Understanding Our Regional Economies
By John Deskins
West Virginia is made up of multiple regions that vary dramatically in terms of economic strengths, weaknesses, challenges and opportunities. For instance, the changes needed to promote economic prosperity in the Metro Valley are very different from those needed in the Southern Coalfields.
Given these individual needs, a one-size-fits-all approach to economic development in the Mountain State will not work. Instead, state leadership should embrace regional differences and push to empower and encourage leaders in each area to span county lines and work together efficiently to tailor a set of economic development strategies that fits each region’s unique needs.
With this map, the state has been broken down into 10 regions, each defined by its challenges and opportunities. By pinpointing these strengths and weaknesses, state leadership can more easily create individualized action plans intended to solve the problems each area is facing. By strengthening the regional economies in the state, West Virginia will move closer to a more prosperous future.
Southern Coalfields
The Southern Coalfields region has experienced a great depression in terms of employment losses in recent years. Of all the regions in the state, this one was the most dependent on coal. In short, the region that could least afford the losses experienced the greatest losses. These economic losses are also coupled with severe human capital challenges related to poor health outcomes, dwindling population and drug abuse.
The economic challenges in the Southern Coalfields region are enormous. A fundamental problem is that the region has fallen into a vicious cycle. Consider this: economic losses occur due to the loss of coal, and some men and women who lose their jobs decide to move out of the region in search of work. Statistics show that, overall, those who out-migrate tend to be younger, healthier and more educated, leaving the region less attractive to potential businesses. In addition, drug abuse rises as economic opportunity falls, further eroding the region’s attractiveness to potential businesses. This kind of cycle is very difficult to curb.
The region is now searching for industries that will fill the gap that has been created by significant declines in coal employment. While the region definitely has potential with various industries like adventure tourism and industrial hemp farming, it’s hard to say precisely which industries will work in the region and which will not, given its various characteristics. The fate of the region ultimately depends on entrepreneurs willing to try different and innovative directions. A primary role for government is to foster an environment that encourages and supports these entrepreneurs as they try different directions.
Shale Gas Boom
The state’s Shale Gas Boom region has experienced a decent amount of job growth in recent years, and opportunities are looking up. However, a sizeable share of recent job growth in the region is due to natural gas pipeline construction, and while these jobs tend to be high-paying and create economic benefits in many ways, most are temporary and will naturally disappear in a few years. Further, in general, while drilling and exporting raw natural gas also creates an array of economic benefits, the industry is very capital intensive, meaning that the number of workers involved is relatively small compared to the value of the economic output. This is not bad; it is just the nature of the industry. However, this does mean drilling and exporting raw natural gas is unlikely to be a game-changing opportunity for the region.
Rather, that opportunity lies in keeping the raw natural gas in the state and allowing the value added to occur here rather than elsewhere. West Virginia truly has the opportunity to attract dozens of industries that would benefit from a cheap, local supply of natural gas to use in the manufacturing of countless chemical and plastics products. The Mountain State has the potential to realize tens of thousands of manufacturing jobs throughout a wide swatch of the state. However, other states like Pennsylvania and Ohio are working vigorously to attract these jobs as well, so this flourishing of activity is not going to just happen. We must work aggressively to promote our state and make it as attractive as possible to these potential businesses
Eastern Panhandle
West Virginia’s Eastern Panhandle region has, by far, shown the strongest population and job growth of any region of the state in recent years. The region has benefited from its proximity to the very strong Washington metropolitan area that includes Jefferson County. Thousands have chosen to work in this metro area outside of the state while living in West Virginia because of quality of life considerations and lower cost of living. This bedroom community characteristic is certainly a positive for economic development. Hopefully, commuting options from West Virginia into the D.C. area will be enhanced in coming years, allowing for more economic development of this sort.
Further, the area has benefited from some very sizeable capital investments within the state in recent years, making for a more diverse array of economic drivers. The region is very attractive to potential businesses from numerous perspectives like location, highway infrastructure and the availability of human capital, and this combination has recently led to significant gains in distribution and manufacturing. The economic forecast calls for continued healthy growth in this region in coming years. Economic development priorities for the area likely include continuing to enhance infrastructure, providing amenities that make the area more attractive to potential residents and continuing to market the area so potential businesses are aware of the strengths the region offers.
North Central
West Virginia’s North Central region is another outlier within the state as this region has experienced very stable and healthy growth for many years. In North Central, while the presence of West Virginia University is definitely a pillar of strength and stability, it is difficult to really point to one factor that is responsible for the region’s economic successes, and this is exactly what one hopes for from an economic development perspective. We want to see a diversified economic landscape where multiple sectors are experiencing growth and it is impossible to identify one factor that is responsible for a strong economy.
North Central continues to be a relatively attractive region within West Virginia for potential businesses because of this diversity. And perhaps more importantly, the region benefits from stronger human capital outcomes, which means businesses can have a greater level of assurance that they will be able to find the skilled, healthy and drug-free workers they need if they choose to locate in the region. North Central has a lot of potential in various sectors, such as health care, manufacturing and high-tech manufacturing. While somewhat on the edge of the Shale Gas Boom region, North Central stands to see tremendous gains in professional and business services sectors as downstream natural gas manufacturing opportunities materialize. A key economic development priority should be to continue working toward adequate infrastructure to ensure reasonable drive times and housing availability.
