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Executive Summary

The West Virginia economy is currently growing and the probability of a national or state recession is low. However, our West Virginia forecast calls for weak employment growth over the coming five years. While the state has enjoyed some important economic development announcements and initiatives in recent years and has strong potential in some areas, the state faces major demographic challenges, and many counties or regions of the state continue to struggle to create positive momentum. 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:

• By the end of the third quarter of 2023, the state completed its employment recovery after losing over 80,000 jobs in early 2020. The state has continued to add jobs, and now has about 7,000, or 0.9 percent, more jobs than 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 2022 and has remained very low. Currently the unemployment rate is in the low four percent range.
• Only 55 percent of West Virginia’s adult population is either working or looking for work . Though an improvement from recent years, this is the second 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 49 ^th highest among the 50 states, surpassing only Mississippi. PCPI in West Virginia stands at 77 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 growth lagged the nation every year from 2012 through 2022. However, GDP growth in the state nearly doubled growth at the national level in 2023, and the forecast calls for growth for 2024 to be roughly on par with the nation.
• The energy sector remains an important driver of economic growth in the Mountain State . The value of output in the state’s energy sector has grown by a cumulative 43 percent since 2017, far surpassing growth in all other parts of the state’s economy.

• Output growth in four of the healthiest sectors in West Virginia – energy, healthcare, information, and professional services – comes in at a cumulative 24 percent since 2017. Conversely, growth in the rest of West Virginia’s economy is negative one percent since 2017. Overall, this implies that West Virginia desperately needs a healthier level of industrial diversification, or health in a wider swath of industrial sectors.

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

• Employment in West Virginia is expected to remain essentially flat through 2029. This lags the nation, which is expected to add jobs at an average annual rate of 0.5 percent over the forecast period. Major drivers of this slow growth are the lingering effects of high interest rates, fundamental demographic challenges, and severe weakness in many of the state’s counties.
• 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 . Strongest examples of recent positive developments are the addition of an estimated 800 jobs associated with Nucor in Mason County, and the addition of 750 jobs associated with FORM Energy in the state’s Northern Panhandle.
• The state’s unemployment rate is expected to increase slightly over the next couple of years, reaching five percent or so by 2026 or 2027 . This increase will largely be driven by entry into the labor force.
• Real per capita personal income is expected to grow 2.0 percent annually through 2029. Transfer payments are expected to register faster growth over the next five years, compared to wage and salary income. However, the degree to which the state is increasing its reliance on transfer payments is slowing significantly 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 80,000 residents – or nearly 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 15 employment growth counties added 18,841 jobs between mid-2014 and mid-2024, while the remaining 40 counties lost 26,380 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.
• Twenty-five counties are expected to add jobs in the coming five years , which represents a noticeable improvement in terms of the number of growth counties. Expectations for the other counties range from stagnation to significant 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, the Potomac Highlands, 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.

Section I: United States Economic Overview

Introduction

We begin with a brief discussion of the US economy to set the stage for understanding West Virginia. This contextual material is vital to understanding the West Virginia economic outlook because national growth is a key driver of state growth.

After the sharp recession that was driven by the COVID-19 pandemic, a new wave of significant uncertainty emerged in late-2021 surrounding inflation. For over three years now the US has suffered rates of inflation that surpass the level that is generally considered acceptable by economists.

This surge in inflation was catalyzed at least four factors: First, global supply chain constraints emerged during the pandemic, driving up prices for goods that were in short supply. Second, widespread workforce shortages emerged during the pandemic as many men and women left the labor force. These workforce shortages lead to more aggressive wage increases to attract workers to fill job openings, and these wage increases typically filter through to higher consumer prices. Third, a surge in energy prices in 2022 had a direct impact on overall inflation and filtered through to increase the price of goods and services more broadly due to higher production and transportation costs. Finally, overall demand in the economy was strong, in part due to aggressive fiscal and monetary policy stimulus measures during the COVID era. Even though there has been much improvement in these four factors, inflation can become self-perpetuating if left unchecked. In other words, high inflation can persist even after the initial causes of the inflation have dissipated. 

This high rate of inflation would undoubtedly create great long-term damage to the US economy if left unchecked, as was observed in the US in the 1970s and in many other countries over time. Returning inflation to a modest and stable position is, and should be, a top priority for economic policymakers. As such, the US Federal Reserve (Fed) worked aggressively in 2022 and 2023 to raise interest rates to suppress overall demand in the economy and therefore reduce inflation. Indeed, the speed at which the Fed increased rates over this time was as aggressive as ever observed over a similar length of time.

