Section II: Recent Trends in the West Virginia Economy
Employment and the Labor Market
TOTAL EMPLOYMENT According to the most recent data, West Virginia’s economy has not fully recovered from the COVID-19 recession in terms of employment. Payroll employment, which contracted by around 100,000 between January of 2020 and late-Spring 2020, bounced back at a healthy pace through mid-2022. The speed of the recovery during this phase is especially impressive when compared to previous recession-recovery episodes. The rebound in employment was strongest during the early-summer of 2020 as the reopening process began, and continued through early-2022, when payrolls in the state nearly reached 700 thousand again. Overall, the state was able to avoid the L-, W- or checkmark-shaped recovery scenarios that were feared by some and has recovered mostly on par with the V-shaped recovery that we anticipated in our forecast in the summer of 2020.
Despite the strong recovery through early-2022, however, the state has not observed a similarly rapid rate of employment growth over the past year or so – adding only about 6,000 jobs since mid-2022. This slower rate of growth is likely a result, at least in part, of the headwinds associated with the national interest rate increases discussed above. The state remains around 2.5 percent below its January 2020 level in terms of total employment.
PRIVATE SECTOR EMPLOYMENT In Figure 1.8 we present total private-sector employment in West Virginia, in contrast to total employment presented previously. Here the figure follows a similar trajectory compared to that in Figure 1.7. However, the recovery has been somewhat stronger when focusing solely on private-sector activity, indicating that government employment (both state and local, as well as federal), has failed to match the recovery in private-sector jobs over the recovery period. Focusing solely on private-sector employment, the state is currently only around four thousand jobs – or less than one percent - below its January 2020 level.
WEST VIRGINIA COMPARED TO THE NATION In Figure 1.9 we present total private-sector employment again, for the state and for the nation, except that we have converted the data to an index beginning at 100 in January of 2020. This approach allows for an easy comparison between state- and national-level performance. As illustrated, the state and the nation performed similarly through the first year and one-half of the pandemic. However, since mid-2021, the state has fallen behind in terms of private-sector employment growth. As of the most recent data, the state is at 99.2 percent of its pre-pandemic level of private-sector employment, while the nation stands at 103.3 percent.
EMPLOYMENT GROWTH BY COUNTY While we present a broader analysis of economic performance by county in a separate report, here we briefly consider how employment growth varies across county. Here we present a simple long-run view by calculating total employment in 2022 minus total employment in 2012 on a county-by-county basis. In Figure 1.10 we illustrate the top 10 growth counties over the past decade compared to the remaining 45 counties in the state. As noted in the figure, the top 10 growth counties added over 14 thousand jobs over the period, whereas the remaining 45 counties lost over 58 jobs over the period. The point here is that economic performance varies widely across the state’s counties and relatively strong performance in a few counties or regions may be masked in aggregate data by the numerous counties that have been stagnant or have declined.
UNEMPLOYMENT For several years prior to the pandemic, West Virginia’s unemployment rate averaged between five to six percent, exceeding the national average by roughly one percentage point or so during most months. Over the course of the pandemic, however, the state’s unemployment rate was in line with the national average for the most part. More recently, West Virginia’s jobless rate fell below four percent for the first time on record in early-2022 and remains at a very low level, setting a new all-time low of 3.5 percent in 2023.
In many instances historically, declines in West Virginia’s unemployment rate can be explained at least in part by some combination of labor force attrition and underlying demographic trends. Over the past three years or so, the sharp drop in the unemployment rate has been the product of increased hiring activity mostly, but ongoing friction between factors influencing the demand and supply for labor have also caused the labor market to appear even tighter than the measured unemployment rate might indicate.
LABOR FORCE PARTICIPATION Based upon the unemployment rate, West Virginia is at “full employment.” But, while the state’s labor market is very tight in the short-run context of the unemployment rate, it only provides a partial representation of labor market health. Specifically, West Virginia’s underlying demographic characteristics, industrial structure, and other unique factors warrant additional information to assess labor market conditions.
