Factories, Coal Mines Bring Income Relief to Some States

This story was originally published by Stateline, an initiative of The Pew Charitable Trusts.

High-paying blue-collar jobs lifted incomes in West Virginia, New York and Illinois last year, even though the states lost residents, while farmers and government workers shared the pain of more stagnant income in Nebraska, Maryland and Washington, D.C.

The new per capita income numbers show how national policies and international markets directly affect state and local pocketbooks. Deregulation in the United States and a heat wave in China boosted coal demand in West Virginia, for example, while overseas mining and farming led to more giant truck manufacturing in Illinois. At the same time, U.S. tariffs hurt Nebraska soybean farmers.

Nationally, per capita income rose 1.4% between 2017 and 2018 after inflation, about the same as the previous year’s 1.6%, according to a Stateline analysis of Bureau of Economic Analysis data. The most recent peak was 4% growth between 2014 and 2015.

West Virginia had the biggest per capita income growth in the nation, with a 3% increase to about $40,600 after inflation.

The boost in the Mountain State stemmed largely from natural gas and coal jobs, said Brian Lego, economic forecaster for the Bureau of Business and Economic Research at West Virginia University.

“Coal and natural gas, and natural gas pipeline construction, all pay high wages, so that helped push up wages,” Lego said. “Health care and business services also helped, but energy and energy-related infrastructure played the largest role.”

West Virginia still ranks next to last for per capita income, ahead of only Mississippi, despite the increase last year.

Ashley Burke, a spokeswoman for the National Mining Association, said coal mining employment will likely show a modest increase for 2018 when the final numbers are in. Those jobs can lift income per capita because they pay, on average, $80,000 a year, Burke said.

“This follows years of steep declines due in part to an extremely hostile regulatory environment,” Burke said. “This administration has done a lot to reverse those negative trends.”

But coal industry analyst Joe Aldina of S&P Global Platts said while the Trump administration reduced regulations, coal’s success in West Virginia last year came from high demand overseas. Market demand had more impact than the deregulation, he said.

“The Trump administration has sought to help the coal industry in a myriad of ways, some of them quite creative, but it is market factors that have been the main drivers of the rebound,” Aldina said.

Coal exports hit a five-year high last year, according to the U.S. Energy Information Administration, but a drop is predicted this year. 

Meanwhile, the administration’s trade war with China took a toll on Nebraska, one of the nation’s most agriculture-dependent states. Sales of soybeans and other food to China suffered, said Ernie Goss, a regional economist at Creighton University in Omaha. Low oil prices also kept a lid on profits from corn-based ethanol, he said.

Nebraska ranked last in per capita income growth, with almost no change after inflation, at about $52,110.

“Agricultural commodity prices are just not high enough to support solid earnings,” Goss said. “In fact, there were losses by most farmers because of low prices, which are about oversupply but also the trade disagreements.”

Farm woes also translated to lower income for owners of retail stores where farmers shop and for suppliers such as seed merchants, he added.

Other agricultural states eked out modest increases, despite tariff troubles, because of more diversified jobs, Goss said. Kansas, for instance, has a successful aircraft construction industry that can help it weather downturns in agriculture, he said, and the state saw a modest gain of 0.7% after inflation to a per capita income of about $50,200.

Elsewhere, New York state saw a boom in construction jobs, fed by new office and other non-residential buildings in New York City. Washington state also had high income growth as the digital economy remained strong. New York saw a 2.5% gain in per capita income, and Washington 2.8%.

Maryland and Washington, D.C., both had relatively low income growth of less than half a percent. Both had drops in government employment under the Trump administration.

Uptick in Manufacturing

Manufacturing and construction both had a good year in Illinois after lagging in recent years, said Jim Muschinske, revenue manager at the state Commission on Government Forecasting and Accountability.

“Those are some of our historically poorer-performing segments and some of our higher-paying jobs, so we had at least a temporary break from that troubling trend,” Muschinske said.

That helped boost Illinois’ per capita income 2.4% after inflation, to $56,933, the fourth-highest increase after West Virginia, Washington and New York. Illinois also surpassed Colorado and Minnesota to rank 13th among the states.

In the Peoria area of central Illinois, factories are hiring and looking for more skilled workers for large machines made by Caterpillar and Komatsu as well as by John Deere in nearby Moline, said Chris Setti, CEO of the Greater Peoria Economic Development Council.

Caterpillar told investors last year its mining, oil and gas machinery was in such demand abroad that it had a six-month backlog of orders. Analysts likewise say mining machinery, such as that made by Komatsu and Caterpillar, is in demand worldwide, especially in fast-urbanizing countries like India and China.

“All of these companies came roaring back as the economy improved, and last year they were paying a lot of overtime to meet demand,” Setti said. “That really gives a lift to household incomes.” In early 2018, Peoria County had the highest wage growth in the nation, mostly because of machinery manufacturers.

The boom extended to suppliers such as Morton Industries just southeast of Peoria, which started an in-house training program to develop more welders among its 650 workers to make metal tubes required for big machines like mining trucks.

“Here in Central Illinois and around the country, everybody is trying to recruit skilled workers. In this company, we want to grow our own,” said Steve Stewart, director of organizational development at Morton Industries.

Illinois had about 592,000 manufacturing employees and 241,000 construction employees in the third quarter of 2018, according to the latest figures available from the federal Quarterly Census of Employment and Wages.

Like West Virginia, New York and other states, Illinois has lost population as residents age and young people move west to booming tech and energy economies. But some Rust Belt cities can grow income with manufacturing just the same.

A loss of people can inflate per capita income when good jobs come back, but states are hoping some former residents will be attracted back by the prospect of better jobs.

“We have lost a lot of people, and some of those people left in search of work in the long, slow decline of manufacturing,” said Setti, the Peoria CEO. “We’re hoping some of them will come back.”