The annual West Virginia Economic Outlook from West VirginiaUniversitys Bureau of Business and Economic Research calls for growth during the next five years but warns that gains in the short term are likely to be weak.
Presented at the Charleston Marriott this morning (Nov. 19), the report predicts that a”double dip”recession is unlikely, but that economic recovery remains uncertain.
“The state and national economies fell into recession in early 2001, with job losses and generally rising unemployment rates during the past 18 months,”said George Hammond, director of the Economic Outlook Project in the College of Business and Economics.”Renewed, but sluggish, national growth next year may put the state economy on the road to recovery, but progress will likely be correspondingly slow.”
The state economy remained mired in recession during the summer of 2002, as job losses accelerated and the seasonally adjusted unemployment rate spiked up to 5.9 percent in August. From March 2001, the beginning of the national recession, to August 2002, the state has posted net losses of 8,800 jobs on a seasonally adjusted basis. This translates into a percentage loss of 1.2 percent, which is similar to the rate of job loss nationally.
However, the state has experienced more severe mining job losses than has the nation. Coal mining jobs in the state have been through a mini boom/bust cycle during the last two years, as the national energy crisis intensified during 2000 and 2001 and subsequently waned. Coal mining has gained and lost roughly 2,000 jobs since 2000.
Manufacturing job losses during the recession have been significant and widespread, but they have come at about the same rate in the state as they have nationally. Slowing growth (or outright declines) in demand for consumer and investment goods, coupled with a strong U.S. dollar, has depressed manufacturing output and employment.
Job growth in services has outpaced the national rate during the March 2001-to-August 2002 period, the report shows. Health care and social services, business services, and other services such as legal and repair services drove employment gains in this sector. Most other sectors �€such as hotels, recreation services, membership organizations, and engineering and management services �€were stable or declined slightly.
The outlook for the state economy depends in part on the future performance of the U.S. and international economies. The national forecast, prepared by DRI -WEFA in September 2002, calls for real gross domestic product growth to rise from 2.3 percent in 2002 to 3.2 percent in 2003 and 3.3 percent by 2004. This drives the national unemployment rate down from 5.9 percent in 2002 to 5.3 percent by 2004. In other words, the national forecast calls for the U.S. economy to emerge from recession and to avoid a”double dip”recession.
The state economy is forecast to add 5,000 jobs per year during the next five years, although mining jobs will continue to decline during the forecast as the industry responds to intense competitive pressure and to risks related to regulatory concerns. Manufacturing jobs should roughly stabilize during the forecast, assuming the value of the U.S. dollar continues to gradually depreciate from current levels. Steel, chemical and glass products jobs will continue to decline during the forecast, while wood products and transportation equipment (auto parts and aircraft) stabilize and should begin to grow again.
Most of the net job growth in the state will come in the service-producing sectors, particularly in services, although growth is expected to be slow compared to the last half of the 1990s. Health care and social services will record job gains, but moderate population losses and tight state budgets will likely restrain growth. The business services sector will post job gains during the forecast as rebounding national growth will drive demand for call centers and computer programming. Stronger national growth will also support gains in travel-related sectors, while the fledgling biometrics sector will likely gather steam as homeland security concerns continue to attract attention.
Moderate job growth, primarily in the service-producing sectors, will generate correspondingly moderate per capita personal income gains. This likely leaves the state about as far away from the national average in five years as it is today. Further, job and income growth at rates below the national average will contribute to moderate population losses during the forecast. These losses will drive further increases in the states median age.
Finally, modest job growth, combined with moderate population losses, will push the state unemployment down from the 6.0 percent range in 2002 to 5.4 percent by the end of the forecast.
Risks to the state forecast range from the possibility of a”double dip”national recession to homegrown risks targeting several large sectors of the state economy. A renewed national recession would depress demand for goods and services produced in the state and thrust the state economy deeper into recession as well. Coal mining, steel and chemicals each face competitive pressures within their respective industries and respond to overall macroeconomic events. Closures of major operations in these sectors would have overall macroeconomic impacts on the state.
The forecast will be presented again at the WVU College of Business and Economics, Room 458, at 4 p.m. Thursday, Nov. 21. Copies of the report are available by calling 304-293-7831.