Two and one-half years after the beginning of this cycle of interest rate increases, inflation stands at around one-half-of-one-percentage-point above the Fed’s inflation target (two percent for core inflation, which excludes food and energy from consideration) and it is widely believed that inflation will reach the Fed’s target in 2025. As such, analysts are increasingly growing in confidence that this battle with inflation is nearly over. As such, the Fed reduced its target interest rate in September of 2024, and it is likely that several more cuts will follow over the coming year or so.

This new series of interest rate cuts is necessary to prevent excessive downward pressure on demand in the economy which would create unneeded economic weakness. Barring any unforeseen shock in the near term, ultimately the Fed will move its target interest rate to its estimated “neutral” level, which is a level that, by definition, does not provide an external source of restrictiveness or stimulus on demand in the economy. While uncertainly remains over whether the Fed was ultimately too restrictive with its monetary policy, uncertainly has significantly diminished over the past two or three years and the odds of a “soft landing,” loosely defined as a situation in which the Fed’s monetary policy effectively curbs inflation while at the same time does not create undue weakness in the economy, seems increasingly likely.

Given this context, in this section we explore a few recent trends in the US economy with special attention paid to inflation and interest rates, and we consider the likely path of growth in the US over the coming five years. These findings have important implications for our discussion of the West Virginia economy in Sections II and III.

National Trends in Output, Employment, and the Labor Market

GDP As illustrated in Figure 1.1, economic output, as measured by real Gross Domestic Product (GDP), fell dramatically in early 2020 due to the outbreak of the COVID-19 pandemic. Likewise, GDP growth was very strong as the economy emerged from the pandemic. After weaker performance in 2022, growth has been slightly above the long-term average over the last year or so. No recession is expected in the near term. However, growth is expected to slow by the end of 2024 and to remain below its 30-year average (around 2.5 percent per year), throughout the forecast period. Overall, the pressure that the economy faces from high interest rates is an important driver of these below-average rates of real GDP growth throughout the outlook period. This is true even though interest rates have already begun to fall, due to the significant time lag between movements in interest rates and economic effects.

Figure 1.1

EMPLOYMENT The US labor market was strong prior to the pandemic, and in fact employment stood at the level that economists generally perceive as the maximum level of jobs the economy can sustain over the long run - termed “full employment.” Over the course of the initial onset of the COVID-19 pandemic, nearly 20 million people in the US lost their jobs. While the US labor market cannot be strictly defined as that of as a “V-shaped recovery,” the rebound in payrolls after the recession was strong enough such that the nation attained its pre-recession level of employment by mid-2022, and employment has continued to growth since then. Overall, the national economy is again at or near its full employment level.

The employment forecast calls for relatively slow growth throughout the forecast period. The slow growth is largely due to the fact that the economy is at full employment currently, but also due, at least in part, due to the headwinds associated with high interest rates, as discussed above, and other demographic factors. Overall, the forecast calls for the addition of just under 3.5 million jobs over the forecast period, representing around 2.2 percent cumulative employment growth.

Figure 1.2

UNEMPLOYMENT Turning to the unemployment situation, the national unemployment rate stood at a low of 3.6 percent just before the beginning of the COVID-19 recession, as noted in Figure 1.3. This was one of the lowest jobless rates experienced since the beginning of modern economic statistics. The unemployment rate skyrocketed as the pandemic began, reaching a peak of 13 percent in the Spring of 2020. However, the jobless rate fell rapidly as pandemic-driven lockdowns ended in 2020 and returned to its pre-recession low by early-2022 as hiring activity was consistently strong for that period. Unemployment remained in this historically low range through the end of 2023. The rate has risen slightly over the course of 2024, but remains in the low-four-percent range, a position that is low by any historic standard. The forecast calls for a gradual increase in the rate over the next two years, returning the figure close to its natural rate of around 4.5 to 5 percent. This expected increase in the unemployment rate will largely be driven by entry into the labor force.

Figure 1.3

LABOR FORCE PARTICIPATION The labor force participation rate is a complementary measure to the unemployment rate. The labor force participation rate captures the share of the adult population that would like to work—termed “in the labor force”—while the unemployment rate captures the share of the labor force that is unable to find employment in any given month. Ultimately, the labor force participation rate is a more fundamental descriptor of an economy’s long-run labor market situation.

