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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. 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