The Economic Contribution of West Virginia's Forest Products Industry

The Economic Contribution of West Virginia’s Forest Products Industry C. Clinton Gabbert The hardwood forests that cover West Virginia have historically been an important resource to the state. The turbulent economic conditions resulting from the U.S. housing market collapse of the mid-2000s and subsequent economic recession have cause immense disruptions in the country’s forest products industry (FPI). An assessment of the economic contribution of the state’s FPI and the 7 major forest product sectors which comprise it was completed using the input-output economic modeling software IMPLAN with 2017 data. The historical contribution of the state industry was then assessed and compared for the years 2006, 2010, 2015, and 2017 to examine the changes in the industry’s contributions among these years. Finally, an assessment of the FPI’s economic contribution in five separate regions of the state for the years 2006 and 2017 was performed. As of 2017, the West Virginia FPI directly contributed $2.2 billion in output, 10,198 jobs, $750.5 million in gross state product (or value added), and $404.5 million in employee compensation to the state economy. In terms of total contributions to the broader economy, the industry supported $3.4 billion in output, 19,219 jobs, $1.4 billion in gross state product, and $764.4 million in employee compensation. In 2017, the primary solid wood products sector was found to be the largest individual FPI sector in terms of direct contributions of output, jobs, and employee compensation while the logging sector was the largest in terms of value added. In 2006, the West Virginia FPI directly contributed $2.8 billion in output and over 15,000 jobs, while supporting $3.7 billion in total output and nearly 21,000 jobs in the broader state economy. Immense decreases in industry contribution were found in both the direct and total contributions of the industry from 2006 to 2010. The largest percentage decreases between these years were experienced in the secondary solid wood products and wood furniture sectors. Between 2010 and 2015, the industry direct contributions rose by all measures except employee compensation, which continued to fall by 1.5 percent of its 2010 level of $395 million. Increases in indirect and induced contributions of the industry, however, resulted in increasing total contributions of all measures. Between 2015 and 2017, all measures of direct contributions of the industry increased, but failed to rise to their previous 2006 levels of any measure analyzed. This was also found to be the case of the FPIs in the five regions of the state that were analyzed. The Highlands region, comprised of 11 counties in the eastern portion of the state was, by far, the largest contributor to the state’s FPI in both 2006 and 2017. By 2017, the region provided more than half of the statewide industry’s direct contributions of output in the logging and primary and secondary solid wood products sectors. The North Central region of the state, meanwhile, experienced most of the largest losses in direct and total contribution of the state from 2006 to 2017. As of 2017, the West Virginia FPI remains a key industry for the state as total industry contributions accounted for 2.2 percent of all jobs and 1.8 percent of gross state product. While these shares are still below 2006 values, they were seen to have increased from 2010 to 2015 and 2015 to 2017. However, the inability of the FPI throughout the state to return to 2006 levels of direct contributions suggest long-term industry trends such as the continued offshoring of valueadded forest products sectors and increased industry automation are still putting negative pressure on direct industry growth. Additionally, new challenges the industry faces may be diminishing industry contributions such as the uncertainty about the future availability of the foreign markets and competition for labor from new industries. In order to meet these challenges, it is recommended that state and federal policymakers, developmental authorities, and other industry interests make a concerted effort to grow the state FPI through targeted growth of the industry’s secondary solid wood products and wood furniture sectors. Though these sectors experienced some of the most severe decreases in direct contributions over the years analyzed, as of 2017, they were still large contributors the state’s overall FPI. These sectors require more highly skilled labor and were found to contribute a large number of jobs and high employee compensation relative to their output. Growth in these sectors would not only support valueadded wood products manufacturing jobs but would also increase economic activity between FPI sectors within the state and decrease the industry’s reliance on exporting its primary forest products out of state. Secondly, these efforts should be targeted in the Southern and Highlands region of the state, in which the FPI was found to fare relatively better over the years analyzed. The FPI presents immense opportunity to provide badly-needed jobs in these regions and serve to induce further growth in industry activity throughout the state.