In Figure 1.4 we report labor force participation for the US since the mid-1980s. As illustrated, the figure peaked around 2000 at 67 percent, fell substantially after 2008, and then maintained stability up until early-2020. The broad evolution of this figure is largely driven by demographic processes, namely the aging and retirement of the “Baby Boom” generation. The figure began to rise substantially around 1965, when the first of the Baby Boomers were entering the workforce. This measure continued to rise through the late 1990s, when the first of this group turned 55 years old, but then began to decline substantially around 2008, the point when the leading edge of the Baby Boomers approached conventional retirement age. In addition to the baby-boomer effect, the post-WWII structural change in labor force participation rates was driven in large part by meaningful gains in the female labor force that occurred through the mid-1990s.

Labor force participation once again fell substantially because of the COVID-19 recession, as “discouraged workers” left the labor force, reaching a low of just over 60 percent. Immediately after the lockdowns, the figure began to improve, recovering to around 62 percent. However, the figure remains around one-half of one percentage point below its pre-COVID level, due primarily to a slower recovery in labor force participation among workers in older age groups (i.e. ages 55 to 64).

Overall, the declines in labor force participation likely present an impediment to the nation’s long-run economic growth potential as fewer workers will be available to support retirees vis-à-vis private pension plans as well as Social Security and other federal programs. Furthermore, many economic challenges might interact with a lower rate of labor force participation, leading to weaker performance for the US economy over the long term.

Figure 1.4

INFLATION Next, we turn to inflation – perhaps the most significant problem that the US economy has faced over the past three or four years. As reported in Figure 1.5, inflation skyrocketed to nearly seven percent on a year-over-year basis in 2021 and 2022, depending upon which reported measure is used. This is the highest rate of inflation experienced in the US since the early-1980s and comes in sharp contrast to the mostly modest and stable inflation that the US experienced for more than two decades, rarely moving outside of the 1 to 3 percent range—a period in economic history referred to as “The Great Moderation.” This sharp rise in inflation was catalyzed by at least four factors: a) high energy prices; b) global supply-chain constraints that emerged during the COVID pandemic; c) workforce shortages that emerged during the COVID pandemic; and d) strong aggregate demand, in part driven by aggressive fiscal and monetary stimulus during the COVID era. As described above, even though these drivers have at least mostly dissipated, inflation has still not quite returned to its target level. The forecast calls for inflation to remain at least slightly above the Fed’s target level (two percent for core inflation, which excludes food and energy from consideration) until some point in 2025. 

Figure 1.5 

INTEREST RATES The high inflation of the past three years would undoubtedly create great long-term damage to the US economy if left unchecked, as observed in the US in the 1970s and in many other countries over time. Returning inflation to a modest and stable position is and should be a top priority for economic policymakers. As such, the Fed worked aggressively over the course of 2022 and 2023 to raise interest rates to suppress overall demand in the economy and therefore reduce inflation. Indeed, the speed at which the Fed increased interest rates over the course of 2022 and 2023 was as aggressive as ever observed over a similar length of time. In retrospect, we understand that the fast pace of interest rate increases is partly because the Fed was slow to begin the cycle of interest rate increases due to lingering concerns over new coronavirus variants/outbreaks that continued until early-2022.

Two and one-half years after the beginning of this cycle of interest rate increases, inflation stands at around one-half-of-one-percentage-point above the Fed’s inflation target and it is widely believed that inflation will reach the Fed’s target in 2025, as discussed above. As such, analysts are increasingly growing in confidence that this battle with inflation is nearly over. As such, the Fed reduced its target interest rate in September of 2024, and it is likely that several more cuts will follow over the coming year or so.

This new series of interest rate cuts is necessary to prevent excessive downward pressure on demand in the economy which would create unneeded economic weakness. Barring any unforeseen shock in the near term, ultimately the Fed will move its target interest rate to its estimated “neutral” level, which is a level that, by definition, does not provide an external source of restrictiveness or stimulus. While uncertainly remains over whether the Fed was ultimately too restrictive with its monetary policy, uncertainly has significantly diminished over the past two or three years and the odds of a “soft landing,” loosely defined as a situation in which the Fed’s monetary policy effectively curbs inflation while at the same time does not create undue weakness in the economy, seems increasingly likely.

Figure 1.6

[1] All forecast estimates for this document are provided by S&P Global, Inc.

