Opportunities from the federal climate infrastructure package to grow clean and efficient manufacturing in the Ohio River Valley of Appalachia, aka coal country, are bringing back hope to the region. At the September 12, 2024, listening session about the region’s manufacturing strengths, participants demonstrated their eagerness to transform Appalachia into a hub for manufacturing jobs and the new clean-tech, sustainable economy (Figure 1). Our research found a strong foundation for economic development.
Figure 1: Word Clouds on Manufacturing Needed in Appalachia
The September listening session focused on a dive into the structure of the regional economy based on an analysis of employment in manufacturing industries. Researchers found the 193 Appalachian counties of Ohio, Pennsylvania, Kentucky, and West Virginia have a comparative economic advantage in manufacturing, with about a third more workers in manufacturing than typical in the nation.
Manufacturing and manufacturing jobs matter
Manufacturing is at the base of the economy. The businesses that supply the materials, parts, and pieces that go into a finished good have invested in plants and equipment to make those items. In the old economic model, that investment anchored them in a location. Recovering and profiting from the initial investment depended on stable relationships among customers and suppliers, workers and communities. Paying a living wage was a necessary part of survival.
That paradigm shifted in the past 50 years as global markets opened and old equipment wore out or became obsolete. Corporations closed plants in Appalachia and shifted investment to new factories in far-flung locations. New automated technology eliminated jobs. Workers struggled to find new jobs that paid as well as the old ones.
Today, climate change, pandemics, and other uncertainties present new challenges to businesses. Uncertainty is reviving interest in stability and sustainability. Many companies are viewing domestic investment through a new lens. Companies that have continued to flourish in the region have a head start on growth. Others seeking new locations with competitive advantage have reason to consider Appalachia.
Central Appalachia’s strength in manufacturing jobs and industrial capacity
The economy is shaped by many things: workers, families, businesses, institutions, and communities; natural resources and infrastructure; history and sociology, and more. The economy of central Appalachia has taken a hard hit on many fronts, but a strong foundation for economic growth remains. “King Coal” may have sucked up all the workers and dominated the economy in some communities, but in many places the economy was diverse, and it remains that way. Our research found that manufacturing jobs are more concentrated in the counties of central Appalachia than in the nation. The region’s manufacturing location quotient, or the measure of manufacturing workers as a share of the population, is about a third higher than typical for the nation (Figure 2).
A location quotient of one in a place or region means the concentration of employment there is the same as the nation. The four-state region that encompasses Appalachia has a manufacturing location quotient of 1.37, which means employment in manufacturing jobs is 37% higher than typical. The manufacturing location quotient in the 193 Appalachian counties of Ohio, Pennsylvania, West Virginia, and Kentucky is about the same: it is 31% higher than the nation. This shows that there are about a third more workers in manufacturing jobs, which indicates more productive capacity (plant and equipment) and stronger supply chains than elsewhere. This gives the region a competitive advantage in manufacturing. Researchers used the employment data from the Bureau of Labor Statistics and the proprietary data made available to them from a partner.
This economic foundation will be attractive as companies burned by the pandemic’s shipping difficulties, tariff uncertainties, and the lure of federal subsidies move production back from overseas and look for new locations for domestic factories.
Figure 2: The states of the Appalachian region, and the Appalachian counties, retain a competitive advantage in manufacturing
Source: Author’s analysis of the BLS and proprietary data. Note: NAICS stands for “North American Industrial Classification,” which is used by the United States Department of Census
Central Appalachia is strongest in the production of industrial materials like primary steel and aluminum, plastics, rubber, chemicals, cement, clay products, and glass. A closer look reveals specific industrial strengths (Figure 3).
Figure 3: Central Appalachian Counties have high location quotients in selected industrial sectors
Source: Author’s analysis of the BLS and proprietary data. Note: NAICS stands for “North American Industrial Classification,” used by the United States Department of Census
Connecting research numbers to your community
Spatial analysis tools allowed us to connect our analysis to place and see precisely where there are industrial strengths in specific types of industries. For example, Figure 4 shows in dark blue the widespread areas in which the location quotient for the manufacture of machinery is higher than the national norm; those counties in green show a significant concentration, with employment that is between 10 and 50 times as concentrated as typical for the nation. The concentration of counties with higher location quotients in these products is linked to their industrial history. Much has changed, but a foundational strength in those sectors remains.
Figure 4: Location quotients for machinery manufacture by county in central Appalachia
Source: Author’s analysis of the BLS and proprietary data. Note: NAICS stands for “North American Industrial Classification” which is used by the United States Department of Census
Strengths vary from place to place based on history, natural resources, and the demands of different markets. Figure 4 shows employment in machinery manufacture is not concentrated in most of West Virginia, but many counties in that state have a high or very high concentration of employment in wood product manufacturing (Figure 5).
Figure 5: Location quotients for wood product manufacture by county in central Appalachia
ReImagine Appalachia will continue to analyze the manufacturing strengths of the central Appalachian counties on a more granular level and broaden our understanding of the elements that create strong industries in particular places in the region. New mapping tools are emerging that allow researchers, economic development professionals, and corporate location experts to identify precisely where an existing competitive advantage favors business location or development.
The location quotient is not the only way to view the strengths of the economy. For example, worker skills and the size of the labor force are critical components of any economy. So are the institutions that provide the workforce training that ensures a pipeline of skilled workers as well as a way to provide constant renewal of workforce skills in a world of rapidly changing technology. ReImagine Appalachia has written about this, providing in-depth case studies of new training programs. There are many other important strengths of the economy we look forward to examining with a more granular focus and a broader scope of study.
Central Appalachia has great strengths in this area of the economy. The nation and world need to better understand our region’s more important economic characteristics. Our research will continue to focus on the short—and long-term manufacturing opportunities of central Appalachia.