|Photo by Derek Redd| WVU economics professor and assistant dean John Deskins discusses the economic outlook for West Virginia and the Northern Panhandle in Wheeling on Wednesday.
Some of West Virginia’s top economic experts predicted slow growth at national and statewide levels, with Ohio County staying on pace with the rest of the state.
David H. McKinley, Principal and Chief Investment Officer of McKinley Carter Wealth Services, was the first featured speaker at the Wheeling Chamber of Commerce 2024 Economic Outlook Conference. He gave audience members a national look at the economy, with the country due for a “soft landing” following an inflationary period.
McKinley outlined the Federal Reserve “hiked interest rates to slow the economy’s growth” to reach a healthy inflation rate to avoid “accidentally slipping into a recession.”
McKinley noted after the inflationary period, current interest rates and inflation are at “a bit of an inflection point,” with the former moderating and the latter “coming down substantially.” He added short-term rates began to come down “just last month.”
“It’s just an interesting time, and things are changing,” McKinley said.
Regarding job creation in the U.S., McKinley noted an “interesting pattern” of job creation slowing down “substantially” and then recently increasing, with approximately 254,000 new jobs created in Sept.
According to McKinley, the unemployment rate has also “meaningfully declined,” with a current rate of 4.1%. After a rise due to the COVID-19 pandemic, McKinley labeled today’s unemployment rate as “healthy.”
“In a weird way, this is what the Federal Reserve was engineering,” McKinley noted. “The federal reserve wants slow growth of the economy to let unemployment rise a little bit, and then let off some of the pressure on wages because that’s an inflationary factor.”
McKinley added improving unemployment would “lighten the load on wage pressure.”
“The reality is, there’s a slight uptick among higher-wage workers,” McKinley noted. “Very recently, there’s been meaningful improvements in compensation for all others, but suddenly, it’s starting to turn upwards for higher-wage workers.”
John Deskins, Assistant Dean of the John Chambers College of Business and Economics at West Virginia University, took the stage as the second featured speaker after McKinley. He began with the “big picture,” providing audience members with the country’s economic outlook, and then zoomed into the specifics for the outlook of the state and the region.
Deskins reaffirmed McKinley’s observation that the country was due for a “soft landing” to avoid a recession after increased inflation. He noted he expected slow growth in the nation, which West Virginia would mirror.
“We made it through this battle with inflation, and it seems like we’re going to manage to get by without a recession after it,” Deskins said. “It’s more and more likely every day that we are achieving that soft landing that’s obviously good for the nation.”
Though a recession was avoided, Deskins said the country would still “face headwinds,” with “relatively slow employment growth” over the next five years for the nation and the state. He outlined forecasters predict about 3 to 4 million new jobs cumulatively over the next five years, which only amounts to about 2.2% growth.
“It’s a glass half full, glass half empty,” Deskins said. “Employment is growing, continuing to grow, but not very rapidly. That’s because of lingering effects of interest rates that have very much a lagged effect, and it’s also because we’re pretty much at full employment right now.”
Deskins added U.S Gross Domestic Product was also predicted to “rise steadily” over the next five years, with an expected GDP growth of 1.75%.
Deskins noted the “all growth, no dips” for employment rates and GDP, along with no recession, would have “important implications” for the Mountain State.
The state’s “biggest difference” economically was its jump from 50th to 49th in labor force participation, which is measured by the percentage of non-institutionalized civilians in the state’s population who are economically active.
With its 55% labor force participation, West Virginia beat out Mississippi, which took last place for 2023. The national average for labor force participation in the U.S. is 63%.
“I consider this to be the most important statistic to characterize the West Virginia economy as this statistic captures the share of the adult population that wants to work, never mind whether the people are working or just looking for work,” Deskins said. “From the 1970s when this data was first available at the state level, until last year, West Virginia was consistently 50th among the states.”
Deskins added that labor force participation was the “biggest economic development challenge” for the state, as WV would “never achieve prosperity” unless more of the population participated in the workforce.
“We have a full 8% of our adult population just sitting on the sidelines compared to the national average, not 8% in total, just 8% above and beyond the national average,” said Deskins. “Of course, us having an older population makes a difference, but it’s much deeper than that. Even if you look at labor force participation for prime working age, we’re still at the bottom.”
Deskins then analyzed the economic outlook at the county level, including Ohio, Marshall and Wetzel. He gave “good news” that the trend of the number of people over 65 in each county outnumbering the number of people in younger age categories was “really slowing down.”
“We haven’t reversed the trend, but it has slowed down a lot, which is a good thing,” Deskins said.
Deskins then gave the “bad news” that population decline in all three counties would continue. He added only seven counties in West Virginia were expected to have population growth moving forward, with Ohio, Marshall and Wetzel counties not on the list.
The main factor causing the decline was natural population decline, meaning the number of deaths outnumbered the number of births in each county. While a positive net migration into the state occurred in 2023, with over 5,000 more people moving to the state compared to people who moved out, the positive net migration was not enough to offset the natural population decline.
“This gives me hope because the implication here is that we have to focus on ways to get people to move to West Virginia,” Deskins said. “We have to focus on ways to bring more job opportunities to West Virginia and focus on ways to make West Virginia a more attractive place to live, to entice more people to move here and entice fewer people to move away.”
Ohio and Wetzel counties experienced negative cumulative employment growth between -0.1% and -9.9% over the past ten years, while Marshall County experienced positive cumulative employment growth between 0.1% and 9.9%.
Deskins noted about 67,000 jobs in the Wheeling area, which is about 96% of the jobs in 2019. Deskins attributed the decline to the conclusion of pipeline construction projects.
“The point remains, we haven’t been able to gain much traction [in job growth],” Deskins said. “We haven’t been able to get back to the amount of jobs in the area before COVID-19.”
Though the number of jobs has not reached pre-COVID-19 levels, Deskins reported the unemployment rate in Ohio County was at a “historic low” of 4.1%. Marshall and Wetzel counties reported 5.2% and 6.5% unemployment rates, respectively.
Deskins added Ohio County was also a “standout” in the state regarding per capita personal income by area for 2023. Ohio County reported a per capita personal income by area of just under $75,000, which is higher than the nationwide and statewide averages.
Looking into the future, Deskins noted physical location was less important in determining where businesses were located, which meant the traditional focus should remain on attracting “footloose” firms that can be located anywhere.
With physical location being a less important determining factor of where people can live, Deskins said West Virginia “has to be made into a place that people want to move to.” He noted the state should focus on promoting its “amazing outdoor amenities.”
“We have to invest in quality of life amenities that make people move here, not because they have a job, but because they want to live here,” Deskins said. “The research shows, to a large extent, the jobs will follow.”