DATE: Sunday, October 26, 1997              TAG: 9710250644

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY MICHAEL CLARK, STAFF WRITER 
                                            LENGTH:  118 lines

SAME ECONOMY, DIFFERENT LOOKS FOUR RECENT STUDIES OF HAMPTON ROADS OFFER DIVERGENT INSIGHTS.

The Hampton Roads economy (choose one). . .

A. Continued to weaken in August.

B. Will see growth in 1997 retail sales.

C. Is getting stronger.

D. All of the above

The answer: D. All of the above.

The economics quiz follows the release of four different economic reports in October. There was something for everyone.

Virginia Wesleyan College produced the Hampton Roads Index, showing local economic activity continued to weaken in August. A William & Mary forecast said Hampton Roads total retail sales will be up 7.1 percent in 1997. The Hampton Roads Planning District Commission reported that the regional economy had been ``troughing'' in 1994-95, but was getting stronger. Old Dominion University forecast economic growth was slowing in the fourth quarter, but still moving forward.

There were no direct conflicts, no fierce arguments over right and wrong. The reports were just different - as intended.

``Generally, we draw data from the same sources,'' said David G. Garraty, professor of economics at Virginia Wesleyan.

They just look at it differently.

In his Hampton Roads Index, Garraty relies on employment and wage data to rate the local economy's performance. His index is not a forecast but can be used to develop one.

Based on five months of seasonally adjusted data from the Virginia Employment Commission, the index showed the economy was slowing.

ODU's recent economic forecast showed employment rose by about 3 percent through the third quarter of 1997. That rate exceeded the national growth rate of 2.4 percent for the same period.

ODU reached its figure by comparing the first eight months of this year to the first eight months of last year.

In his index, Garraty took the first eight months of this year and compared the data to the entire average of last year, and got 2 percent.

``It's not flawed,'' he said. ``Apparently, there was a strong fall last year, which accounted for the deviation. If the fall of this year is as good, the rosier scenario will be the ticket. If not, it will go down.''

Garraty said the ODU economists look at things a little more broadly.

``They've got more indicators,'' he said. ``That's one weakness of my index. It looks at employment.''

The Hampton Roads Planning District Commission uses more indicators and looks at a different time frame.

The commission reported the region lagged other metropolitan areas in employment and income growth from 1994-95, taking its usual long-term perspective on the economy.

Commission economist John W. Whaley said the group also specializes in making comparisons between Hampton Roads and other metropolitan regions in the southeastern United States and throughout the rest of the country.

``Everybody is filling a niche,'' he said of the region's economists. The commission, he explained, relies ``entirely on causal modeling, trying to determine the fundamental causes for any phenomena that we are attempting to project.''

But Whaley said the commission uses the same data the others use.

The commission uses annual data for its yearly forecast. After that, it drops back to a different database for the rest of year.

After the data is collected, wisdom comes into play, Whaley said.

``There's a heavy element of judgment that has to be incorporated into all of this,'' he said.

So even though the commission reported that earnings per worker in Hampton Roads remained at about 88 cents for every dollar earned nationwide, Whaley said when the report was released that he expects income to improve.

``The good news is that we've stabilized when compared to the U.S.,'' he said at the time. ``There is some reason to expect that in 1996 and 1997 and 1998, as new data comes in, that for a variety of reasons, the numbers may begin to rise.''

Roy Pearson, an economist at William & Mary, agrees that economic forecasting is more than a collection of statistics.

``Forecasting in just about everybody's case is about 25 to 30 percent judgment,'' he said. ``When you run econometric models, you combine them with history and recent events.''

Pearson's data offered an optimistic forecast this month.

``Virginia's economy will continue to grow in 1997, ease slightly in 1998, but come back for a strong performance for the rest of the decade,'' the college's report said.

The report highlighted a 5.9 percent rise in personal income for the rest of 1997, and said the state will add 81,126 jobs.

Next year, though, Pearson said income growth statewide is likely to decline by one-half percent from the previous year, and payroll job growth will average 2.2 percent.

``What we use are econometric models showing economic links,'' Pearson said. ``We go out quarterly through 1998, and out by years to 2007.''

For its economic niche, William & Mary forecasts for the entire commonwealth and for multiple metropolitan areas, Pearson said.

Whether annual or quarterly, economic forecasts need to distinguish between the past, present and future.

``The time frame of the analysis is a critical component of the interpretation,'' said ODU economics professor Gilbert Yochum. ``In terms of the forecast, we're different from everyone else.''

The ODU Economic Forecasting Project uses a mathematical simulation of regional economic activity.

That simulation predicted tourist spending in the fourth quarter of 1997 will be up 8.7 percent from the fourth quarter of 1996.

But forecasting isn't simply a matter of interpreting economic data, Yochum said. ``It's important for one who interprets to differentiate between rates of change as opposed to changes in absolute levels of economic activity.''

Virginia Wesleyan's Garraty summed up the difficulties with an artistic description.

``The best analogy is that the economic picture is an Impressionist painting,'' Garraty said. ``It takes a lot of individual data dots before a consistent picture emerges. If you stand right next to an Impressionist painting it doesn't make any sense, you have to step back.'' ILLUSTRATION: Graphic

Color photos

EMPLOYMENT

TOURISM

EARNINGS

[For complete graphic, please see microfilm]

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