MORGANTOWN, W.Va. — It’s not a crystal ball, but the Mountain State Business Index indicates the state is slowly pulling out of a recession.
Economists at the WVU Bureau of Business and Economic Research use indicators like building permits, stock prices for state employers, interest rates, coal production and unemployment claims to determine the state’s progress or regression over a period of time.
“You only needed to look at any news report on the scope and scale of layoffs from the coal industry and the natural gas industry. That was where we’ve come from,” explained Brian Lego, research assistant professor with the BBER.
Data from June and July showed a 0.1 percent increase in the index. It is a slight improvement following a very difficult start to the study period.
“Over the past several months, we have seen things even out. That’s why we said we’ve said the state’s recession has likely ended,” Lego added.
A lull in job losses has positively impacted the state’s economic outlook according to Lego.
“The coal of industry for example, you heard of a lot of layoffs by a lot of the operators and some outright closures of mines. That period, at least at this point seems to be slowing down.”
That doesn’t address prospective job opportunities for those already out of work. And, there’s no guarantee West Virginia’s recovery from a recession will be quick.
“What you would prefer to see is a strong bounce back. And, that’s what you typically see after a recession. If you look at the history of the index, for example, things tend to relatively quickly,” said Lego.
The economy in the southern coalfields has suffered more than areas elsewhere. The June 23 flood that wiped out thousands of homes, businesses and schools, will certainly impact the rate of recovery from the recession in a number of hard hit counties.
“When you even look at the state in say a northern and southern West Virginia perspective, the southern part of the state has really endured a much more significant fall off in activity,” noted Lego. “That really is continuing to play out of the course of this past year.”
For July, four components made positive contributions to the overall index, with roughly equal contributions coming from stock prices for the state’s largest publicly-traded employers, natural gas and coal production, followed by a small improvement in initial unemployment insurance claims.
Lego suggested a turnaround in the natural gas industry is needed after several months of volatility.
“What we would like to see there is a stronger bounce back in the level of the rate of production growth that would really help bring in some of those idol workers we’ve had in some of the supporting industries.”
Economists are cautiously optimistic pointing to a rising use of natural gas, plans for new, gas-fired power plants in the U.S. and the construction of natural gas pipelines across a number of states including West Virginia.