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.

This figure illustrates U.S. and West Virginia employment growth and projected employment growth from 2011 through 2029.

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.

This figure illustrates the distribution of jobs across the major industrial super sectors in West Virginia for 2023.

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.

This figure illustrates projected employment growth for each major industrial supersector for West Virginia 2024 through 2029.

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.

This figure illustrates the U.S. and West Virginia unemployment rate and projected unemployment rate from 2012 through 2029.

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.

This figure illustrates projected growth for the major components of personal income for West Virginia from 2023 through 2029.

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.

This figure illustrates population change in West Virginia for various age groupings from 2013 through 2023 and projected population change for 2023 through 2029.

Figure 1.30

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