Section II: Recent Trends in the West Virginia Economy

Employment and the Labor Market

TOTAL EMPLOYMENT West Virginia’s economy has fully recovered from the COVID-19 recession in terms of employment. Payroll employment, which contracted by over 80,000 between January of 2020 and late-Spring 2020, bounced back at a healthy pace through mid-2022. The state attained a full employment recovery by the end of the third quarter of 2023. Since then, the state has continued to grow. Altogether West Virginia has now added about 7,000 new jobs over the pre-pandemic level, representing growth of just shy of one percent.

Figure 1.7

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. Overall, private sector employment currently stands at about 100.9 percent of its January 2020 level, almost exactly on par with performance overall. This indicates that the private sector and the public sector (state and local, as well as federal government), have performed similarly in terms of employment recovery and growth.

Figure 1.8

WEST VIRGINIA COMPARED TO THE NATION In Figure 1.9 we present total 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 employment growth. As of the most recent data, the state is at 100.9 percent of its pre-pandemic level of employment, while the nation stands at 104.5 percent.

Figure 1.9

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 mid-2024 minus total employment in mid-2014 on a county-by-county basis. In Figure 1.10 we illustrate the top 15 growth counties over the past decade compared to the remaining 40 counties in the state. As noted in the figure, the top 15 growth counties added nearly 19 thousand jobs over the period, whereas the remaining 40 counties lost over 26 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.

Figure 1.10

UNEMPLOYMENT Unemployment has been very low since the recent pandemic. The state’s jobless rate fell below four percent for the first time on record in early-2022 and set an all-time low of 3.5 percent in 2023. Unemployment has risen slightly over the past year or so, but remains very low, in the low-four-percent range.

Figure 1.11

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 very low 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 2023, West Virginia’s labor force participation rate was second lowest among all states at just shy of 55 percent. The fact that West Virginia surpasses Mississippi in terms of labor force participation reflects a slight improvement in some sense, since West Virginia has consistently been 50 ^th among the states since the US Bureau of Labor Statistics began reporting this data series in 1976. The fact that a large proportion of West Virginians are age 65 or older explains some of the state’s workforce participation deficit against other states. However, the underlying causes extend to issues beyond age since the state also lags well behind the nation among the prime working age population (25-54 years of age) and among other age categorizations. 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.

Figure 1.12

JOB OPENINGS A significant trend that emerged both nationally and within West Virginia that speaks to the massive swing in labor market conditions during the COVID-19 pandemic was a sharp increase in the rate of job openings. According to the Bureau of Labor Statistics, over the course of 2021 through 2023, 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 stemmed from early retirements during the pandemic. The rate has improved to the low-six-percent range over the past year. However, the rate in West Virginia is still above pre-pandemic levels and the state continues to experience significantly higher job openings compared to the nation overall.

Figure 1.13

Income and Output

INCOME Per capita personal income in West Virginia stood at $52,585 in 2023, placing the state 49 ^th highest among the 50 states. West Virginia is substantially ahead of Mississippi by this metric, and lags 48 ^th placed Alabama by less than $1,000 per person. Overall, the average West Virginian receives around $77 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 the nation over the past decade or so. Since 2011, the figure has grown by about 53 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 decade or so.

Figure 1.14

Figure 1.15

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 $55,000 for 2023. 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 stood at only around $26,000 for the year.

Figure 1.16

GDP West Virginia has lagged the nation in terms of real GDP growth over much of the past decade or so, as depicted in Figure 1.17. And the state has generally posted more volatile performance in terms of real GDP growth, as compared to the nation. After experiencing a large annual percentage decline during 2020 (approximately 3.7 percent), West Virginia failed to bounce back in a mirrored fashion in following two years: the state posted real GDP gains of only 2.1 percent and 1.3 percent in 2021 and 2022, respectively, lagging performance at the national level. However, 2023 was a very strong year for West Virginia; economic output grew by around 4.7 percent in West Virginia in 2023, compared to 2.6 percent for the nation. The projection calls for the state to be almost on par with the nation for 2024.

Figure 1.17

GDP – SELECT SUPER SECTORS 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 grown by less than three percent since 2017, after accounting for inflation. In contrast, output in the mining super sector has grown considerably over the period – posting nearly 43 percent cumulative growth between 2017 and 2023, after accounting for inflation.

In figure 1.19 we expand the set of growing sectors to include the health, information, and professional & business services super sectors, all three of which have also posted healthy growth in West Virginia in recent years. If we consider all four of these super sectors combined, they have posted cumulative output growth of over 24 percent since 2017, after accounting for inflation. In contrast, all other industrial super sectors have collectively declined in terms of output by just over one percent over the period.

