Recession: 10 years later
Employment has largely rebounded in the valley
A decade ago the national economic collapse led by a mortgage crisis began, and although the Mid-Ohio Valley didn’t experience the same sort of crushing despair that came down on regions heavily exposed to the real estate market, the reverberations inevitably came around.
It is difficult to trace the impact throughout the national economy, but the Marietta area saw a dramatic reduction in its workforce starting in 2009, and the area has not yet fully recovered.
Data from the Federal Reserve Bank of St. Louis shows that the civilian workforce in the Parkersburg-Marietta Metropolitan Statistical area going into the second quarter of 2009 stood at 43,716; a year later it had declined by 2,500, and continued a steady drop through July 2018, when it stood at 38,416.
Unemployment peaked in the area in June 2009 at 9.4 percent after only months before being at a seven-year low of 4.5 percent. The job market recovered steadily after that, and unemployment in June 2018 was 5.6 percent.
Per capita income in the MSA stalled during 2008-09 at about $31,900 a year, but began picking up around 2011 and by the start of 2016 stood at $37,600.
“The financial crisis in the mid 2000s from a statistical standpoint was not as catastrophic in the region because the crisis stemmed largely from home foreclosures,” said Andy Kuhn, executive director of the Southeastern Ohio Port Authority. “I know it’s not purely statistical because jobs were terminated, pensions lost, and families were uprooted, but the economic diversification and overall insulation of our region positioned us to better weather the financial storm.”
Jeff Welch, a longtime banker in the area who is now senior vice president at Settlers Bank, said lending practices in the Mid-Ohio Valley were more conservative than those in the areas worst affected by the mortgage and real estate crisis.
“Most of the community banks here weren’t as aggressive in their lending products as the larger banks,” he said.
The crisis was triggered by questionable lending practices in hot real estate markets coupled with new financial products called mortgage-backed securities. When the real estate market burst and foreclosures began, the securities went down with them, creating a national catastrophe that erased years of gains for people who had invested in equity markets through instruments such as 401(k) and IRA retirement savings accounts.
Welch said a key element was lending to people who had adequate down payments and understood what they were getting.
“I don’t think the impact on the Mid-Ohio Valley was as great as it was nationally,” he said. “We suffered a little bit, businesses suffered, but not as greatly as the larger metro areas. As for coming back, I think we’re OK compared to 2008, but a lot of factors contributed to what happened here.”
Jim Black, former director of the port authority and a resident of Beverly, said much of the decline in workforce has been gradual over the past several years. As an example, he said, the closure of the AEP coal-fired Muskingum power plant near Beverly took place in stages as the company responded to changes in the use of coal as fuel. Ultimately, the plant either laid off or relocated a workforce of 400 people.
“It hasn’t been an overnight thing, but the companies have seen the handwriting on the wall,” he said. “The oil and gas boom was going on at the same time, around 2011-12, confusing the issue. A lot of the plants curtailed operations. They didn’t shut down, they were just responding to market conditions.”
Bret Allphin, development director for the Buckeye Hills Regional Council, agreed that the real estate bust affected some individuals but as a whole, the market in the Mid-Ohio Valley hadn’t experienced the same bubble as other areas and consequently didn’t experience the same impact when the bubble burst.
“People in our area are generally single household owners, and this was not a popular area for speculation,” he said. “The banks are generally conservative, and as a whole it was kind of a non-issue.”
The shrinking workforce and the spike in unemployment in the immediate wake of the 2008 crisis, he said, looks extraordinary on a chart but is nothing historical.
“Here’s the thing about unemployment – in our communities and in Appalachia, it is chronically high. That’s why we have commissions. It took that crisis to bring the rest of the country to our level of distress,” he said. “I’ve looked at 20 years of workforce data, and it’s essentially a flat line. People have this feeling that it’s way up or way down, but in actuality our region has been very steady, no high peaks or low valleys, and that’s something good because it has insulated us from some of those shocks.”
Meanwhile, the employment market has become increasingly brisk.
“I think things are very optimistic,” Black said. “I’ve never seen so may help wanted signs, and that’s a good sign. People are hiring.”
Appalachia might be coming into a new economic era that’s more representative of its cultural reality, Allphin said.
“There’s a prevailing image that everyone in Appalachia works in a factory, but the reality is, our region is filled with vibrant mediums and small businesses,” he said. “I’m encouraged because we have a long heritage of arts and culture, and that’s been an important sector of business but now it’s being taken to the next level, with revitalization of downtown areas, small businesses and the kind of diversity to insulate us against future fluctuations in the market.”
Washington County, changes from 2008 to 2017:
• Population: 61,773 to 61,418.
• Housing units: 28,042 to 28,083.
• Median household income: $40,805 to $44,763.
• Unemployment rate (MSA): 5.0 to 5.6 percent.
• Civilian workforce (MSA): 40,805 to 38,462.
Sources: Census Bureau, Federal Reserve Bank of St. Louis.