will become a reality.

Big negative numbers. A big loss to the region. Three carriers will be operating at Norfolk while one carrier is being refueled at Newport News. I can’t remember when we’ve had that few carriers homeported in Norfolk.

In addition, the Navy is in the process of pivoting the fleet to Asia/Pacific. Sixty percent of the fleet will be homeported in the West; 40 percent remain in the East. The ships to move west are being identified. As many as six could leave the region. These are not temporary ship movements; none of the ships is scheduled to return.

The report predicted slow economic spending but said “it’s not going to be as bad as it might have been.” But I don’t think people understand the full impact of the reduced Navy presence in the region.

All local leaders must realize it is not business as usual as the economy slows.

The Department of Defense has been and will continue to be a major driver of the region’s economy. But DOD will not be the engine that will provide the recovery.

Fred Metz, a retired rear admiral, headed the Navy’s carrier and air-station program at the Pentagon before he retired in 1990. Metz, a Virginia Beach resident, writes a community blog, “Military affects all,” for HamptonRoads.com.