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State’s Economy Slows, But Shows Signs of Growth

September 20, 2007
By WAYNE SHEETS, Contributing Business Writer
Last week we looked at some interesting statistics regarding West Virginia’s economy as revealed by its Gross Domestic Product. Today we look at some areas that are influencing the GDP statistics as reported by the Bureau of Business and Economic Research (BBER) of the College of Business and Economics at West Virginia University. Many areas of the state’s economy are slowing, but recent legislative actions promise to strengthen the state’s competitiveness in the national and world market place.

According to George W. Hammond, associate director of the BBER, the West Virginia economy lost steam during last year with a major deceleration in employment growth driven by weaker performance in the goods-producing sectors. This overall job growth slowdown mirrors the national trend.

West Virginia’s seasonally adjusted job growth slowed substantially during the first quarter of 2006 and the first quarter of 2007, adding just 3,500 jobs during the period. That’s significantly below the 12,900 jobs added between the first quarter of 2005 and the same quarter of 2006. The goods-producing sector, (natural resources, mining, construction and manufacturing) lost 1,000 jobs during the last four quarters, compared to gains of 4,500 during the previous four-quarter period. The service-providing sectors also slowed last year, combining to add just 4,500 jobs, with most of that growth coming in wholesale and retail trade. Professional and business services employment declined during the last four quarters.

Job growth in natural resources and mining has slowed significantly during the last year with the sector adding just 800 jobs from the first quarter of 2006 to the same quarter of 2007.

Coal production from the state’s southern coalfields fell by 11 million tons from the first quarter of 2006 to the same quarter of 2007. Increasingly challenging geologic conditions and falling spot prices, combined with regulatory uncertainty, are likely precursors of production decline. Production of the state’s northern coalfields, however, is estimated to have risen by 700,000 tons during the year.

Hammond, writing in the summer issue of the “West Virginia Business & Economic Review” said that data from FW Dodge through April 2007 suggested that the value of construction starts would remain strong again this year with most of that strength in non-building activity, driven primarily by power plant construction in Monongalia County. Residential activity is well below the 2006 levels, likely reflecting rising mortgage rates and past house price increases.

House price appreciation has slowed in West Virginia during the last four quarters. That slowdown is particularly evident in the Eastern Panhandle’s metro areas, where year-to-year single-family house price appreciation has slowed from more than 20 percent to the low single digits in the first quarter of this year.

Manufacturing job losses during the last year were concentrated in primary metals, wood products and furniture, auto parts and chemical products. These sectors all face intense international competition.

Sources indicate that many of the problems West Virginia faces are the result of the state’s tax laws, insurance policies and litigation. According to Steve Roberts, president of the West Virginia Chamber of Commerce, “the time has come for a thorough review of our attitudes and actions toward employers in the backbone industries of manufacturing, construction, mining and energy production. We must ask ourselves, ‘Are our policies helping or hurting them? Do the policies enacted by our Legislature and interpreted by our courts lead companies to choose West Virginia as a good place to invest and create jobs, taxes and a descent standard of living?’”

Roberts said the employers he hears from say that our litigation climate does have a negative impact. His feedback from employers, he said, indicates that our litigation troubles have led us to the country’s worst reputation for lawsuits. Our environmental regulatory permitting processes are burdensome, our business taxes are among the nation’s highest and our educational attainment is low.

He did point out, however, some actions that are helping the state become more competitive in the market place. To start with, he mentioned legal reforms recently enacted in medical malpractice are working and more doctors and medical services are now available. Because our insurance costs were higher than surrounding states, insurers were leaving. But now because of changes in these areas, the costs for auto and homeowners coverage have begun to drop noticeably.

Roberts also said, “The West Virginia Chamber of Commerce believes three important areas need attention. First, we must decide not to have just a better business climate, but the nation’s best business climate. Second, we must support education that continuously improves our workforce skills and raises the overall level of attainment. Finally, we need a comprehensive, statewide economic development plan that will help drive small business expansion and attract new industries, particularly those of the 21st Century economy.”

Roberts did not mention the overhaul of the state’s Worker’s Compensation structure that, from all reports that I’ve read, is having a substantial effect in the considerations of employers when considering West Virginia as a place to either expand or start a new business.

Another report from the coal industry last week offered some relief in that the price of coal has seen a modest increase, edging toward the $45 per ton mark, up from $40 per ton.

While the economic news in the state is not as stellar as everyone would like it to be, there is reason to believe that it will continue to grow, perhaps not at the national rate but at a positive rate none-the-less.

The forecast for potential growth in the state’s economy, unfortunately, hasn’t helped the Fenton Art Glass Co. in Williamstown. After 102 years, the company will wind down operations, but has not specified an actual closing date. President George W. Fenton said that many ongoing trends have contributed to the closure including less discretionary income of those who buy their product; people are collecting less, more competition from overseas and the price of natural gas. News of the closure is bittersweet in that the product will become scarcer but that, in turn, will drive the price of the collectables upward.

Congratulations are in order to DeMotto Honda for having been in business for 50 years, Wheeler Sports, who have supplied hunters and anglers with firearms, ammunition, rods and lures for 35 years, and Elkins Sewing Center for being in business for more than 25 years. Detailed stories of the success of these businesses will be forthcoming in the next couple of weeks.

Several people have asked me over the last couple of weeks about what’s with all the late night flight operations going on at the Elkins-Randolph County Airport. An official at the airport, who spoke only on terms of anonymity, told me that the Army is testing a new low visibility landing system. The system, through the use of new radar technology, permits pilots to land in zero-visibility by displaying a 3-D picture of the landing environment on instruments in the cockpit. Not to worry, folks; were it not for these gallant warriors we wouldn’t be enjoying all the benefits of democracy that we do.



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