WVU report indicates that state's recession has ended for now

By Dawn Geske | Aug 9, 2016

MORGANTOWN – A report from West Virginia University is indicating that the state’s economy has stabilized, stopping the economic recession that has been occurring for several years.

The University of West Virginia released the Mountain State Business Index, which was put together by a group of economists at the university. The index showed a 0.1 percent increase in July and a revision to the June numbers of a similar percentage, indicating that the state’s recession has come to end for now.

“Unfortunately, we are not very optimistic at the moment,” John Deskins, director of the West Virginia University Bureau of Business and Economic Research, told The West Virginia Record. “Our index seems to indicate that the decline is coming to an end, so output isn’t going to shrink further according to our estimates. Jobs aren’t going to shrink much further according to our estimates. That’s positive. But, on a sourer note, the index is just flat. It’s not going back up. It seems like we are going to have a flat, stagnant economy. We don’t see a strong return to growth, at least not in the near term, because we still have these long-term challenges lingering.”

Still signaling that the economy is weak in the state, the index will show significant findings over the next several months as West Virginia begins to rebuild after damage from floods. Business revenue is down in the state – a result of several businesses shutting down after the floods.

“Now we have the floods that are going to put more pressure on our economy and prevent a robust growth,” said Deskins. “We’re already starting to see some of the effects of the floods. A major problem is the money that we are spending to repair the infrastructure to try and get the flood-affected part of the state back to normal.”

Another factor affecting the economy in West Virginia is the large reduction in coal production in the state. With coal production going from 158 million tons in 2008 to 95 million tons in 2015, the drop is significant and is impacting the state severely. Coal production is expected to drop even further this year to an estimated 70 million tons.

“Our economy is so heavily driven by coal,” said Deskins. “If you look at West Virginia’s economy over the last several years, economic output is very stable if you don’t consider the energy sector. Energy is so volatile and coal has suffered tremendously. The drop in coal production, we think, is coming to an end. Coal has underperformed our expectations for the last several years so we’re hesitant to say that with a lot of authority. We think the fall in coal production, which is coming to an end, is leading to stabilization in the state’s economy.”

A boost in West Virginia’s economy may be coming with natural gas production that is gaining in the state. While a more robust infrastructure is needed for the gas production, it is expected that this could help the state’s stagnant energy sector.

“Over time, as we get improved natural gas infrastructure, natural gas production will increase,” said Deskins.

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