As a result, one should examine the labor force participation rate, in conjunction with the jobless rate, for a more complete depiction of West Virginia’s labor market. As of 2022, West Virginia’s labor force participation rate was the lowest among all states at just over 55 percent, a ranking that it has maintained since the US Bureau of Labor Statistics began reporting this data series in 1976. Age distribution does explain some of the state’s workforce participation deficit against other states, but the underlying causes extend to issues beyond age since the state also lags well behind others among the prime working age population (25-54 years of age). On a positive note, the state’s rate has increased over the past couple of years and the workforce participation gap with the nation has narrowed slightly.
JOB OPENINGS A significant trend that has emerged both nationally and within West Virginia that speaks to the massive swing in labor market conditions during the COVID-19 pandemic has been the sharp increase in the rate of job openings. According to the BLS, since early 2021 an average of seven to eight percent of all jobs available are not filled in West Virginia. Some of this persistently high rate of job openings stems from early retirements during the pandemic as well as significantly lower levels of immigration into the US since 2016. While the job openings rate has improved significantly for the nation, West Virginia continues to observe an unusually high figure.
Income and Output
INCOME Per capita personal income in West Virginia stood just shy of $50,000 in 2022, placing the state 49th highest among the 50 states. West Virginia is substantially ahead of Mississippi by this metric, and lags 48th placed Alabama by just under $1,000 per person. Overall, the average West Virginian receives around $76 dollars in income for every $100 received by the average American.
Turning to Figure 1.15, we report the growth of per capita personal income for the state and for the nation over the past decade or so. While the state has been near the bottom of states in terms of per capita personal income, the relative position of the state compared to the nation has not moved significantly. As reported in the figure, per capita personal income growth (not accounting for inflation) in West Virginia has lagged nation since 2011. Since 2010, the figure has grown by about 50 percent for the state, versus nearly 61 percent for the nation. However, most of this deficit occurred over the first few years of this window of time. Since around 2016 the state and the nation have performed very similarly in terms of per capita personal income growth. While West Virginia has not improved relative to the nation in terms of per capita personal income, it has not fallen further behind over the past six years or so.
WAGES In Figure 1.16 we report average wages for the state overall and across the major industrial super sectors. Altogether, the average wage in the state was around $50,000 for 2022. Unsurprisingly, wages vary widely across supersector, with typical wages in the utilities sector and in the mining and oil and gas sector exceeding $100,000 for the year. This stands in sharp contrast to a sector such as leisure and hospitality, where the typical wage barely surpassed $20,000 for the year.
GDP After experiencing a large annual percentage decline during 2020 (~3 percent), West Virginia has failed to bounce back in a mirrored fashion in the two years since. The state posted real GDP gains of only 1.3 percent and 0.4 percent in 2021 and 2022, respectively, significantly lagging performance at the national level. While the COVID recession created some volatility in West Virginia’s economic performance, the state has tended to experience a much more uneven pace of real output growth over the past decade or so when compared to the nation. Further, the state has lagged the nation significantly in terms of real GDP growth during the years depicted in Figure 1.17 overall. The state has underperformed the nation every year since 2011. And over the entire period depicted in the Figure, West Virginia has posted an average annual rate of real GDP growth of 0.4 percent, compared to 2.1 percent for the nation.
GDP – MINING and OIL & GAS It is important to consider the mining super sector (which includes coal mining, oil and gas production, as well as quarrying) to fully understand the state’s economic output picture. In Figure 1.18 we use an indexed approach to illustrate the change in West Virginia’s total GDP outside of the mining super sector, versus GDP from the mining super sector exclusively. As illustrated, output outside of mining has not grown at all since 2017, and in fact the figure stands at 99.5 percent of its 2017 level, after accounting for inflation. In contrast, output in the mining super sector has grown considerably over the period – posting nearly 23 percent cumulative growth between 2017 and 2022, after accounting for inflation.
