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ARI SHAPIRO, host:

Well, here's some good economic news for you this morning from a place that may come as a surprise. The state of West Virginia often battles dismal rankings in statistical categories like education and poverty. Yet Morgantown, West Virginia boasts of the nation's lowest unemployment rate; its just 2.7%. That's not a fluke either, as Emily Corio of West Virginia Public Broadcasting reports.

EMILY CORIO: Mountaintop removal mining is a hot topic in West Virginia, but in one part of the state mountains are moved for a different purpose.

(Soundbite of bulldozers)

CORIO: Bulldozers carve out the Allegheny foothills for condos and shopping malls in Morgantown. The city is home to West Virginia University, where enrollment has grown to nearly 30,000, putting a big demand on housing. Inside this 1970s apartment building, workers are busy renovating the place. Developer Chris Ilardi is the owner.

Mr. CHRIS ILARDI(Developer): Morgantown definitely is doing better than the rest of the state, but the state as a whole is still doing better than as the rest of the country.

CORIO: Five years ago, the government classified Morgantown as a metropolitan area. National developers then flooded into the market and the population increased to more than 87,000 people. Morgantown Mayor Ron Justice says it's difficult to relate to the hardships other places in the nation face now because the local economy is so strong. But then he remembers what happened to his town 15 years ago.

Mayor RON JUSTICE (Morgantown, West Virginia): Sterling Faucet, a large faucet company in the area and nationally, moved from Morgantown to Chicago. We had another company, Morgan Shirt Factory, that closed, and a lot of that went to outsourcing overseas and other areas of the United States.

CORIO: When those businesses closed and the mining industry slowed, several thousand jobs disappeared and Morgantown had to reinvent its job market. Justice says that's paid off. Today the largest manufacturer is a pharmaceutical company, and most people work in education or healthcare.

Mayor JUSTICE: We looked at the technology to replace some of those manufacturing jobs, as well as the educational and healthcare components in our community. And as a result, you know, we've seen a big net growth from that period on.

CORIO: While more than 1.3 million people lost jobs nationwide last year, Morgantown created 1,000 jobs, and it's West Virginia's fastest growing economy. But there are downsides. It has the highest cost of living in the state. Last year the median home price was $190,000, and it's even higher so far this year. But West Virginia University economist George Hammond says this all could change as the recession continues.

Professor GEORGE HAMMOND (West Virginia University): No local economy is an economic island. We all depend on the economic growth of our trading partners, and Morgantown, even as diversified and dynamic as it is, still faces that fundamental fact.

CORIO: Coal mining and natural gas drilling helped West Virginia's economy last year, but the energy sector has slowed. Hammond also predicts fewer construction projects, which might help employers like developer Chris Ilardi.

Mr. ILARDI: When you're just looking for laborers, it's still difficult with that low unemployment, and it's hard work. When you only have 2.7 percent looking for a job, they're not necessarily looking for a hard job.

CORIO: And local officials are wary of another problem. They are monitoring new home construction. They don't want supply to outweigh demand, which has contributed to declining home values in other parts of the country.

For NPR News I'm Emily Corio in Morgantown, West Virginia.

SHAPIRO: You can see a list of the metro areas with the lowest unemployment rates in the country at npr.org.

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