Blog Posts > Sean O’Leary: Use Economic Data With Care
October 9, 2019

Sean O’Leary: Use Economic Data With Care

Charleston Gazette-Mail – Every year, at our Summer Policy Institute, I give a presentation to the students there on finding and working with economic and other data sources. One of the key lessons is that, with economic data, particularly in a small state like West Virginia, there is a balance between timeliness and accuracy. Read op-ed.

Economic data is constantly being revised, when new and more accurate information becomes available. A monthly or quarterly data release might have the latest numbers, but those numbers are highly likely to be revised. And in a state like West Virginia, whose economy recently has been strongly influenced by swings in energy prices and large construction projects going online and finishing up over a short time frame, those revisions can be significant.

This is not to say that most economic data about the state should be ignored, or that it is useless. Instead, it means that economic data should be used with care, and put into its proper context. Sometimes, that means digging deeper into the data: What industries are adding jobs, what sectors are contributing to income growth? Other times, it means bringing in other data points for context: Is growth showing up in other areas, how does this compare historically, is this measure stable or volatile?

Which brings us to Gov. Jim Justice and the Chamber of Commerce highlighting West Virginia’s then-No. 1 ranking in personal income growth in the first quarter of 2019, linking the growth to the policies they have helped enact. At the time, I cautioned that West Virginia’s personal income growth was particularly volatile, with the state just as likely to be ranked in the bottom 10 as the top 10 in any particular quarter.

And that a major source of income growth, temporary pipeline construction, was not a sign of a broadly growing economy, and in any case, could not be attributed to any particular policy.

That caution was merited. Revised numbers showed that West Virginia’s personal income growth actually ranked 47th in the first quarter of 2019, not first, and ranked 40th in the second quarter of 2019, hardly any reason to celebrate.

As it turns out, the pipeline construction jobs were skewing the data, and when some projects wrapped up earlier than expected, it took some time for the data to reflect that. This was evident in the data from the Quarterly Census of Employment and Wages, which is based on an actual census of employers, not a sample or model, which showed pipeline construction was driving growth.

But one did not need to wait for the revised data to see that it wasn’t a good idea to raise a banner celebrating the state’s skyrocketing economy. One quarter does not make a trend, and examining past quarters would have shown that West Virginia has had only two quarters of growth above the national average over the past two years, both driven by temporary factors, rather than sustained growth in the economy.

Job figures would have shown some signs to be cautious. West Virginia ranked 38th in nonfarm employment growth over the past 12 months and, so far, nonfarm employment is down 1,700 jobs in 2019.

The state’s unemployment rate in August 2019 was the sixth-highest in the country, nearly a full percentage point higher than the national average. And a recent release from the Census Bureau showed, once again, that West Virginia had the fourth-highest poverty rate and the lowest median household income in the country.

None of these economic indicators point to a strong, vibrant economy that the news releases from the governor and the Chamber of Commerce would have you believe.

Economic data is complex and incomplete. There is no one answer or measure to tell you how well an economy is doing and who is benefiting from its growth. But what data is available can help organize our world into ways we can understand and work to improve. Cherry-picking data to fit a political narrative doesn’t help us understand anything.

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