Economic forecast for West Virginia: Sluggish growth in 2012

November 8, 2011

West Virginia is expected to post modest job growth in 2012, according to the latest forecast from the West Virginia University College of Business and Economics. The forecast was released at the 18th Annual West Virginia Economic Outlook Conference in Charleston.

"The state's continued growth will be a big improvement over the huge job losses during the 2009 recession," said Dr. George Hammond, associate director of the Bureau of Business and Economic Research in the College.

West Virginia lost 23,000 jobs from the third quarter of 2008 to the fourth quarter of 2009. During the following six quarters, the state added back 11,600 jobs, replacing roughly half the jobs lost during the downturn.

"Overall, the state is likely to continue to expand during the next five years, assuming that the national economy avoids recession. The forecast calls for West Virginia's job growth to average 1.0 percent per year during the 2011-2016 period, which is below the expected national rate of job growth of 1.6 percent per year," Hammond said.

Job growth in natural resources and mining slows significantly during the next five years. This reflects contrasting trends in coal mining and oil and gas extraction. The forecast calls for coal production to decline significantly during the next five years, falling from 138 million tons in 2011 to 125 million tons by 2016. Declining coal production in the future reflects the increasingly challenging geologic conditions in the southern part of the state, as well as the cumulative effect of a number of regulatory policies related to concerns about air and water quality. In addition, natural gas is expected to be a more potent competitor in the future.

"Lower coal production in West Virginia translates into coal mining job losses during the next five years. However, the job losses in coal mining are expected to be offset by job gains in oil and gas extraction, as the development of the Marcellus Shale play in West Virginia picks up speed," Hammond said.

While construction and manufacturing employment are expected to expand modestly during the forecast, most job growth is expected in the service-providing industries, particularly health care; professional and business services; and trade, transportation, and utilities. Job gains in health care are related to the aging of the state's residents and to the continued funding growth in Medicare and Medicaid. Jobs in professional and business services expand as state and national growth raises demand for business services like accounting, legal, management, computing and call center services. The trade, transportation and utilities sector adds jobs during the next five years, with growth expected to be strongest in the near term. This reflects gains in retail trade related to the location of the Macy's fulfillment center in Berkeley County.

"Sustained job growth during the forecast translates into a gradually declining state unemployment rate during the next five years. The forecast calls for the West Virginia unemployment rate to fall from 9.1 percent in 2010 to 6.4 percent by 2016," Hammond said.

Continued, but slow, job growth during the forecast translates into inflation-adjusted income growth. The forecast calls for West Virginia real per capita income growth to average 1.8 percent per year during the next five years. That is slightly faster than growth during the past five years and is also just above the national growth rate of 1.7 percent per year.

"With job growth well below the national rate, West Virginia is unlikely to attract many more residents than it loses to other states. Since the state gets no boost to growth from natural increase, that sets the stage for rough population stability during the forecast," Hammond said.

Full details are available in the printed publication available from the WVU Bureau of Business and Economic Research for $30 per copy. Contact Jamie Bouquot at (304) 293-7831 or via email at jamie.bouquot@mail.wvu.edu for more information.