Figure 1.18

Figure 1.19

Recent Demographic Trends

POPULATION West Virginia has seen its population decline annually for more than a decade and has registered an overall loss of over 88,000 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 with the 118 ^th Congress in 2023 (down from a high of six decades ago). Losses are expected to continue throughout the forecast period.

Figure 1.20

West Virginia’s population declines have been driven both by net outflows of residents to other states and natural population losses in many years. Natural population losses are defined as the situation in which deaths exceed births. West Virginia saw an important swing in net migration beginning in 2020, however, and the state has recorded more in-migrants than out-migrants for four consecutive years. Indeed, it is estimated that the state received more than 5,000 more in-migrants compared to out-migrants for 2023. The rate of natural population decline in West Virginia worsened in 2020, 2021, and 2022, but is expected to be stable at losses of around 6,000 to 7,000 annually for the forecast period. Altogether, these facts support the idea that economic development policies that effectively encourage in-migration are crucial to the state’s long-term economic prosperity.

Figure 1.21

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 more than three 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.

Figure 1.22

HEALTH AND DRUG ABUSE Even after accounting for the state 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 and Prevention, West Virginia’s age-adjusted all-cause mortality rate is the highest among all states. The state also ranks within the bottom tier of states in terms of 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 extremely high rate of death from opioid and other drug overdoses. Indeed, the drug overdose rate in West Virginia was far more than double the national average in 2022 (most recent data available). However, the rate of drug overdose mortality in West Virginia in 2022 – 81 deaths per 100,000 residents – represents a noticeable improvement from the rate of around 90 in the previous year.

Figure 1.23 

Figure 1.24

[1] All forecast estimates for this document are provided by S&P Global, Inc.

Section III: West Virginia Economic Outlook

West Virginia Outlook

EMPLOYMENT GROWTH Expectations for the US economy will directly influence West Virginia’s economic performance during the outlook period. ^[1] As described above, the US economy is expected to avoid an outright recession, but the lingering effects of high interest rates and other factors are expected to lead to only slow growth over the outlook period. 

Overall, the forecast calls for total employment in West Virginia to increase at a rate of almost exactly zero between mid-2024 and 2029, which will trail the national average annual rate of 0.5 percent during this period. We expect some continued growth early in the outlook period, i.e., late-2024, to be followed by modest losses in employment later in the outlook period.

Figure 1.25

EMPLOYMENT BY SECTOR In Figure 1.26 we provide an illustration of the 2023 distribution of jobs in West Virginia across the various industrial super sectors to provide context for the sector-specific growth forecast below.

Figure 1.26

EMPLOYMENT GROWTH BY SECTOR As illustrated in Figure 1.27, forecast growth varies quite widely across the major industrial super sectors in West Virginia over the forecast period. The natural resources & mining super sector, which includes coal, natural gas, and quarrying, is forecast to post the highest rate of growth over the period, with a projected average annual rate of growth of nearly 1.3 percent. However, the sector is relatively small, accounting for only about three percent of jobs in the state. (It should be noted that the sector accounts for a much larger share of economic output (more than 10 percent), however, as the sector is extremely capital intense and wages in the sector are very high.) As such, the 1.3 percent average annual rate of growth is only associated with the addition of about 1,500 jobs over the five-year forecast period. This comes after significant losses in the sector over the past decade. Coal output and employment is expected to be more stable over the next several years, compared to the past two decades, in part because a much larger share of West Virginia’s coal output is sold into overseas markets and metallurgical markers, after massive declines over the past decade in the use of coal for electric power generation in the US. However, significant uncertainly is always present with coal due to the volatile nature of global coal markets. 

Figure 1.27

SERVICES Job growth is expected to come in relatively strong for several private service-providing sectors over the forecast period. The education and health services super sector is expected to post an average annual growth rate of just under one percent per year, as healthcare services continue to enjoy growth that far exceeds the overall statewide average. Recent moves by WVU Medicine, Charleston Area Medical Center (CAMC), Mon Health and other major networks solidify the sector’s financial conditions and increase capacity within certain areas of patient care for state residents that were underserved or unavailable within the state. Overall, we expect the sector to add over eight thousand jobs over the forecast period.

In line with national trends, the professional & business services sector is expected to post an average annual growth rate in West Virginia of nearly 0.7 percent over the forecast period, adding nearly three thousand jobs. The umbrella category “other services” super sector is also forecast to post above average rates of employment growth.

