- December 15th, 2010, 3:33 pm
#333288
Take note Liberty U haters out there.
Recent Performance. Lynchburg’s economy is at risk of falling back into recession, as businesses have resumed cutting payrolls. Problems are broad-based; government and private services employment trends turned decidedly negative during the third quarter. Meanwhile, goods-producing industries remain weak, primarily because of construction. Manufacturing layoffs are slowing and industrial production continues to improve. The unemployment rate increased to 7.9% in October, only slightly below its March peak of 8.1% but almost 2 percentage points lower than the national average.
Single-family permits have barely budged since the beginning of the year and prices have fallen in two of the past four quarters.
Liberty University. Expansions at Liberty University, LYN’s second largest employer, will be a primary driver of near-term economic growth. Recently, the university was able to sell $120 million in 30-year tax-exempt education facilities bonds for the purpose of refurbishing older buildings and constructing a new library and sports complex. Specific construction schedules have not been released; therefore exact impacts of the expansion cannot yet be quantified. However, the activity should provide a boost to construction; industry payrolls have fallen more than 20% since 2006. Consequently, the increased capacity at the university should result in increased enrollment numbers. Higher enrollments, coupled with additional faculty and staff to handle the increased enrollment will help lift the economy.
Nuclear technology. Despite the university’s in-creasing influence over the economy, nuclear tech-nology will be the most important long-term growth driver. Outside of healthcare and education, the two largest employers in LYN are nuclear energy firms—Babcock & Wilcox Co. and Areva. Each company has recently displayed its potential for growth. B&W, for example, has undertaken the development of a new modular reactor, the design and testing process for which, accompanied by construction of a prototype reactor, will all take place in LYN. The project’s first customer, the Tennessee Valley Authority, initiated dialogue with nuclear regulators in November re-garding the purchase and construction of up to six new reactors. Given the relative stability but low growth potential inherent in the rest of the econo-my, the area’s long-term outlook hinges on the suc-cess of its nuclear industry.
Housing. LYN home prices will return to their prerecession level by late 2013, more than seven years earlier than the nation’s. This is due to the relatively mild decline seen during the recession, having fallen roughly 4% from the prerecession peak, despite a simultaneous 350% increase in mortgage delinquencies. The elevated delinquency rates, though historically high for LYN, remain very low by national standards. Area foreclosure rates will finish 2010 about a quarter of the U.S. average and roughly half of that seen in Virginia. Going forward, the area’s relatively high credit quality will continue to be a source of economic stability throughout the forecast horizon.
Lynchburg will begin to add jobs in the first quarter of 2011, although at a moderate pace. Employment growth will accelerate in the second half of next year but will lag that of the nation. The unemployment rate will peak near 8% next year, but it will not decline until 2012. Peak payrolls will not be regained until 2015, but measurable upside risk does exist related to expansions at Liberty University. Longer term, LYN still has to deal with slowing population growth and low retention of its college graduates. All told, LYN will lag the U.S. in both population and employment growth for the foreseeable future.
- By flamehunter
- By jmclaughlin
- By LUOrange