All hands on deck
Military has outsized economic impact on region
The military’s impact on Hampton Roads is unmistakable.
Drive along the Hampton Roads Bridge-Tunnel and it’s nearly impossible to miss the hazy gray of U.S. Navy vessels docked at Naval Station Norfolk, the world’s largest naval station. A few minutes spent in Virginia Beach and one is likely to hear the roar of a Navy F/A-18 fighter jet — the sound of freedom, some locals call it — well before it’s spotted overhead.
Hampton Roads is home to five branches of the military scattered across nine major installations, though the Navy plays the largest role, with more than 150,000 military and civilian employees and contractors, according to Navy Region Mid-Atlantic’s most recent economic impact statement, released in December 2020. A mid-year economic forecast from Old Dominion University predicts direct spending in the region by the Department of Defense will reach $24.8 billion this year.
Extrapolate that to include indirect spending, and the military accounts for about $40 billion of the region’s estimated $100 billion gross domestic product — or about $4 out of every $10 spent in 2021 — says Robert McNab, director of ODU’s Dragas Center for Economic Analysis and Policy.
“If we look at comparable areas, or larger areas in the United States, Hampton Roads has the largest share of economic activity that is attributable to the Department of Defense,” McNab says.
The DOD’s impact includes not only some of what active-duty service members and their dependents may spend, but also support contracts and spending by shipyards and other workers involved in supporting the military.
Industrial partners such as Newport News Shipbuilding, a subsidiary of Huntington Ingalls Industries, the largest military shipbuilder in the nation, have a major role in the region’s economy.
The shipyard’s construction of the future USS John F. Kennedy, the second in the Navy’s Gerald R. Ford class of nuclear-powered aircraft carriers, is about 83% complete and early manufacturing is underway on the third Ford-class vessel, the USS Enterprise, Vice President of Navy Programs Matt Needy says. Also, earlier this year, the shipbuilder announced a $2.9 billion contract for midlife refueling and complex overhaul of the Nimitz-class aircraft carrier USS John C. Stennis.
Not only does the Navy rely on industry to build its ships, it relies on industry to fix many of them, too. Bill Crow, a retired Navy captain who spent his active-duty career as a surface warfare officer, is president of the Virginia Ship Repair Association, which includes about 30 shipyards — more than 80% of which work on Navy vessels — and another 270 contractors and subcontractors.
Ship repair was deemed an essential industry to the country’s national security throughout the COVID-19 pandemic. Crow says the virus and subsequent shutdown of other industries didn’t appear to affect any local work scheduled by the Navy.
“If you drive over [Norfolk’s] Berkley Bridge — which has pretty much been the case throughout the pandemic — you will see that there along the waterfront on the eastern branch and the southern branch of the Elizabeth River in the private yards, there are multiple ships,” he notes.
But while the military may be one vast section of the local economy, it is not immune to federal budget cuts and congressional decisions. As a possible example, the Navy has proposed decommissioning more than a dozen vessels in its upcoming budget to make way for new technologies. At least five of those are aging guided missile cruisers homeported in Hampton Roads, Crow says. “That’s five less that our shipyards have to consider and that are in the inventory for them to repair here in this port.”
McNab also warns that other weapons systems, like the third and fourth Ford-class carriers, have drawn the ire of Congress over the years. Those nuances make the military’s outsized impact on the region a double-edged sword. While DOD spending might provide a buffer for the local economy, too much dependence on it has caused the region to lag because of a lack of a diverse private sector, he says.
However, the region is focused on diversifying, including in unmanned systems and offshore wind, says Doug Smith, president and CEO of the Hampton Roads Alliance. Smith sees a place for the military there, too. Thousands of service members retire annually, and the alliance views those highly skilled veterans as a readymade workforce and a selling point for attracting companies to the region.
About 40% of veterans stay in the region, says Craig Quigley, a retired rear admiral who leads the Hampton Roads Military and Federal Facilities Alliance.
“We’d love to make that number higher, and if we can retrain them, get them into a good job, make sure their spouses have [the] opportunity to pursue their career desires as well, then all other things being equal, we think we’d have a fighting chance of keeping them right here … [to] contribute to the workforce,” Quigley says.