State of the State: West Virginia

West Virginia, fondly nicknamed the “Mountain State,” has much to offer in its scenery, small-town charm, and rich history, but the state faces challenges in its employment landscape.

The Federal Reserve Bank of Cleveland serves the Fourth Federal Reserve District, which comprises Ohio, western Pennsylvania, the northern panhandle of West Virginia, and eastern Kentucky. Like the other Federal Reserve Banks, the Cleveland Fed collects anecdotal reports and analyzes data about the region it serves in order to inform national monetary policy. In the Bank's State of the State series, we share some of what our regional researchers find.

In 2015, West Virginia’s overall employment fell 1.3 percent, the third largest decline in employment by percentage in the nation, behind that of only North Dakota and Wyoming.

All 3 states rely heavily on the natural resources and mining industry as an important contributor to employment. But in West Virginia, employment in this hard-hit sector fell 20.3 percent, declining more than in any other industry sector in the state. Also contributing to the employment decline was the construction sector, which saw employment decrease by 6.6 percent, followed by professional and business services, at 3.8 percent. In fact, the only sectors showing growth were the education and health and leisure and hospitality sectors, though these grew by less than 2 percent.

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Employment grew in just 2 sectors throughout 2015, and the largest negative employment change was in natural resources and mining, a 20.3 percentage point decline.

Despite the overall decline in employment, West Virginia’s unemployment rate has also decreased through 2015 and the first two quarters of 2016, barring some short-lived fluctuations. The unemployment rate began its slow downward trend after a post-recession high of 8.8 percent in November 2010 and has decreased to 6.0 percent. It remains higher than the national average of 4.9 percent, however.

How can the unemployment rate be falling when employment growth is also low?

The answer most likely lies in West Virginia’s notable decline in population growth, resulting in a decrease in the size of the labor force. This downturn in population growth has been on a steady path since mid-2010, in large part because of both workers’ relocating to other states for better employment opportunities and an aging population. In fact, as of this year, West Virginia’s portion of the population aged 65 and older, at 17.8 percent, is among the highest in the nation, bested only by those of Florida and Maine.

In West Virginia, the number of working-age residents (ages 18 to 64) has fallen at an alarming rate since 2011.

Local contacts indicate qualified workers are also in short supply, contributing to the economic health of the job market. Educational attainment and social factors such as frequent opioid and heroin use present challenges to employers. Both of these factors contribute to the state’s low labor force participation rate, currently the lowest rate among those of the 4 states that lie at least partially within the Fourth Federal Reserve District, Ohio, Pennsylvania, Kentucky, and West Virginia.

Census data collected in 2014 show that just 32.6 percent of West Virginia’s working-age adults hold a 2- or 4-year college degree, well below the national rate of 40.4 percent. The dramatic uptick in drug abuse has also contributed to the ineligibility of many potential employees―especially in the construction and mining and logging sectors. The Center for Disease Control notes approximately 34 drug overdose deaths per 100,000 West Virginia residents from 2011 to 2013, more than double the nation’s average of 13.4 deaths per 100,000 residents during that same time period.

Despite these discouraging statistics, the first 2 quarters of 2016 have shown a slight upward movement in the labor force participation rate. Additionally, there was a 1.1 percentage point decline in the unemployment rate from June 2015 to June 2016, the third largest decline of unemployment rate in the country for that time period. West Virginians have been pursuing higher education at an increased rate, as well, with a 4 percentage point increase since 2013 of adults who hold either a 2- or 4-year college degree.

We are hopeful that this positive momentum will continue into the next chapter of West Virginia’s employment story.

Sum and substance: West Virginia’s employment rate fell in part because of the large decline in the state’s hard-hit natural resources and mining industry, but the state’s unemployment rate has also decreased.