Download The Economic Impacts of Forest Industry in Virginia

The Economic Impacts of Forest
Industry in Virginia
Virginia Forestry Association,
Board of Directors Meeting
October 29, 2013
Center for Economic and Policy Studies
Outline





Forest Industry Patterns and
Trends
Methodology
Results
Conclusion
Report is available at the
Weldon Cooper Center for
Public Service
(http://www.coopercenter.org)
and Virginia Department of
Forestry websites
PATTERNS AND TRENDS
Forest Land as Percentage of
Total Land Area, 2008-2011
Source: U.S. Forest Service, Southern Research Station, Forestry Inventory Analysis System
Stumpage Value
Source: Virginia Department of Forestry
Total Stumpage Values
$400
$350
$300
(Millions)
$250
Hardwood
$200
$150
$100
$50
Softwood
Source: Virginia Department of Forestry
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
$0
Extractive Forestry Employment
3,000
2,500
2,000
Support Activities for Forestry
1,500
1,000
Forestry and Logging
500
0
2006 2007 2008 2009 2010 2011 2012
Source: Virginia Employment Commission, Quarterly Census of Employment and Wages
Virginia Forestry Related
Manufacturing Employment
60,000
50,000
40,000
Furniture and Related Product
Mfg
30,000
Paper Manufacturing
20,000
Wood Product Manufacturing
10,000
0
2006 2007 2008 2009 2010 2011 2012
Source: Virginia Employment Commission, Quarterly Census of Employment and Wages
Real GDP Growth, 2006 to
Present
6.0
% Real GDP Change
4.0
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
Source: Bureau of Economic Analysis
Average=1.2%
U.S. Housing Starts, Actual (1959-2012)
and Forecasted (2013-2018)
2.5
Millions of Units
2
1.5
1
0.5
Source: Census Bureau and Global Insight
2016
2013
2010
2007
2004
2001
1998
1995
1992
1989
1986
1983
1980
1977
1974
1971
1968
1965
1962
1959
0
Import Share of U.S. Consumption of
Furniture and Related Products
80
70
60
Wood Kitchen Cabinets
50
Upholstered Wood Household
Furniture
Nonupholstered Wood
Household Furniture
Institutional Furniture
40
30
20
Showcases, partitions,
shelving
Office Furniture
10
Source: International Trade Administration
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
METHODOLOGY
Methodology


Use input output analysis to estimate the
contribution of the forestry industries to Virginia
Implement the general approach of last study


Start by defining the industry as those industries with
strong forward (selling) linkages and distribution
linkages (e.g., food processing)
Uses input-output model to measure magnitude of
backward (purchasing) linkages and the ripple
effects of household, business, and public sector
spending and investing
Changes



Addition of biomass power production .
Estimate impacts for counties and independent
cities
Estimate impacts of wood exports (e.g.,
roughwood, lumber, veneer, fiberboard, and
wood chips)
Forest Industry Sectors


Division into production, processing,
distribution/power generation sectors
Processing sectors are further divided into core
and extended industries.


Core (primary). Heavily dependent on raw materials
from the state.
Extended (secondary). Clearly identified with the
sector but not necessarily dependent on Virginia raw
materials.
Input Output Models


An input-output table
provides a picture of an
economy. It shows flows
of goods and services
among industries,
households, and
government.
IMPLAN (IMpact analysis
for PLANning)

Software that implements
input-output analysis
Input Output Models

For a one dollar change in final demand for
forest industry products, the total impact will
include direct, indirect, and induced
components:



Direct effect. Initial injection of new economic
activity or expenditure
Indirect effect. Change in input purchases due to
direct effect.
Induced effect. Change in employee household,
business and public sector expenditures due to
direct and indirect effect.
Input Data

Input data from 2011 for
Quarterly Census of Employment and Wages
(VEC)
 Harvest value and volume (Virginia
Department of Forestry)
 IMPLAN database (to adjust for selfemployed in logging and other industries)

RESULTS
Economic Impacts Breakdown
Total industrial output impact of $17.2 billion
Indirect and Induced Effects
Value-added Industries
Production
$.8 Billion
$8 Billion
$8.4 Billion
Total Impacts
Output
(Million $)
Employment Value Added
(Million $)
Direct
8,855
37,704
3,154
Indirect
2,231
14,010
1,407
Induced
6,131
52,133
4,187
Total
17,217
103,848
8,748
Employment Impacts
Every job results in another 1.75 jobs elsewhere
60,000
50,000
40,000
30,000
20,000
10,000
0
Direct
Indirect
Induced
Value Added Impacts
Bulk of impact in forest primary manufacturing
One in 20 dollars
7%
9%
31%
53%
2.0%
98.0%
Forestry Production
Forestry Core
Forestry Extended
Forestry
Other
Forestry Distribution
Forestry-Related Exports
Output
(Million $)
Employment Value Added
(Million $)
Direct
789.3
2,723
275.0
Indirect
319.3
2,114
175.1
Induced
473.8
3,987
331.7
Total
1,582.4
8,824
781.9
What has changed since
previous studies?

Decline in logging and forest-related
manufacturing due to collapse of housing
market, deep recession, and continued global
competition facing portions of industry.
Forestry Direct Employment
Changes, 2006 and 2011
Sector
Forest (Prod)
Forest (Core)
Forest
(Extended)
Forest
(Distribution)
Forest Total
2006
2011
Change
%
Change
6,931 5,931
21,479 15,034
-1,000
-6,445
-14%
-30%
27,309 13,606
-13,703
-50%
4,528 3,133
60,247 37,704
-1,395
-22,543
-31%
-37%
Forestry Total Employment Impact
Changes, 2006 and 2011
Sector
Forest Total
2006
2011
144,380 103,848
Change
-40,532
%
Change
-28%
Forestry-related Industry
Employment Impact by Locality
CONCLUSION
Takeaways

Economic impacts are lower than last study
because of erosion in forestry industry output
and employment.


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Housing market collapse
Recession and slow economic growth
Furniture and pulp and paper competition
Forestry industry employment has stabilized in
2011-2012 and is poised for some growth,
particularly with revival of housing and
increased demand for wood products
Takeaways


The forest industries still account for 2 percent
of state output and employment.
The forest industries are particularly important
for some regions.


Sixty-eight localities have total employment impacts
in excess of 1,000
Seven localities have employment impacts greater
than 2,000 jobs
• Alleghany/Covington, Henrico,
Pittsylvania/Danville, Franklin, Richmond,
Henry/Martinsville