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The big picture from the 23rd annual West Virginia Economic Outlook Conference was that things aren't as bad in West Virginia as they could have been, following the nation's recession, and they should be getting a little better, especially in the North-Central and Eastern Panhandle regions.

The Outlook was presented Oct. 4 in Charleston by the West Virginia University Bureau of Bureau of Business and Economic Research, which operates within the College of Business and Economics.

Projections were for the construction, natural gas and service industries to lead West Virginia's economy during the next five years, but the state's older, unhealthy and low-participating workforce would drag down significant economic advancement.

BBER Director John Deskins began the presentation by talking about energy, which he said was a slight diversion from his usual presentations.

"It is impossible to understand West Virginia's economy without understanding energy," Deskins said. "It's just so dominant."

Deskins cited the environmental regulatory climate, natural gas boom and international demand as key drivers of the decline in the demand for coal.

He said the baseline economic forecast for West Virginia calls for job losses in coal to temper in the near term, but there is risk, depending on the environmental regulatory climate and conditions in the global coal market. He said the natural gas industry should start to rise again.

"Overall, production is expected to increase at an annual average rate of 9 percent through 2021, and employment is expected to increase at an average annual rate of 4 to 5 percent," he said.

Natural gas had tremendous growth for about four years, Deskins said, but output stabilized over the past year and is expected to again rise at a healthy pace in coming years.

The total Gross Domestic Product from natural gas is expected to equal that of coal in the near future. By comparison, the GDP from natural gas was one-tenth of 1 percent of coal less than a decade ago. Deskins said the downturn in the coal industry has been a major factor in the state's employment decline of about 17,000 jobs over the past four years.

"By the end of 2016, we expect that coal output will have fallen by around 55 percent since 2008, with the losses occurring in the state's southern coalfields," he said.

Deskins said West Virginia is expected to see just 0.6 percent job growth in the next five years, compared to 1 percent nationally, so it will take more than five years for the state to get back to its 2012 peak levels. He presented a breakdown of the state's employment distribution, which was led by government at 20 percent, trade, transportation and utilities at 19 percent and education and health services at 17 percent. He compared hat to the state's GDP by sector, which was led by trade, transportation and utilities at 18 percent, government at 16 percent and financial activities tied at 13 percent with natural resources and mining.
BBER Research Assistant Professor Brian Lego pointed out only 53 percent of the state's adult population is either working or looking for work, which is the lowest labor force participation among all 50 states.

Deskins said the state must diversify its economy to see growth, and each region of the state must make efforts appropriate for its needs.

"Five counties have seen a great depression, and I'm not saying that to be dramatic," Deskins said while pointing to the southern coalfields. "The development discussion here has to be absolute fundamentals — what industries really fit for this area of the state?"

Deskins said the southern coalfields region had seen a 36 percent decline in jobs since 2012. The New River Gorge area had been "mostly flat," Deskins said, with a 2 percent decrease in wages and a 4 percent decrease in employment. The Metro Valley had seen a 6 percent increase in wages, and Deskins said it had "lots of potential with manufacturing and the chemicals industry." A few counties at the base of the Northern Panhandle and along the Ohio River Deskins categorized as the "natural gas boom region" had seen a 12 percent increase in wages. Deskins said that area needs downstream activity. North-Central West Virginia had seen a 13 percent increase in wages and a 6 percent increase in jobs, and the Eastern Panhandle saw a 20 percent growth in wages and a 14 percent increase in employment.

"There is real potential in industries such as health care, energy, manufacturing, construction, hospitality and tourism and service industries," Deskins said. "A positive shock to encourage in-migration is essential to lessen the severity of natural population decline."

WVU economists said the state unemployment rate would remain at about 6 percent throughout the next five years, and they projected West Virginia would lose more than 20,000 residents in the next two decades, continuing a population slide that has seen a loss of an estimated 12,000 residents over the past three years.

Deskins said the key to prosperity will be finding the right industrial mix for West Virginia.

"The discussion has to be on cultivating a more entrepreneurial climate," he said. "The number of new business is down in recent years, and that's true nationally, to some extent.

"It's going to take everyone in West Virginia thinking in this vein to make the state more attractive to entrepreneurs."

Deskins added that in the face of budget constraints, "we have to think about good government," including the overall structure.

"I look at Monongalia County for example," he said. "Do we need five governments in Mon County? Ironically, this is something the liberals and conservatives should all agree on."

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