Economic outlook conference: State's economy shows some growth
CHARLESTON, W.Va. -- West Virginia's economy and the nation's economy continue to show signs of growth while recovering from the Great Recession, speakers told attendees at the 20th Annual West Virginia Economic Outlook Conference on Tuesday.
"We have a lot of things to be happy about in West Virginia," said John Deskins, director at the West Virginia University Bureau of Business & Economic Research. "And I'm not talking about the Mountaineer win over Oklahoma State, but the economy."
The state's economy has added about 3,000 jobs over the past year, mostly driven by natural resource industries. The state's unemployment rate remains lower than the national average and has been for the past five years, Deskins said.
Deskins forecasted continued growth for the state. Last year the state's real Gross Domestic Product grew by 3.3 percent, ranking West Virginia No. 10 among the states in real GDP growth.
"Despite the growth there are only three states below West Virginia in per capita income," Deskins said. "So we still have a long way to go but we've had some encouraging news."
The state experienced "strong growth" in service-producing and construction industries. Deskins said much of the construction growth has been heavy civil engineering projects for the region's expanding natural gas exploration.
The natural resources and mining sector is positioned to lead the state in employment growth. Deskins added the natural resources and mining sector is the highest-paying industry in the state.
"Our state's exports have been booming over the past four years or so," Deskins said. "Exports play an increasingly important part of our economy. That's true for the nation as a whole."
In 2000, exports accounted for just 5 percent of the state's total economic output. This past year, exports accounted for 16 percent of total economic output.
Coal is leading the state's export surge. It now accounts for more than 60 percent of the state's exports, Deskins said.
"Coal exports are moving widely across the globe," Deskins said. "We do expect coal to be a big part of our economy in the future."
Mark Muchow, deputy secretary for the West Virginia Department of Revenue, said the state is much more reliant on severance tax revenues than it has been in the past, which creates a more volatile picture down the road.
Last year, severance tax collections for coal were down 16 percent while natural gas rose 8 percent from the previous year. In 2003, severance tax accounted for 6 percent of the revenue mix. Now it accounts for 10 percent.
Muchow said they are expecting 3.5 percent revenue growth for fiscal year 2014, despite little or no revenue growth in 2013.
"If we get that level of growth, our budget imbalance will only be about 7 percent," Muchow said. "If we fail to get that growth level, it will be higher."
Deskins is predicting 1 percent growth annually for the next five years. However, he cautioned the growth is not evenly spread across the state's 55 counties.
Andrew Bauer, senior regional economist for the Federal Reserve Bank of Richmond, said the U.S. economy is improving but that growth is slower than expected.
"Unfortunately we were hoping to see once the Great Recession ended at some point some ... really strong growth, but we just haven't seen that," Bauer said.
"We've settled into this situation where the U.S. economy continues to move along in a very modest rate."
The national economy's moderate pace is expected to continue through the second half of this year and into next year. Consumer spending needs to increase for the economy to grow faster.
Real GDP growth was less than 2 percent for the first half of the year, Bauer said.
"Some of that was expected. ... This time last year we were not talking about government shutdowns, we were talking about the fiscal cliff," Bauer said. "We're hoping that it is going to pick up a little bit from where it's been over the last couple quarters."
Auto sales are now back to pre-recession purchasing levels, signaling more consumer confidence.
The rate of home sales is back to 5.5 million units, where it was during the housing boom of 2004-2005.
"The trends in the housing market look very positive," Bauer said. "It's nice to be able to say that after years of the housing market moving in the wrong direction.
The Federal Open Market Committee expects the economy to pick up a little bit in the second half of the year so that growth for the year is a little better than 2 percent. In 2014, FOMC estimates growth at 3 percent.
"It's not until 2015, when the FOMC is expecting much stronger rates of growth, around 3 and 3.5 percent," Bauer said.
Reach Caitlin Cook at firstname.lastname@example.org or 304-348-5113.