WVU’s Deskins says West Virginia won’t reach economic prosperity potential unless state gets more people into the workforce


CHARLESTON, W.Va. – West Virginia’s continued short-term economic growth remains uncertain for 2023; however, as the 86th Legislature prepares to convene on Wednesday, there are several indicators that leaders should watch as they guide the state through this economic “turbulence,” according to Dr. John Deskins, director of the West Virginia University Bureau of Business and Economic Research.

Deskins, speaking Friday at the West Virginia Press Association’s annual Legislative Lookahead, at the Culture Center in Charleston, said, “Right now, as if we didn’t already know, is a time of tremendous uncertainty nationally … Last year, we saw the Federal Reserve increase interest rates the most aggressively that it has done in years.”

He explained that the Federal Reserve increases interest rates to “suppress overall demand in the economy” in an attempt to stop inflation – which hasn’t been this high (reaching over 8 percent in 2022) since the early 1980s.

Oil prices, global supply chain constraints, labor force shortages and the aggressive federal stimulus policy were the major factors that contributed to such high inflation, Deskins further explained. Now, economists are waiting to see if the federal government has “created just enough pressure to choke inflation out of the economy to get us back to a reasonable, acceptable, stable rate of inflation – to engineer a soft landing, but to do that without throwing us into a deep recession.”

“That’s creating a lot of uncertainty, and there is a lot of fear, nationally, where the economy is going,” Deskins stated. “West Virginia is not immune from that uncertainty.”

As for statewide economic indicators that should be watched in 2023, Deskins said job growth, the labor force, in-migration, regional growth and revenue growth should all be considered.

West Virginia’s job growth, after being “on a roller-coaster” as a result of the pandemic, has fully recovered, Deskins said, adding that growth is expected to increase about one percent this year.

Additionally, the unemployment rate is at a historic low, both nationally and in West Virginia, although Deskins stated he expects the unemployment rate to rise slightly to about five percent by the end of the year.

“That’s not a bad thing,” he continued, noting that just means that those who left the workforce during the pandemic may decide to rejoin the labor force.

The most important statistic to “characterize the state’s economy,” according to Deskins, is the labor force participation rate, since it shows how many people want to work, not just those who are “actively seeking full-time employment.”

Citing data from 2021, Deskins noted that West Virginia’s labor force participation rate was just 55 percent, while the national average was 62 percent.

“We are dead last among the states,” Deskins said. “We’re never going to achieve the economic prosperity that we hope for unless we can get that blue bar to move to the right – unless we can get more of our people in the workforce.”

Some of the factors that keep West Virginians out of the workforce include health concerns, fewer opportunities for higher education and substance abuse, he added. In 2020, West Virginia had the highest drug overdose death rate in the country with 81 deaths for every 100,000 residents. The U.S. average was 28 deaths per 100,000 residents.

The state’s population will also continue to age, Deskins noted, with natural population growth increases in those over age 65 expected for the next four years.

Additionally, there has been a natural population decline, with 12,000 more deaths than births last year, he said. To counter this population loss, it’s important to get people to move to the state.

“Last year, we actually experienced net migration of about 2,000 people,” Deskins said, adding this number isn’t as high as it should be, but it’s “better than nothing.”

This net migration may be the result of better job opportunities and remote worker programs, but more data must be studied in the upcoming year to make that determination, he noted.

As for regional growth, Deskins explained that from 2012-2019, 10 counties in the state (Jefferson, Berkeley, Preston, Monongalia, Taylor, Harrison, Doddridge, Marshall, Jackson and Cabell) experienced the most growth, adding 16,000 jobs, while the remaining 45 counties have lost a total of 44,000 jobs.

“The good things that we have happening are good, and I’m very happy about those things, but they tend to be concentrated geographically. So, another thing to watch for is to what extent these good things broaden out geographically to other counties,” Deskins said.

Lastly, the state’s record revenue growth was largely assisted by natural gas price increases, Deskins said.

From July 1 to Oct. 31, 2022, about 20 percent of the state’s surplus came from natural gas price increases, he noted. That percent of the surplus is expected to decrease in the coming year as natural gas prices are projected to somewhat decline.

Deskins stated that if the federal interest rate increases cause the country to enter into a deep recession, then most of the statewide outlooks he discussed during the Legislative Lookahead would no longer be applicable.

“If another bad recession does follow as a result of these interest rate increases, everything I have said before about job growth in our state, everything I said before about labor force reentry, about in-migration is uncertain, because other issues that I have talked about before are all out the window if this process creates another bad recession,” Deskins stated. “Right now many economists are putting a 50/50 shot on a severe recession coming up this next year.”


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