Narrative: II. a. 1. A.

Economic and Workforce Analysis (A) Economic Analysis The U.S. Virgin Islands continues to recover from the widespread devastation brought about by two back to back category 5 hurricanes that severely impacted the Territory in September 2017. Prior to the storms, the local economy had been making gradual strides towards stability, with small businesses beginning to expand their product and their workforce; with infrastructure projects on roadways and harbors projected to start within a few months; and with anticipation of the oil refinery, once the top private employer in the Virgin Islands and now an oil storage facility, about to announce its reopening.

Over the past 12 months our labor market has experienced contraction related to the impact of the storms. The retail and hospitality sectors which are our core economic drivers have been impacted and continue to offset the growth we are experiencing in 2018. Year to date both sectors combined are down by -26.7%. However, with the recovery efforts in both the private and public sector, the labor market is anticipated to see growth in the coming quarters of 2019 and 2020. More specifically in the construction sector and by the 4th quarter of 2019 the manufacturing sector should see employment gains related to refining operations. • There have already been gains in workforce activity as construction openings have come on line since November of 2017 and continue to rise with a 40.4% increase from Aug 2017 to August 2018. • In the manufacturing sector occupations that were no longer in demand will return to the labor market such as welders, pipefitters, erectors, and millwrights — all associated with refining operations. • The return of the tourist market is assured but will be slower to come back to the market; however it is anticipated that the retail and hotel inventory will move up compared to the 2018 season. • Other signs of positive labor economic activity are apparent with the decline in the amount of initial filings for unemployment insurance which averaged 130 year to date, compared with 495 in 2017, with the peak occurring in October 2017 immediately after the Hurricanes. • In addition, based on federal awards, upwards of five million dollars will be made available from other sources to assist in worker training and job activity for Virgin Islanders. As we move forward into the last quarter of 2018 and based on the activity occurring in the economy, our employment is anticipated to reach levels prior to the storm and rise higher as the refining projects and other private sector projects impact the labor market. Current Employment Employment in the Virgin Islands during the 2017 and first half of 2018 continued to see the impact of the hurricanes on the current employment data (measure of persons on payrolls). In 2017 employment averaged 37,553 and dropped to an average of 35,844 at the third quarter of 2018 (see table 1). Construction was the major growth sector in the latter part of 2017 and continued to climb in 2018 as result of the recovery efforts from the storms. This increase occurred in Oct 2017 at 1,863 and has continued. From October 2017 through July 2018 the sector has increased by 25% (see table 3). The hardest hit sectors on an over the year basis were in the retail and leisure sectors wherein many establishments and 60% of the major accommodation business were closed or at minimal operating capacity. Although the construction sector resulted in increases during the period the offsets in the downturn in other sectors still kept employment count low. As of July 2018 the retail, and leisure, still reflect the offline factors in addition to the cyclical slowdown that occurred during this slower than normal tourism season (see Table 2). • On the total employment year over July 2017-2018 employment estimates were -2,089. • Construction employment was up by 627 or roughly 25% higher than 2017 estimates. • Total private sector employment also continued to be impacted as a result of the overall economic slowdown in all sectors of the Territory. • Looking at the sectors that establish our core tourism related employment, roughly 2,083 have exited the economy compared to the 2017 data. Industry Employment Industry employment in the 1st quarter of 2018 aligns with the employment situation and reflects increases in the construction sector. This sector is expected to be sustained at this level throughout the year and into the 2nd quarter of 2019. The continued recovery and the reestablishment of refining petroleum products are the main drivers in this sector. The weak sectors continues to be the leisure and hospitality, and retail which have been down from the 4th quarter of 2017 into 3rd quarter of 2018 as a direct result of tourism related establishments offline due to the impact of the storms. This sector is expected to remain weak straight through 2018 — 2019. Establishments in the Virgin Islands paid out $1,513,847,665 in total wages in 2017 (see table 4). • The private sector paid $935,553,040 or 61.80% o The leisure and hospitality total wages were at 18.85% representing the highest sector in private sector ($176,394,171) although impacted by storms. o The retail sector total wages were $135,000,426 or 14.43% of private sector wages. • The public sector total wages were $578,294,625 at 38.20%. o The Federal government at $71,098,323. o The Local government at $507,196,302. The firm size (count of employee within an establishment) reflects that the Virgin Islands economy is primarily based on small to medium size businesses. Approximately 1,252 of 3,121 firms at the end of 2017 employed 1-9 employees (see table 5). In 2017, a -13% decrease in the number of firms were apparent as a result of the storms, limited energy, communication, and impacted infrastructure, and weak economic activity occurring at year end. The 1-4 employee firms ended -103 less in 4th quarter compared to 1st quarter of 2017. In addition all other size firms sustained losses as entities remained offline or simply dissolved (see table 6).