WVU Forecast: West Virginia job losses end, recovery under way

November 10, 2010

The economic recovery is under way in West Virginia, according to the latest forecast from the WVU College of Business and Economics. The forecast was released at the 17th annual West Virginia Economic Outlook conference in Charleston.

"The state has added 9,100 jobs from the first to the third quarter of 2010," said George W. Hammond, associate director of the Bureau of Business and Economic Research. "That translates into an annualized growth rate of 2.5 percent," Hammond said. The comparable national job growth rate was just 0.9 percent. "Most state sectors contributed to positive job gains this year, but the largest gains were reported in leisure and hospitality; construction; education and health care; and natural resources and mining," Hammond said.

"The state economy is likely to continue to expand during the next year, although growth is likely to be slow," Hammond said. The forecast calls for state job growth to average 1.0 percent per year during the next five years, well below the expected national growth rate of 1.7 percent per year. Most job growth in West Virginia is expected to come in service-providing sectors, like health care; professional and business services; and trade, transportation and utilities. Manufacturing and construction also add jobs during the forecast, reflecting the global economic rebound and the gradual recovery from the housing bust. Mining jobs decline modestly during the forecast, reflecting the mild recovery in coal production.

With soft job growth during the 2010-2015 period, the state's unemployment rate gradually declines from 8.8 percent in 2010 to 6.9 percent by 2015, but remains well above its pre-recession low of 4.2 percent in 2007. In addition, inflation-adjusted per capita income growth averages 1.8 percent per year through 2015, below the national growth rate of 2.0 percent. That implies a rising state income gap with the nation.

"With job and income growth expected to be below the national average, West Virginia struggles to attract more residents than it loses to other states," Hammond said. That sets the stage for overall population stability and rapid demographic aging in West Virginia. Indeed, the state's population age 65 and older is expected to rise by 29,500 during the next five years.

"Risks to the baseline outlook include the risk of a national downturn during 2010-2011," Hammond said. That would generate renewed job losses in West Virginia as well. In addition, the state faces regulatory risks related to concerns about clean air and water, which could reduce mining and manufacturing activity in the state. Further, attempts by the federal government to rein in deficits and debt could adversely affect health care job growth during the forecast. Finally, the state gaming industry faces increasing competition from surrounding states. If that competitive pressure is more effective than expected, then growth in this sector may fall below projected levels.

Full details are available in a 57-page publication available from the WVU Bureau of Business and Economic Research for $30 per copy. Order the publication online at www.be.wvu.edu/bber/puborder.htm. Contact Jamie Bouquot at 304-293-7831 or via email at james.bouquot@mail.wvu.edu for more information.