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Report: West Virginia needs to diversify economy

Photo by Brett Dunlap Patrick Opitz, a senior in the Business and Economics Department at West Virginia University, presents part of the Parkersburg Area Economic Outlook Report about the economic indicators in the area to leaders Wednesday.

PARKERSBURG — The area could benefit from downstream industries using the state’s natural gas products to make a variety of products, a group of economic students told community and business leaders.

Also, other new businesses can diversify the state’s economy, the group said.

Brian Lego, research assistant professor, Bureau of Business and Economic Research at West Virginia University, and three of his students who have been looking at economic trends of the Parkersburg area as part of the statewide Economic Outlook Conference Series presented a report Wednesday at West Virginia University at Parkersburg to area leaders.

The Parkersburg area is considered as Wood, Wirt, Pleasants and Ritchie counties in West Virginia and Washington County in Ohio.

Lego said the report presents a holistic view of the West Virginia economy.

Photo by Brett Dunlap Danielle Kaminski and Ian Wylie, students in the Business and Economics Department at West Virginia University, answer questions from area leaders after presenting the Parkersburg Area Economic Outlook Report.

“We have a good idea on how things have gone, but we are more interested in where things are going and where the economy is headed,” he said.

According to the report submitted by the group, Wood County is the largest county in the region in terms of population and jobs. Unfortunately, Wood County has also accounted for the majority of job losses during the last three years and a sizable share of these declines have been concentrated in the local retail sector following a string of store closures in 2017 and 2018.

Washington County has posted moderate growth over the past few years, the report said. Although it trails other nearby counties in Ohio in terms of energy producing jobs, the surge in Marcellus and Utica gas output throughout the tri-state area has been a boon to segments of the county’s manufacturing base, particularly those companies that supply metals, machinery and other key inputs to the upstream and midstream portions of the gas industry, the report stated.

Pleasants County’s economy has generally been stable over the last couple of years, with slight gains in a few sectors canceling out losses in others. The news of the Pleasants Power Station at Willow Island would remain open until 2022 provided some measured positive news.

Ritchie County has been one of the five-county region’s most solid performers over the last several years, reflecting consistent gains in local manufacturing activity and additional gains in natural gas production. Ritchie County is the area’s primary source of gas production and ranked as the state’s third highest-producing county in gas withdrawal from wells in 2018, according to the report.

Wirt County payroll has mostly declined over the last five years as the state’s least populated county and has not recovered from the closure of Mustang Survival’s facility. Lack of growth in Wood County has also impacted Wirt’s labor force as the destination many there would go to for jobs, the report stated.

“The state as a whole still has a lot of room for improvement,” said Patrick Opitz, a senior in the Business and Economics Department. “The goal is to attract new business and industries into the state of West Virginia.”

A recession in 2012 resulted in 26,000 jobs lost. In 2017, the state entered a period of growth adding back 9,000 new jobs, mostly in the natural gas industry, he said.

The recession did not fully hit Parkersburg until 2015, resulting in a loss of 3,700 jobs. In 2017, the area has stabilized, Opitz said.

The natural gas industry has seen an annual growth of around 40 percent over the past few years. This growth could provide growth in other jobs, such as plastics manufacturing which could benefit this area, he said.

Ian Wylie, a senior in the Business and Economics Department, said there is a need for industrial diversification in the state economy as coal is no longer the primary economic driver and other industries have not made up for the losses from the coal industry over the last several years.

“It is important we have a strong energy sector in West Virginia, but we have to have growth in the other sectors in the economy to prevent one industry from dragging down the rest of the state,” he said.

It is hard to diversify the economy, but he said the key could be in entrepreneurship, people trying to establish new businesses.

“We need those who try to succeed,” Wylie said. “Entrepreneurship is really going to drive innovation in the state.

“We need to create an environment that is conducive to small businesses.”

The Wood and Washington County area has a higher average income than the rest of the state by around $2,000, he said.

“There has been steady growth in income throughout the region,” Wylie said.

However, there is a low labor participation number throughout the state, 9 percent lower than the national average, of people actively looking for work,

“West Virginia can never hope to obtain the level of economic prosperity that the average American experiences with a whole 9 percent of our workforce sitting on the sidelines compared to the national average,” Wylie said. “This is not a good look for outside investment in the state.”

Danielle Kaminski, a junior in the Business and Economics Department, said the new businesses that succeed statewide are the ones people establish and make work.

“It is about how welcoming we are to new businesses to regain that economic stability that we are looking for in this area,” she said.

Natural gas extraction is increasing, but there has only been a small increase in employment. Once a well is established, it only takes a small number of people to operate it.

“The future is not really extraction, but that downstream activity,” Kaminski said of related industries that will use the gas in manufacturing plastics and other products.

The chemical manufacturing industries of this area could benefit.

“We should be optimistic,” she said.

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