CONSTRUCTION The construction super sector is also expected to post above-average growth in West Virginia over the coming five years. The sector’s homebuilding segment has been weak recent in recent years, but will likely improve now that interest rates are falling. A host of major commercial, industrial and infrastructure projects will likely be the larger driver of the sector’s growth in coming years. Indeed, projects such as Nucor, BHE’s microgrid/manufacturing development, Sparkz, Greenpower, Mountain Top Beverage and other industrial construction projects will account for several billion dollars of new nonresidential projects over the near term.

PUBLIC SECTOR West Virginia’s public sector is expected to post above-average growth over the forecast period as well. The sector has endured some volatility in recent years associated with the COVID recession and recovery. The forecast growth in the sector stems from new job creation from the federal government 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 are expected to continue to increase staffing levels.

RETAIL TRADE Among the state’s major service-providing sectors, retail trade is expected to face the most downward pressure on payrolls during the forecast horizon (categorized in the figure under Trade, Transportation & Utilities). West Virginia’s underlying demographics and the seismic shifts in the retail sector’s shift from brick-and-mortar to online platforms are major limiting factors to hiring by retailers in the state, particularly those outside of the state’s stronger economic regions.

UNEMPLOYMENT After standing around the very low rate of four percent from 2022 through the present, the forecast calls for West Virginia’s jobless rate to rise slightly over the next couple of years or so, returning to the low-5-percent range by some point by the beginning of 2027. Much of this upward movement in the unemployment rate will come from individuals re-entering the labor force, due to factors such as ‘un-retiring’ individuals or higher starting wages incentivizing discouraged workers back into the workforce to compete for open jobs. This evolution will generally return West Virginia to what economists consider its natural rate of unemployment, ending the period of unusually low unemployment that has been experienced over the past three years or so. This general pattern is also true for the nation as a whole. Of course, as always, unemployment could rise significantly higher if the state and nation experience a new, unexpected economic shock.

Figure 1.28

INCOME Personal income is expected to grow at an average annual rate of just over 2.0 percent over the forecast period, after accounting for inflation, as illustrated in Figure 1.29. This is slightly lower than expected growth at the national level, which comes in at just over two percent (not shown). Growth in personal income from transfer payments, stemming from programs such as Social Security or unemployment insurance is projected to grow more rapidly than total income or wage and salary income over the forecast period. This pattern implies that West Virginia is becoming more reliant on transfer payments over time as a share of total income in the state. However, the degree to which growth in transfer payments is expected to surpass labor income is significantly lower than has been in the case in recent years. Small business income and investment income (dividends, interest, and rent) are expected to outperform growth in transfer payment income or wage and salary income over the forecast period.

Figure 1.29

POPULATION Following a decade in which the state lost more than 4.6 percent of its residents, West Virginia’s population losses are expected to slow over the next five years. Overall, we expect a cumulative 1.4 percent population loss through 2029. This continued (albeit slower) population loss is driven by a continuation of the natural population loss - a situation in which deaths exceed births - that has been observed in the state for several years now.

Unfortunately, the underlying structural economic and demographic trends that have prevailed in West Virginia in recent decades will be difficult to overcome as the forecast progresses. As such, the state is expected to further age, as the only age group with growing numbers is those aged 65 and older, as illustrated. The “under age 25” segment of the population is expected to suffer the highest rate of population loss.

Recent positive economic news could provide a shot in the arm to the state’s long-run growth prospects and lift the potential for larger positive migration flows into West Virginia from other states, offsetting some natural population decline. Furthermore, enhanced broadband capabilities could allow some localities to become increasingly attractive to remote workers, which underpins the idea behind the Ascend West Virginia program and other programs to attract remote workers.

Figure 1.30

[1] All forecast estimates for this document are provided by S&P Global, Inc.

Section IV: West Virginia’s Counties

While statewide figures reflecting West Virginia’s economy are central to this work, it is also important to recognize that they mask significant economic and demographic variation across the state’s regions and counties. As such, in this section we illustrate how three key economic statistics performed during the past decade across each of the state’s 55 counties and how these measures are expected to perform from a geographic perspective over the next five years.

West Virginia Economic Outlook 2024-2029

Table of Contents

• List of Figures
• Executive Summary
• Section I: United States Economic Overview
• Section II: Recent Trends in the West Virginia Economy
• Section III: West Virginia Economic Outlook
• Section IV: West Virginia’s Counties