New River Gorge
The state’s New River Gorge region has suffered in recent years, largely driven by losses in coal. However, we are already seeing improvements in the region, and growth is expected in coming years. Several green shoots have emerged recently, such as Great Barrel Company’s new facility in Greenbrier County. The region has strengths to build upon, like its urban core in Beckley, better infrastructure access, a manufacturing footprint, strength in wood products and numerous tourism opportunities that are influenced by major drivers like The Greenbrier and the Summit Bechtel Reserve. Economic development leaders should focus on factors such as further promoting the area for tourism and attracting more manufacturing to the area.
Metro Valley
The Metro Valley region has seen mixed results in recent years with small declines in employment but slight increases in wages. However, the region enjoys several strengths. The urban nature of the area is an asset for economic development, especially with the attractive housing possibilities throughout the region. Perhaps most importantly, the footprint of auto parts and petrochemical manufacturing in the area is a potentially major source of strength. In particular, given that the state is poised for significant growth in this sector in coming years, this petrochemical manufacturing footprint could be a major asset for the region that can be built upon by leveraging network effects with the existing businesses that are in the region with potentially new and related businesses.
Mid-State
Although most of the growth in West Virginia’s natural gas industry has occurred in counties to the north and west of the Mid-State counties, this region has benefited from the industry’s rebound over the past couple of years. Indeed, the four-county area—especially Lewis and Upshur counties—contains a healthy number of businesses that provide transportation and engineering support services for drilling and exploration companies operating in the state. Pipeline construction has also provided a boost to regional economic activity as the Mountain Valley Pipeline and Atlantic Coast Pipeline (ACP) projects are being constructed within the area’s geographic footprint. The latter project does pose a downside risk to the region’s near-term expected performance, as the ACP’s construction has seen prolonged delays following a court-ordered stay of several required federal permits in late 2018 and the outcome of court appeals is uncertain at this time.
The Mid-State region, like other rural portions of West Virginia, faces sizable demographic challenges going forward, most notably a shrinking workforce and overcoming the impacts of the opioid epidemic. However, the area has potential for positive—albeit moderate—growth over the longer term. In addition to leveraging the area’s potential for natural gas development and expanding its network of industry support services, the four-county region’s wealth of natural amenities points to placing an emphasis on marketing its tourism opportunities and enhancing infrastructure access, both transportation and broadband.
Mid-Ohio Valley
The Mid-Ohio Valley has experienced some significant economic volatility in recent years. The area has registered measurable job losses within several of its longer-established manufacturing industries and has also experienced some sizable layoff activity within the retail trade sector, which can be linked to a series of store closures throughout the region. At the same time, the region has had its share of positive news, thanks to broader growth and development of the Appalachian Shale Basin. In particular, the construction of the Mountaineer XPress pipeline and Sherwood Lateral for the Rover II pipeline led to the addition of several thousand high-wage jobs in Jackson County and other parts of the region.
Another positive economic driver for the area is Hino Motor Manufacturing’s expansion, which will lead to a few hundred new production and assembly jobs at its new facility in Mineral Wells. Although the region does face many of the same long-term demographic and workforce-related challenges that are facing other parts of the state and will also likely see additional job losses in parts of its older manufacturing base, the Mid-Ohio Valley is well situated from a geographic perspective to benefit from spillover growth associated with the ongoing expansion in shale gas production in southeastern Ohio and adjacent regions in West Virginia. In addition, the area contains a critical mass of chemical manufacturing, available land and river/highway transportation infrastructure options to bolster its chances of attracting downstream natural gas processing activity over the longer term.
Allegheny Highlands
The Allegheny Highlands region has seen some economic declines in recent years. Much of the region’s primary opportunities lie in tourism, given the region’s attractive natural amenities and the strengths that already exist in areas such as Elkins and Snowshoe. Similar to the Potomac Highlands,
economic development priorities should include marketing the region’s tourism opportunities more effectively and improving access through various infrastructure enhancements.
Potomac Highlands
The Potomac Highlands has experienced some wage gains in recent years, although employment has been flat. Nonetheless, the region has experienced some positive developments. For example, the region’s wood products industry, led by American Woodmark’s Moorefield facility, has bounced back from the recession and is now seeing increasing employment. In April, Northrop Grumman announced plans to expand operations at its Mineral County manufacturing plant, adding as many as 500 new jobs. However, in the same month, Verso Corporation announced it will shut down its paper mill in neighboring Luke, MD, laying off 675 workers, many of whom live in West Virginia.
Ultimately, this region has potential for growth in several areas. For instance, the region offers a lot of opportunities for expanded tourism and second homes, as well as manufacturing and agriculture. Economic development priorities should include factors such as marketing the region’s tourism opportunities more effectively, supporting growing industrial clusters such as wood products and advanced materials manufacturing and improving access through various infrastructure enhancements.
