WVU researchers say construction and extractive industries will pace state economy, northern WV to see larger growth
Economists at West Virginia University today (October 4) projected the construction, natural gas and service industries will pace the West Virginia economy over the next five years, and population gains and economic growth will be more prevalent in the northern half of the state.
However, an older, relatively unhealthy, low participating work force will slow significant economic advances during the forecast period.
The economic forecast for the state was delivered at the 23rd Annual West Virginia Economic Outlook Conference in Charleston by the WVU Bureau of Business and Economic Research, which operates within the College of Business and Economics.
BBER Director John Deskins said the baseline economic forecast for West Virginia calls for job losses in coal to subside within the near term. However, the outlook is subject to considerable downside risk depending on the environmental regulatory climate and conditions in the global coal market. Natural gas shows some promise over the period, though, as low prices and regional infrastructure bottlenecks that have weighed on the industry will subside over the next year or so.
“We anticipate conditions will improve considerably in 2017-18 thanks to new pipeline capacity and expanded natural gas use in electricity generation,” Deskins said. “Overall, production is expected to increase at an annual average rate of 9 percent through 2021, and employment is expected to increase at an average annual rate of 4 to 5 percent. Natural gas output stabilized over the past year after tremendous growth for four years. Output is expected to again rise at a healthy pace in coming years. Total GDP (Gross Domestic Product) from natural gas is expected to equal that of coal in the near future. GDP from natural gas was one-tenth of one percent of coal less than a decade ago.
“Construction is expected to add jobs at the fastest rate going forward, but the service-providing segment will tend to pace the state’s overall performance during the next five years,” Deskins said, “led by professional and business services, leisure and hospitality, and healthcare.”
BBER Research Assistant Professor Brian Lego said economic progress in the state is challenging, and that diversification and commitment to a stronger economy and a better West Virginia are essential.
“Only 53 percent of West Virginia’s adult population is either working or looking for work,” Lego said, “and that represents the lowest labor force participation among all 50 states. This problem is a major obstacle when it comes to long-term economic prosperity.”
Deskins said the state has seen employment decline by an estimated 17,000 jobs over the past four years, a significant number of which can be attributed to the downturn in the coal industry. “By the end of 2016, we expect that coal output will have fallen by around 55 percent since 2008, with the losses occurring in the state’s southern coalfields,” he said. “A more diverse economy is necessary in order to steer West Virginia toward a brighter economic future.”
WVU economists said the state unemployment rate would remain at approximately 6 percent over the next five years. Additionally, they projected that West Virginia would lose more than 20,000 residents over the next two decades, continuing a population slide that has seen a loss of an estimated 12,000 residents over the past three years.
In a time of retooling West Virginia’s economy, what are the recommendations for economic recovery?
“There is real potential in industries such as healthcare, energy, manufacturing, construction, hospitality and tourism and service industries,” Deskins said. “A positive shock to encourage in-migration is essential to lessen the severity of natural population decline. Additionally, state economic development strategies are going to have to focus on ways to improve health, education and drug abuse outcomes to make the West Virginia work force more attractive to potential businesses.”
Economists also discouraged a one-size-fits-all plan for the state, given dramatic differences between regions. “Policymakers should be keenly aware of significant differences across West Virginia and ensure that strategies to bolster economic development play to the strengths of each region,” Deskins said. “For example, while the state is losing population overall, we expect 19 counties to remain stable or add residents over the next five years. On the other hand, eight counties are expected to lose jobs. Expected growth rates vary widely.
“Population gains will be heavily concentrated in North Central West Virginia and the Eastern Panhandle. The highest rates of job growth tend to be in the northern half of the state.”
For a free PDF download of “West Virginia Economic Outlook: 2017-2021,” go to be.wvu.edu/bber/pdfs/WV-Economic-Outlook-2017.pdf. For further information on the WVU College of Business and Economics, follow B&E on Twitter at @wvucobe or visit be.wvu.edu.
CONTACT: Patrick Gregg, WVU College of Business and Economics
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