Recent Demographic Trends
POPULATION West Virginia saw its population decline in number for the tenth consecutive year in 2022 and has registered an overall loss of over 82,000 residents since 2012. Overall, the absolute and percentage declines in population over the past decade have surpassed the losses observed during the mid- to late-1990s but are demonstrably smaller than the massive population declines that occurred during the early- to mid-1980s economic collapse. West Virginia’s sustained population declines set it apart from nearly every state in the US. Indeed, because of this population loss the state saw its representation in the US House of Representatives drop from three to two beginning this year (down from a high of six decades ago).
West Virginia’s population declines have been driven both by net outflows of residents to other states and natural population losses in most years, which occur when deaths exceed births. West Virginia saw an important swing in net migration during 2021 and 2022, however, as the state recorded its first positive net inflow of residents from other states in several years. At the same time, the rate of natural population decline in West Virginia accelerated recently as the state saw a significant increase in deaths caused by COVID-19.
A separate section of this report details population trends on a county-by-county basis. The data show that only a handful of counties have consistently gained population in recent years, while the large majority of the state’s 55 counties have seen population loss, ranging from minor losses in a few counties, to quite large losses in others.
AGE DISTRIBUTION Age distribution represents one of the defining demographic characteristics of the Mountain State’s population when compared to most of the US. And this age structure has palpable impacts on broader economic trends in the state. The state’s median age stands nearly 4 years above the national figure. Another sign of the state’s skewed age distribution is the fact that more than 21 percent of the state’s residents are aged 65 or older, exceeding the national figure by nearly four percentage points.
HEALTH AND DRUG ABUSE While the state’s older-than-average population does contribute to higher rates of mortality, even when accounting for the population’s age distribution, West Virginia experiences higher incidences from various morbidities as well as higher mortality rates. According to the Centers for Disease Control, West Virginia’s age-adjusted mortality rate is the second highest among all states and ranks among the tier of states with high incidences of heart disease, cancer, and diabetes. Furthermore, behavioral or lifestyle factors that contribute to poor health outcomes such as physical activity during leisure time are among the lowest in the nation and rates of cigarette smoking and smokeless tobacco use among the adult population are among the highest nationally. Another source of the state’s poor health outcome trends over the past decade or so has been the skyrocketing use of and death from opioid and other drug overdoses. Indeed, the drug overdose rate in West Virginia was nearly three times the national average in 2021 (most recent data available).
Employment by Supersector
ENERGY SECTOR Even as the employment footprint of extraction industries continues to shrink in West Virginia, especially with respect to coal, the natural gas and coal industries remain a key foundational component of the state’s economy. In some respects, these sectors also represent major opportunities and challenges for the state’s economy due to their connections to global economic, environmental, and political issues. Overall, the natural resources and mining sector accounts for just three percent of statewide employment, but the disproportionate deployment of capital equipment, highly interconnected supply chains (on both the input and output side), and the high wages paid out to coal miners and gas industry workers pushed the sector’s output to just shy of 10 percent of total statewide GDP in 2022.
After recording its lowest annual production level in roughly a century (outside of years characterized by major organized labor strikes) during 2020, West Virginia’s coal industry has rebounded over the past three years or so. However, even as global demand for steam and metallurgical coal has risen and Russia’s invasion of Ukraine has created a negative energy supply shock that has precipitated massive increase in world coal prices, further constraining the global coal trade, coal output from mines in West Virginia has only increased to the mid 80-million-ton range. In addition, most of the rebound in production has occurred across the state’s northern mines, where tonnage levels have recovered to be roughly equal to pre-pandemic levels. New met coal operations have helped to bolster regional output in recent quarters, as has increased coal-fired electricity generation, which became more cost competitive amid the run-up in natural gas prices caused by the war in Ukraine.
