MORGANTOWN – The author of the Mountain State Business Index says West Virginia’s post-recession economy has improved significantly, but it’s a period of wait and see if the growth continues into the future.
“The index has really turned around, and the growth has been broad based,” John Deskins, director of the West Virginia University Bureau of Business and Economic Research, which operates out of the university’s College of Business and Economics, told The West Virginia Record. “The recession has ended and there is growth again.”
The index is compiled by the bureau using seven top economic indicators, which include building permits, unemployment insurance claims, the value of the U.S. dollar, stock prices related to West Virginia employers, interest rates, coal production and natural gas output.
It has increased 0.2 percent for four of the last five months, culminating in a 0.4 jump in January. February statistics are unavailable, but the monthly upticks in the index equal about 2.9 percent annualized rate over the last six months.
Deskins said the index, compiled and released to the public for the last three years, is a short-term snapshot that can be used to see the direction of the state’s economy.
“We look at many variables,” he said. “We don’t want to get our hopes up until we see at least six months of growth. Growth still isn’t as rapid as we’d like it to be.”
He said not all areas of the state have seen growth because of the “major regional differences” in West Virginia, but the overall numbers in the index have seen an uptick.
“Some parts of the state are still very weak and in (an economic) depression,” he said.
One of the major drags on parts of West Virginia’s economy has been the coal industry, which has taken a backseat in the energy sector in the past few years because of low natural gas prices and diminished demand because of clean-air regulations aimed at coal-fired plants.
“The economy was horrible for 2015 and the first half of 2016, and a lot of that was due to coal being down,” he said.
He said national and global drops in demand has been the major hit to the coal industry as cheaper, cleaner natural gas has surfaced through new mining techniques. Additionally, coal mining productivity in West Virginia has dropped as miners try to extract deposits that are harder to reach because of years of aggressive mining.
Deskins said natural gas used to be about 10 percent of coal’s effect on the state's Gross Domestic Product. Now, they are about equal.
Unfortunately, a coal “comeback” is unlikely he said, because of the demand factors here and internationally.
That means, he said, that even if regulations are rolled back as promised by the new Trump Administration, like those limiting mercury emissions, they may not have much effect on the industry – especially since many of those plants have already purchased the scrubbing equipment meant to meet those emissions rules.
“You have to think about the drivers of supply and demand,” he said. “If you can only affect one of three factors (regulations), then you just can’t bring back coal 100 percent.”
Laxer regulations on coal fired plants “is going to keep us from falling further, but it’s not going to bring us back.”
He said emerging energy technology, like wind and solar, will put further competing pressure on the coal industry.