At the only manufacturing facility in Knott County, six employees craft high-quality guitars from Appalachian hardwoods.
It’s not a traditional factory — one official calls it an “artisanal” manufacturing plant — and it started small this year, but it is an example of one sector of the Appalachian Kentucky economy that grew in recent years.
The number of manufacturing jobs in the region increased by 2,000, to a total of 44,000, between 2012 and 2017, according to a new report from the Appalachian Regional Commission.
The news was less encouraging for the overall economy of the region.
The total number of people employed in the Appalachian counties of Kentucky dropped by 1.1 percent from 2012 through 2017, compared to growth of 7.2 percent in the rest of Kentucky and 9.6 percent nationwide, according to the report.
The findings make clear that Eastern Kentucky has not kept pace with the recovery in the rest of the country from the 2008-2009 recession, nor has greater Appalachia, which includes all of West Virginia and parts of 12 other states.
The region’s share of total jobs, wages and population in the country has gone down.
In 2017, for instance, total earnings in Appalachia accounted for just 5.6 percent of all earnings in the U.S., down from nearly 8 percent in the mid-1970s.
A sharp downturn in coal helps explain why Kentucky and nearby areas of Central Appalachia have lagged behind national growth.
Not long ago, the coal industry pumped well over $100 million in wages into the economies of some Eastern Kentucky counties annually.
As an example, the payroll in Harlan County in 2011 from the coal, oil and gas and quarrying industries was $151 million, with coal accounting for most of that total.
After a years-long slump, however, wages in the county from the coal sector totaled just $42.7 million in 2018, according to the Kentucky Center for Statistics.
“That’s an alarming statistic,” Harlan County Judge-Executive Dan Mosley said of the drop.
(map: Will Wright – source: Kentucky Center for Statistics – Get the data)
Other coal counties have seen declines as well, hurting other businesses, forcing laid-off miners to move away for work or take other jobs that often pay less, and causing cutbacks in government services from the loss of a tax on coal production.
“When people don’t have jobs, it makes it very difficult to pay their property taxes and other taxes to fund local government,” said Mosley, a Democrat.
Pike County Judge-Executive Ray Jones said that the county faces higher potential pension costs at the same time coal-severance revenue has dried up.
The county’s pension contribution is about $1.9 million annually, but could increase to $5 million by 2028 if current trends continue, he said.
“Those are the kinds of numbers that threaten basic services,” Jones said.
The news for coal in Eastern Kentucky was no better in the most recent quarter of July through September, according to a report released Tuesday.
It showed that coal jobs in the region were down 17.7 percent from the same period a year before.
Harlan County, where a company called Blackjewel went bankrupt and laid off hundreds of miners in July, was hit particularly hard, with jobs in the third quarter down 45 percent from the same period in 2018, according to the report.
A longer view shows an even more staggering loss. There were 3,223 people employed in the coal industry in Eastern Kentucky in the third quarter, down from 14,219 in the same period in 2011.
In the bigger picture, Eastern Kentucky’s economy was uneven over the last few years, with examples of growth in some communities and sectors, but decline in others, the ARC report showed.
Healthcare and social services was one bright spot, thanks at least in part to the state’s expansion of Medicaid.
The healthcare sector of the economy has steadily risen in prominence in Appalachian Kentucky, from a 10.8 percent share of employment in 2002 to 12.7 percent in 2017 — an increase of 10,000 jobs.
In some counties, the growth has been even more significant. In Letcher County, for example, the healthcare sector has increased from providing 20 percent of all wages in 2002 to 44 percent in 2018.
As the payroll in the health field in the county trended up, the total of all wages in the county went down from $172.5 million in 2002 to $141.4 million in 2017.
Consider another example: Pikeville Medical Center, with a total of 3,000 employees at its main campus in Pike County and clinics in other counties, provided about as many jobs as the coal industry in the entire eastern end of the state in the third quarter.
“We play a huge role in the health and well-being of the area, but we’re also a huge economic entity as well,” said Donovan Blackburn, CEO of the medical center.
Jones, the Pike County judge-executive, said the growth in healthcare jobs has helped offset losses in coal, but raised a question on whether it is sustainable in the long run because the region is losing population.
It will also depend on factors outside the control of local officials.
“The future of the healthcare industry will be somewhat dependent on the Affordable Care Act and Kentucky’s Medicaid expansion,” Jones said.
Republicans in Congress tried to kill the ACA, arguing it was too expensive, and President Donald Trump does not support it, but so far much of it is still in place.
Kentucky Gov.-elect Andy Beshear, a Democrat, plans to keep the state’s Medicaid expansion in place, talking during the campaign about how it had helped people access health care and been an economic driver in rural areas.
Another plus for jobs in Eastern Kentucky in recent years was a category called food, lodging and entertainment, driven by efforts to develop tourism in the region.