West Virginia’s natural gas industry continues to develop and has benefited significantly from recent exploration and resource development in high-yield regions of the state’s Marcellus and Utica shale fields. Natural gas output has increased at a very healthy pace for the past decade or so. Overall, these increases have enabled West Virginia’s natural gas output to rise to fourth highest among all states in 2022. Natural gas liquids (NGL) production has also expanded in significant fashion in recent years and is expected to see some increased demand over the near term from the recently opened Royal Dutch Shell ethane cracker just outside of the West Virginia border in Pennsylvania.
Even as natural gas output has increased at a healthy pace over the past several years, employment levels in the natural gas industry are well below those seen during other growth episodes historically. While some of this represents an increased shifting of hires to contract labor firms, rapid technological progress and innovations in drilling practices have enabled upstream operators to enjoy dramatic increases in new well production without the same number of workers at the wellhead that might have been needed in previous decades. Examples of new innovations include increasingly lengthier laterals, improved rotary engines and other equipment that have enabled drillers to operate more wells from one rig and access deeper wells with a larger ‘sweet spot.’ The net effect of these changing practices and innovations has been to dramatically increase operational efficiency and new well productivity.
MANUFACTURING West Virginia’s manufacturing sector has experienced a rollercoaster ride in recent years. Following a string of positive developments, such as the building out of Procter & Gamble’s campus in Berkeley County, the sector has dealt with some significant issues over the past few years. Indeed, given the dramatic shifts in consumer demand during and after the COVID-19 pandemic, producers in West Virginia (and elsewhere) have struggled with unpredictable production schedules due to global supply chain snarls for inputs ranging from semiconductors to lumber, labor shortages, and rising fuel prices. In addition, decisions by Viatris to close its Mylan Pharmaceuticals facility in Morgantown and Mountain State Carbon to shutter its Follansbee-area coking coal plant have created more challenges for the manufacturing sector.
Despite the problems related to the pandemic and these recent plant closures, portions of the state’s manufacturing sector have performed well, and recent developments indicate some potential for growth in the sector. For example, an additional $240 million capacity expansion is underway at the Toyota plant in Putnam County to build transaxles for hybrid vehicles and the company had already begun investing $210 million in the plant and hiring more workers to boost production of engines.
West Virginia is also seeing an emergence of other clean-tech manufacturers. For example, in early-2022, electric bus manufacturer GreenPower Motor Company announced that it will open a production facility for its Beast line of electric-powered buses in Kanawha County. The company has already started a pilot program with West Virginia’s state government to test the buses and potentially build buses for all counties (if proven feasible), but the plant will produce units for a market that is growing as more states set stricter limits on vehicle emissions.
Another project that is expected for this emerging industry is the next-gen EV battery manufacturer Sparkz. The company’s 300-worker Gigafactory in Taylor County is slated to produce cobalt-free batteries for industrial- and commercial-use vehicles initially, such as forklifts and tractors, but is expected to expand to automotive batteries once certification and testing processes have been completed.
Perhaps the most significant link in the chain to enhance West Virginia’s potential with clean-tech manufacturing (auto or non-auto) or manufacturers seeking to reduce their own CO2 emissions was the announcement by Berkshire Hathaway Energy (BHE) to develop a renewable energy microgrid to power a 2,000-acre industrial park in Jackson County. One of BHE’s own subsidiary businesses, Precision Castparts Corp., is expected to be the first company to operate at the site and will produce titanium castings for aerospace industry, but other manufacturers do are likely under consideration to locate at the site as recent legislation appears to target prospective industries.
Perhaps the biggest news for the state’s manufacturing sector comes from metals manufacturing, where Nucor has committed to build a $2.7 billion steel sheet mill facility in Mason County, which will employ as many as 800 workers upon completion in late-2024/early-2025. The site development and construction is expected to generate as many as 2,000 construction jobs during the peak construction phases. The Nucor development is expected to be one of the single-largest economic developments in West Virginia history.
