Charleston – West Virginia would have fared better during an economic downturn from 2012 to 2016 had West Virginians focused years ago on economic diversification, the director of West Virginia University's Bureau of Business and Economic Research said Wednesday.
"We want energy," John Deskins said at WVU's Economic Outlook Conference at the Embassy Suites in Charleston Wednesday morning. "We want those jobs to be there. That's good. That's a very important part of our economy, so I don't mean to take away energy and replace it with it something else, but I mean we've got to focus on having multiple parts of our economy that are doing well.
"I know a lot of our leaders have an eye towards this, but I still want to stress that point because it takes a lot of us working all across the state to really find the right industrial mix for West Virginia."
Deskins, who said that West Virginia is "too reliant on energy," noted that the call to diversify was a familiar refrain to the state leaders and business professionals present at the conference at the Embassy Suites in Charleston on Wednesday.
"To that point, this is a hard job," he said. "It's not like I just started talking about industrial diversification. It's not like nobody knows about this. People have known about this for decades – the need that we have to diversify – but the reason that we're not diversified as we need to be is because it's difficult."
Deskins said that while WVU economists can "put forth a pretty good idea" of whether a new industry has viability in the state, "nobody really, really fully knows how to diversify our economy or where to diversify our economy until somebody tries it."
"So it all boils down to entrepreneurship.... It ultimately boils down to creating an environment that's supportive and conducive to small business start-up and growth," he said. "We all know that entrepreneurship is messy. Out of all the new businesses that start this year, we know that most of them won't be in existence five or ten years from now. It's a messy process but small businesses that start this year that do succeed, that's how we find the right industrial mix that works for our specific economic strengths and weaknesses and challenges and opportunities."
Deskins, pointing to environmental regulations creating more expenses for power plants as well as reduced demand for coal overseas, said West Virginia lost 26,000 jobs between 2012 and 2016. Since the beginning of 2017, the number of jobs has increased by 12,000, he said.
He noted that while West Virginia has seen an increase in construction jobs along with the natural gas boom, courts have put a halt to natural gas pipeline construction, and that while coal production has increased due to demand overseas, coal markets also remain volatile.
He said most job growth is limited to a handful of counties, including Marshall, Monongalia, Harrison, Lewis, Jackson, Cabell, Raleigh and Berkeley. About 10,000 jobs are in three sectors – coal, natural gas and construction, according to Deskins.
While West Virginia's real GDP rose 2.4 percent in 2018, that gain, too, was driven by energy, he said.
In recent months, Gov. Jim Justice has touted West Virginia's low unemployment rate. Deskins noted that the nation, too, is currently experiencing abnormally low unemployment.
He also pointed out, though, that West Virginia has the lowest workforce participation rate in the country at 54 percent. Lower education levels, the drug crisis and a larger senior population can't fully explain that, he said.
"This is deeply ingrained in parts of West Virginia," he said. "It's going to take a long time to correct it, but there's no better time than now to start focusing on that."
About nine percent of available workers are not looking for a job or have given up.That number isn't considered in unemployment rates.
"I don't know a whole lot, but one thing I know I'm sure of is we can never achieve the prosperity that we want, we can never be on par with the nation in terms of all these broad economic outcome measures if we have a labor force participation rate that is 9 points below the nation," Deskins said. "That is dead last among the 50 states.
"We're not going to enact a policy this legislative session in January and see results or at least not see significant results by this time next year, by October of next year," he added. "This is a long-run issue and it takes a real long-run focus."
Pipeline jobs will eventually disappear, regardless of court action, Deskins noted.
Statewide, coal production fell from 128 million short tons in 2012 to just over 70 million short tons in 2016, according to WVU's Economic Outlook report. Coal output increased to 95 million short tons in 2018, and 2019 is expected to remain at roughly that level, according to Deskins. His bureau projects it will then slip to 85 million within five years, and that coal markets "will be much more sensitive to global energy and climate policy as well as changes in global economic growth."
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