The West Virginia economy is forecast to improve gradually but to continue to trail behind national growth, according to the latest forecast released today (Nov. 14) by the West Virginia University Bureau of Business and Economic Research.

Although the states unemployment rate is forecast to fall below 5 percent, overall state growth is forecast to stay below national gains in employment and per capita personal income. The states population is forecast to drop by 2,500 per year, compared to gains of 1,600 per year during the 1990s.

“The forecast calls for a steadily improving standard of living in the state, but the state is also likely to fall further behind the nation during the next five years,”says Dr. George Hammond, director of the West Virginia Economic Outlook project. This annual study collects and analyzes the latest data on the states economy and forecasts the states economic health for the next five years.

Growth is expected to be sluggish in part because the national economy is expected to slow, but also because the state is forecast to continue to suffer job losses in several high-paying industries, according to Hammond. The forecast calls for annual overall job growth in West Virginia to decelerate from the 11,100 jobs per year rate of the 1990s to 7,100 per year during the next five years. This generates a state rate of growth below the expected national rate.

The states slower job growth is due primarily to less growth in the service-producing sectors of the state economy. The services, trade and government sectors drive this result, with each sector expected to slow compared to the 1990s and to record growth well below the nation, Hammond said. These sectors have been responsible for raising the states overall rate of growth in employment in the past decade, so slower growth here spells slower overall growth.

Employment in the other sectors will either decrease or will not increase enough to take up the slack, Hammond said. Goods-producing jobs are forecast to continue to fall, with losses concentrated in mining. Chemical products, which is the states largest manufacturing industry, is forecast to continue losing jobs as the industry faces stiff competitive pressures. However, the state is expected to see net job gains in lumber and wood products, transportation equipment (auto parts), and printing and publishing during the forecast period. Job gains, coupled with small population losses, drive the unemployment rate down to just under 5 percent during the forecast period, which will lessen the gap between the states unemployment rate and the nations.

Slower overall job gains, combined with continued job losses in several large, high-paying sectors, generate a steadily increasing gap in per capita personal income between the state and the nation. Employers in chemical products, utilities, coal mining and steel production pay the highest wages and account for a larger share of employment in the state than nationally, according to Hammond. The job losses expected in these industries thus reduce gains in the states overall per capita personal income and cause West Virginias standard of living to drop further behind the nation.

In addition, slow job and income gains are not expected to be enough to keep residents from leaving the state, particularly those in the 18-44 age group. Since the states natural increase (number of births vs. number of deaths) is essentially zero, this out-migration creates moderate population losses each year during the forecast, says Hammond. This contributes to a demographic shift in the states population toward older age groups.

Hammond cautions that all findings in the forecast assume that the national economy will avoid recession. The risk of a national recession clouds the states future. A national recession would generate a downturn in West Virginia, with overall job losses and a strong increase in unemployment. Further, with state growth already expected to be weak during the next two years, it is possible that a strong U.S. slowdown (but no recession) could tip the state into a recession.

Besides the statewide forecast, the West Virginia Economic Outlook 2001 also contains information on county performance during the 1990s and West Virginias status relative to other states. Copies of the Outlook 2001 are available for $15 plus 6 percent sales tax from the WVU Bureau of Business and Economic Research. To order, call 304-293-7534 or e-mail moore@be.wvu.edu .