Finally, several other projects across the state recently have or will soon boost manufacturing activity in the state. For example, Mountain Top Beverage recently expanded production at a new Morgantown-area facility and is expected to expand capacity further within the next several years. Moreover, the plant is one piece of a broader plan to expand use of the region’s industrial park and increase infrastructure access. While several manufacturers in the state have a direct connection to the defense and nondefense aerospace industries, West Virginia’s defense-based aerospace industry is expected to grow further within the next few years as Northrop Grumman recently announced it will build a strike missile production facility on its Rocket Center campus by 2024, resulting in the addition of several hundred jobs.
SERVICE SECTORS While goods-producing sectors have endured significant turmoil over the course of the pandemic due to supply chain disruptions, labor supply shortages and erstwhile skyrocketing energy prices, the construction, energy, and manufacturing sectors have seen employment and output recover to the point that they are at least close to pre-pandemic levels. By comparison, several service-providing sectors experienced massive drops in economic activity during the early phases of the pandemic and continue to see business activity lag pre-pandemic levels by an appreciable margin.
Capacity restrictions and concerns over infection risks in indoor settings were significant hindrances for these sectors, particularly leisure and hospitality. Since the pandemic, however, restaurants, bars and other leisure and hospitality sector businesses have faced persistent problems with labor supply shortfalls. Rising wage bills, increased worker turnover, greater competition for workers with other sectors and several years of lower immigration levels into the US have reduced the labor supply to some degree. Some segments of the leisure and hospitality sector will likely not see their payroll levels reach pre-pandemic levels for quite some time.
Healthcare is another sector that has faced a significant hit from the COVID-19 pandemic. Although many of the job losses the sector faced during the initial phases of the pandemic were recovered as hospitals began to re-open patient services by mid-2020, the successive waves of increased hospitalizations and ICU utilization rates in 2020 and 2021 took their toll on the sector, reaching the point of placing significant strains on staff and resource availability. Indeed, several of the state’s major health provider networks have struggled through episodes of over-capacity to the point of having to curtail other types of care and services and shift resources over to COVID-19 coverage.
Recent trends within the state’s healthcare sector enabled some providers to hold up relatively well during the pandemic and position themselves to maintain healthier financial conditions going forward. For example, the state’s largest health systems providers expanded their geographic footprints vis-à-vis mergers and joint venture agreements with smaller rural partners or struggling regional medical centers, which helped in not only buoying financial aspects of these facilities but also serve to protect (and eventually improve) patient care in underserved areas. Finally, the addition of a dedicated WVU Children’s Hospital at Ruby Memorial Hospital now provides the state, which has historically been underserved in many aspects of pediatric care, with advanced facilities and services that were once only available to residents who traveled to Pittsburgh, Cleveland, and other major cities along the East Coast.
PUBLIC SECTOR West Virginia’s public sector has endured some volatility of its own over the past few years. Aggressive federal fiscal and monetary policy response during 2020 and 2021 provided a significant backstop against revenue losses and lifted some of the burden off state and local agencies to pay for many emergency programs that were enacted during the pandemic. Furthermore, stronger-than-expected revenue growth allowed state and municipal governments in West Virginia to avoid the aggressive cutbacks in programs that many feared were possible at the onset of the COVID-19 pandemic.
With that said, however, total employment at the state and local government level in West Virginia has not yet recovered to pre-pandemic levels, as much of the health underpinning public sector finances over the past two years was due to federal government support. As temporary pandemic-era federal spending programs have expired, state and local governments have had to maintain some degree of austerity with respect to some expenditure programs, due to uncertainty over future budget conditions.
By contrast, the federal government has been a source of new job creation in several parts of the state over the past several years, building upon the significant presence it already maintains within several regions such as North Central and the Eastern Panhandle. Most notably, the FBI, US Treasury and National Park Service have increased staffing levels by significant margins.