The sector grew by 8 percent between 2012 and 2017, more than any other piece of the economy in Eastern Kentucky, and accounted for 37,000 jobs, according to the ARC report.
Mosley said the economic impact of tourism has grown in his county, which has historic coal towns, hiking trails, miles of trails for all-terrain vehicles and other attractions.
There are “a lot of gains to be made in that area,” Mosely said.
One downside is that wages in tourism typically don’t match what workers made mining coal.
As in manufacturing, jobs in retail in Appalachian Kentucky also increased between 2012 and 2017, though both sectors had fewer jobs than in 2002.
Ruth Slone said she’s seen that at her Hindman store, called Dion’s, which carries clothing and gifts.
Sales are fair, she said, but don’t measure up to a decade ago. Online shopping has been one factor in that, but the coal slump that started in 2012 and has persisted has hurt.
“It’s impacted everybody’s business,” said Slone, who has operated the store in a local shopping center for about 25 years.
There were no job gains in Eastern Kentucky between 2012 and 2017 in wholesale trade and transportation, construction, and farming and forestry, and all those fields had fewer workers in 2017 than 15 years before.
Local officials said they have seen gains in jobs since that were not reflected in the 2012-2017 ARC report.
In Perry County, for instance, officials announced in September that a call center planned to add 300 employees, followed by news in November that a Canadian company would open an aluminum-products plant and hire 265 people, using a building once owned by a wood-products factory that closed years ago.
“I think there’s been small strides” in the region since 2017, said Chris Boyd, director of fundraising and development for the Appalachian Artisan Center in Hindman.
The center oversees the fledgling guitar-making operation called the Troublesome Creek Stringed Instrument Company.
The hope is that the company will triple to 18 employees by the end of 2021 and become self-sustaining in a few years.
The Appalachian Regional Commission provided an $867,000 grant to get it going this year and the East Kentucky Concentrated Employment Program also put in $220,000.
Officials also are pursuing more traditional manufacturing facilities.
One example is Braidy Industries. Outgoing Republican Gov. Matt Bevin got the legislature to invest $15 million in the company, which has proposed building an aluminum mill near Ashland.
The company said it would hire 600 workers at high wages, but hasn’t yet received enough funding from other investors to build the giant plant.
Officials say the benefits of large employers like Braidy would spread through the entire economy if they succeed.
In announcing a $4 million federal grant to benefit Braidy Industries in 2018, U.S. Rep. Hal Rogers said it paved the way “for future economic development opportunities and helps us reimagine Kentucky’s Appalachian region as a major manufacturing hub.”
However, no major plants have opened in recent years. Some are in the works, but at least one major project, a high-tech battery factory in Pikeville, was scrapped and prompted allegations of fraud.
Appalachian Kentucky includes counties in the Somerset — London area that have seen more growth than counties in the eastern end of the state that have been closely tied to coal for a century.
Still, average earnings per employee throughout the region dropped by about $1,000 between 2012 and 2017, with the loss of relatively good-paying coal jobs as a factor in that.
That average annual gross paycheck per employee in Eastern Kentucky was $36,600 in 2017.
In the rest of Kentucky it was more than $10,000 higher, and more than $20,000 higher in the U.S.
Earnings throughout Appalachia went up 8.6 percent between 2012 and 2017, but went up faster in the country overall, at 13.3 percent.
Employment growth throughout the region was only half the U.S. rate in that period.
Jones, the Pike County judge-executive, said the region has a valuable asset in its workforce, including many laid-off miners with skills that would transfer to a number of industries.
But it will require substantial incentives and dedicated industrial sites if the region is to attract large employers, as well as a sharper federal focus on improving the most distressed counties to get the economy moving, Jones said.
“It’s gonna take a lot of federal funding and a lot of time to fix it,” he said.
Mosley, the Harlan County judge-executive, said ARC should concentrate more resources on the core of economically-distressed counties. Most of those are in Eastern Kentucky.
Nearly two-thirds of ARC’s investments went to counties and areas classified as distressed in fiscal year 2018, according to the agency.
Officials and businesses in the region also hope that a project aimed at boosting access to high-speed internet, called KentuckyWired, will aid development.
Hundreds of workers in areas with broadband have gotten jobs working at home or from hub facilities of a program called Teleworks USA, but some areas still lack access to high-speed internet.
“It’s real important to us to have better internet,” said Hyden Mayor Carol Graham Joseph.
Mosley said there needs to be a focus on diversifying the economy.
That is something a regional development initiative called Shaping Our Appalachian Region, or SOAR, has recognized by advocating a development blueprint focused on seven goals, including boosting small businesses, tourism, industrial employment and broadband connectivity.
“We’ve definitely made some gains in areas, but this is a journey to reinvent our region and our county,” said Mosley, who is a SOAR board member. “We can’t rely on one industry any longer to be able to sustain us.”
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Written by Bill Estep and Will Wright. Cross-posted from the
Herald-Leader via the Kentucky Press News Service.