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John Chambers College of
Business and Economics
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Executive Summary

The United States and West Virginia economies currently face major headwinds resulting from sharp increases in interest rates since early-2022. So far, both the state and the nation have been able to avoid a recession, but the probability of a new recession remains elevated. Overall, however, our West Virginia forecast calls for slow output growth and a roughly stable level of employment over the coming five years. While the state is likely to face some major economic development challenges over the long term, it has also enjoyed some important economic development announcements and initiatives in recent years and has strong potential in some areas. Overall, this report provides a foundation to understand West Virginia’s long-run economic challenges and opportunities.

Highlights related to West Virginia’s recent economic performance are as follows:

  • Despite being the shortest official recession on record, employment fell by around 100,000 in the Spring of 2020. While employment returned at a healthy pace through mid-2022, growth has been much weaker over the past year or so. Indeed, only about 6,000 jobs have been added since mid-2022. The state remains around 16,000 jobs – or 2.2 percent – below its January 2020 level.
  • Private-sector employment has recovered at a stronger pace over the past three years or so. When focusing on private-sector employment specifically, the state stands only around 4,000 jobs – or 0.8 percent – below its January 2020 level.
  • The state’s unemployment rate surged to nearly 16 percent in the Spring of 2020 but has declined significantly since then. The jobless rate reached an all-time low of roughly 3.5 percent during the middle of 2022 and has generally remained at that level.
  • Only 55 percent of West Virginia’s adult population is either working or looking for work. Though an improvement from recent years, this remains the lowest rate of labor force participation among all 50 states and represents a key hurdle to economic prosperity.
  • Per capita personal income (PCPI) in West Virginia ranks 49th highest among the 50 states, surpassing only Mississippi. PCPI in West Virginia stands at 76 percent of the national average. Movement in PCPI has largely been on par with the nation since around 2016, implying that the state has neither gained nor lost ground compared to the nation.
  • West Virginia’s real GDP fell by around 3 percent in 2020, and has failed to bounce back since, growing only 1.3 percent and 0.4 percent over the past two years. Overall, the state has lagged the nation in output growth every year since 2011. Output in the state’s energy sector has grown by around 22 percent cumulatively over the past five years or so. Output in the rest of the state economy – outside of energy – has not increased at all over that period.
  • The energy sector is an important driver of economic activity in the state. Coal output plunged to its lowest levels in decades during 2020, falling to roughly 60 million short tons. Production has rebounded over the past three years, however, and should average in the mid-80-million-ton range during the near term, in part due to global export demand.
  • Natural gas production has consistently increased at a healthy pace for a decade now, and that growth is expected to continue over the forecast period. The state recently became the nation’s fourth-leading producer of natural gas. However, downstream manufacturing activity in the Appalachian Basin will be essential to supporting growth and broadening prosperity related to West Virginia’s natural gas industry over the long term.

Highlights related to West Virginia’s economic outlook are as follows:

  • Employment in West Virginia is expected to remain essentially flat through 2028. This lags the nation, which is expected to add jobs at an average annual rate of 0.3 percent over the forecast period. The major driver of this slow growth is the sharp rise in interest rates that the nation has experienced over the past one to two years.
  • Several recent economic development announcements that are not incorporated into this forecast do offer hope for added strength in a few regions of the state. The strongest examples of recent positive developments are the addition of an estimated 800 jobs associated with Nucor in Mason County, the addition of 750 jobs associated with FORM Energy in the state’s Northern Panhandle, and the addition of an estimated 3,000 permanent jobs associated with the development of a hydrogen hub in the state.
  • The state’s unemployment rate is expected to increase over the next couple of years, reaching five percent or so by late-2025. This increase will largely be driven by entry into the labor force.
  • Real per capita personal income is expected to grow 1.6 percent annually through 2028. Transfer payments are expected to register the fastest growth over the next five years. However, the degree to which the state is increasing its reliance on transfer payments is slowing compared to recent years.

The Mountain State’s underlying demographics remain a major limiting factor to growth moving forward. Consider the following:

  • West Virginia’s population has declined by approximately 75,000 residents – or 4.5 percent - since 2012. Population losses are expected to be smaller in magnitude going forward.
  • West Virginia’s age distribution ensures that the natural population decline will continue in the coming years. Positive shocks to the economy are essential to encourage in-migration and reduce the severity of natural population decline.
  • Economic development strategies should focus on ways to improve health outcomes, lower drug abuse, and advance educational and vocational training outcomes in the state to make West Virginia’s workforce more attractive to potential businesses.

Economic performance is expected to remain extremely variable across West Virginia’s counties. Consider the following:

  • The state’s top 10 employment growth counties added 14,420 jobs over the years 2012-2022, while the remaining 45 counties lost 58,180 jobs collectively. Important successes in certain areas of the state are often obscured in aggregate data by losses or stagnation across a large swath of the state.
  • Sixteen counties are expected to add jobs in the coming five years, while expectations for the other counties range from stagnation to employment losses. The highest rates of job growth tend to be in the northern counties.
  • While the state overall is expected to lose population in coming years, a handful of counties are expected to add residents during the outlook period. Population gains will occur in North-Central West Virginia and the Eastern Panhandle.
  • Policymakers should be keenly aware of significant economic differences across West Virginia counties and ensure that economic development strategies consider each region’s specific strengths and weaknesses.