CHARLESTON – As legislators prepared to begin the 2019 session, West Virginia University economist John Deskins gave them his vision of what the state needs to prosper and what stands in the way of that prosperity.
Deskins, director of WVU’s Bureau of Business & Economic Research, told the delegates and senators that there are reasons to celebrate: The state has seen almost two years of economic growth after the long recession.
But the growth isn’t everywhere, he said, and the improvement needs to spread across the whole state. And we have to remain vigilant. “We still have some daunting big-picture challenges.”
Two keys to prosperity, he said, are promoting entrepreneurship and using the state’s abundant natural gas resources to bring manufacturing jobs here.
Deskins described the post-recession rebound. From 2012 through 2016 the state lost 26,000 jobs. Then, in the last year and a half, it added 8,600. But 8,500 of those are in just eight counties: Monongalia, Harrison, Marshall, Berkeley, Jefferson, Doddridge, Ritchie and Jackson. And more than 7,000 of those are in just three areas: coal, gas and gas-industry construction.
“Let’s broaden the prosperity,” he said.
Deskins noted that coal has rebounded somewhat after falling form 158 million tons in 2008 to 80 million tons in 2016. Production rose to 93 million tons in 2017 and 96 million in 2018, due to easing of federal regulations, rising natural gas prices and increased international demand.
For gas, after a couple stagnant years, production is also rising as infrastructure to get the gas to domestic and international markets is catching up with demand.
The state’s overall output — gross domestic product – was stagnant from 2011 through 2016, and not due exclusively to the fall in coal demand. Other production fell off too. “We just didn’t have other sectors of the economy that were growing to help offset coal.”
That leads, he said, to his “desperate plea for industrial diversification. … Entrepreneurship is absolutely essential.”
Most startups will fail, he said, but those that succeed will help determine the right business/industrial balance for economic diversity.
Deskins also pointed out a few obstacles to diversification. One is growth in transfer payments: Social Security, unemployment and welfare. These will make up 27 percent, nearly a third, of personal income in five years. “That does not bode well for economic prosperity.”
Also, labor force participation, the proportion of adults who can work who are actually working or seeking work, at 53 percent, is the lowest in the nation and a full 10 percent behind the national average. The state can’t achieve the level of prosperity it hopes for unless participation grows.
There are three obstacles to getting people into the workforce, he said: inadequate education, poor health and opioid addiction.
That led him back to the potential for the gas industry. The future doesn’t lie in drilling and exporting raw natural gas, he said. We need to keep it here and use it to manufacture value-added products to sell.
Deskins didn’t mention it, but previous talks about the economy have focused on creating an ethane storage hub in this region as the focal point for an expanded petrochemical industry.
That industry, Deskins said, has the potential to bring tens of thousands of job to the state.
Email David Beard dbeard@dominionpost.com Twitter David Beard @dbeardtdp
