HAZARD – Unemployment in nearly every Kentucky county dropped again in June, according to the latest data from the state, though here in coal-rich southeastern Kentucky a downturn in the coal market has helped fuel a sharp increase in joblessness.

These increases, however, do not seem to be affecting the state’s western coal counties in the same fashion. While unemployment has risen in most of the top coal-producing counties in Eastern Kentucky over the past year, jobless rates in the top producing counties in the western part of the state have in some instances significantly decreased.

In Perry County, the state’s second top producer of coal, the rate of joblessness increased more than two points, from 10.4 percent in June 2011 to 12.8 percent in 2012, according to figures from the Office of Employment and Training. The state’s top coal producer, Pike County, increased from 9 to 9.8 percent in 2012. Increases were also recorded in Knott, Leslie, Letcher, Harlan and Floyd counties.

In stark contrast are those counties in the Western Coalfields. Hopkins County, the third largest producer of coal in the state, saw a decrease from 8.4 percent in 2011 to 7.8 percent this year. Henderson and Union are both border counties on the Ohio River, and both saw significant decreases in their unemployment over the past year. Henderson fell from 9.3 to 7.6, while Union fell from 8.2 to 6.6, with dips in joblessness also noted in Muhlenberg, Webster and Ohio counties.

In addition to their coal economies, the western counties are similar in both demographics and population to their eastern counterparts. So, why are jobless rates in the eastern counties increasing while western coal counties are enjoying a decrease in theirs? For one, according to reports, coal in the Illinois Basin, where the western counties are located, is in higher demand than Appalachian coal because advances in filtration technology make burning their lower cost, higher sulfur coal more cost-effective.

But there are actually several more factors at play, according to Ron Crouch, director of research and statistics at the Office of Employment and Training in Frankfort, who noted the usual culprits of a higher demand for natural gas and a mild winter which is leading to a lesser overall demand for coal. But he also pointed to economic diversity.

“The western Kentucky economies are more diversified,” Crouch said.

When comparing employment trends in the eastern and western parts of the state, in some of the western coal counties, the coal industry has not remained the largest private employer over the years. In Hopkins County in 2010, which are the latest figures available from the state, four other private employment sectors offered more jobs than mining, including manufacturing, retail and health care.

In Henderson County, mining was the 11th largest employer in 2010, behind manufacturing, construction, finance and insurance, retail trade and professional services among others. The coal industry also wasn’t the largest employer in Muhlenberg, Ohio, Webster or Hancock counties.

Here in Perry County in 2010, prior to the current downturn, coal mining was by far the largest private employer with 2,294 jobs, outpacing retail trade jobs by nearly 500. There were no other sectors with more than 1,000 jobs in the county.

The same can be said for other eastern counties, including Knott, Leslie and Letcher. In other words, the western counties have been better suited to absorb job losses in the coal industry, whereas here in Eastern Kentucky, by and large coal mining has remained the main economic driver.

In Henderson County, where in 2009 just over 3.1 million tons of coal were produced (Leslie County produced about 3.6 million by comparison), that diversification began about two decades ago when the coal industry there suffered a bit of a downturn, noted Brad Schneider, president of the Henderson Chamber of Commerce.

“There was a concerted effort to pursue other types of businesses, especially industrial, and we had some success,” Schneider said.

Though manufacturing jobs in Henderson County significantly decreased over the last decade, by 2010 the county had managed to retain more than 4,100 jobs in that sector. Since then, Schneider noted, the local coal industry has taken hits due to the overall lack of demand for coal. Patriot Coal recently shut down a mine in the region, but there are positive signs in the Western Coalfields. Alliance Coal recently opened a mine in nearby Uniontown, and in the manufacturing sector the resurgence of the auto industry has led to the re-hiring of employees at local plants where car parts are made.

Counties like Henderson and Union also have their geography working for them. Henderson is located on the Ohio River, near other manufacturing towns like Evansville, In., and there are topographical benefits there as well. The land is flat, unlike the mountainous eastern region of the state.

But at the same time, Schneider noted that officials several years ago put money into recruiting other business to the region, forming an organization dedicated to doing just that, and saw some success doing it. But even so, he added, business leaders in the western part of the state also recognize the importance of the local coal industry and remain cautious that strict federal regulations like the ones coal operators in Eastern Kentucky are facing could one day make their way to the western part of the state.

What to do now

That some of western Kentucky’s coal counties have a more solid manufacturing sector over the eastern counties isn’t for a lack of effort from leaders in this region. Several years ago here in Perry County, for instance, local leaders formed a regional industrial park in Chavies that attracted several new businesses to the county, and by 2005 more than 750 manufacturing jobs were located here. By 2010, in the midst of the economic recession, that number had dwindled to 197.

Retail trade and health care remain strong sectors in Perry and other counties such as Pike and Floyd, but by and large, the economies in other coal counties like Knott, Leslie and Letcher are overwhelmingly propped up by the coal industry.

There has been a need for several years now a public discourse on how the Eastern Kentucky region is going to rebound in the event of a declining Appalachian coal market, said Jason Bailey, research and policy director for the Mountain Association for Community Economic Development (MACED) in Berea. And so far, he added, that conversation hasn’t happened.

“It’s really important that we have a public conversation about the economic future of the region, particularly now given what’s going on with coal,” Bailey said. “There doesn’t seem to be that conversation happening.”

There is no silver bullet that will replace the hundreds of coal jobs lost in the past few months, Bailey continued, but there is an opportunity to develop different strategies that could help further diversify the local economy.

“Entrepreneurship is something we have put a lot of effort into, and in and of itself is not a silver bullet, but there could be more local businesses providing local services, localizing more things that are now exported or that people go elsewhere to spend their money at,” he said.

If the federal health care reform law is fully upheld, Bailey said there could be local opportunities as a lot of resources will be put into primary and preventative care, and there will be more people on the Medicaid rolls who are basically paying customers for health services.

MACED has also put a lot of work into identifying opportunities in the area of the energy economy and how it’s changing, and also areas of energy efficiency and managing forest resources.

“There is not any one thing that in and of itself is going to replace coal, so it’s going to be a lot of different strategies, and that’s sort of what we work from,” Bailey said.

While manufacturing should also be a part of the overall strategy to diversify, the type of recruitment that Henderson County saw success with a couple decades ago hasn’t been as successful in Eastern Kentucky, largely because of a lack of access to transportation hubs and interstates, Bailey continued. Additionally, manufacturing has been in decline in recent years, with more jobs being shipped overseas, or productivity has gone up while the number of jobs have decreased.

“We’re not saying we shouldn’t have a manufacturing strategy,” he said. “But a lot has been put into that with less success.”

Bailey also touched on tourism in the region. Similar regions topographically in North Carolina or Virginia are enjoying a robust tourism industry, and there is room for growth in that sector in Eastern Kentucky.

There are other options moving forward, including the formation of a fund utilizing coal severance taxes for future development, but at present, while the eastern coal counties continue to face job loss, or reduced hours for those miners who have retained their jobs, Bailey noted that one of the most pressing issues is the formation of a regional strategy to build a diverse job market in Eastern Kentucky. But at present, he’s unaware of any such strategy.

“It seems like an really important time for us to have a conversation about what’s next,” he said. “We’ve been needing to have that conversation for a long time anyway.”