MARTINSBURG, W.VA. -- To the residents of the Eastern Panhandle, the arm of West Virginia wedged deeply between Virginia and Maryland, the problems of the rest of this state seem distant and irrelevant.

While West Virginia is losing population at the fastest rate in the nation, the easternmost counties are scrambling to keep up with double-digit growth fueled by the rapidly expanding outer boundaries of metropolitan Washington.

"As much as we try to become philosophically enjoined with the rest of the state, I don't think we really do," said Tony Senecal, mayor of Martinsburg, a thriving community that has become an economic hub in the Eastern Panhandle.

In this part of the state, where one-quarter of the work force commutes nearly two hours into the D.C. area, shopkeepers boast of burgeoning sales, and local officials worry about whether they can build roads and sewers fast enough.

But their counterparts across the Allegheny Mountains face unemployment rates among the highest in the nation and are trying to develop strategies to keep the state's most precious resource, its young people, from leaving.

"Our problems are so vastly different from the balance of the state," said Ken Green, executive director of the Eastern Panhandle Regional Planning and Development Council. "It's hard for the employees of the state government in Charleston to comprehend or even consider growth as a problem when they're considering problems of high unemployment and declining population."

The irony that a piece of West Virginia is booming while the rest of the state bleeds was underscored two weeks ago when the 1990 census delivered the bleak figures: The state had lost 7.6 percent of its people over the past decade.

West Virginia's population has fallen in three of the past four decades, down from a peak of slightly more than 2 million in 1950 to 1.8 million today. Only three other states lost population during the 1980s -- Iowa, Wyoming and North Dakota -- and no states have suffered losses comparable to those in West Virginia.

Piedmont, a small town buried in the mountainous central crook along the Maryland border, is typical of towns across most of the state. Even the Christmas decorations look tired.

Both schools have closed, the main street is peppered with empty buildings, and the population has fallen from 2,300 to about 900 in the past 30 years.

"It was a real lively town when I was growing up," said Wanda Stewart, 37, who was born in Piedmont and is raising three children there. "We used to have a skating rink where all the kids hung out. Our school was here. It's gone now. The stores are gone. It's like a ghost town."

Now, young people congregate in the afternoons around two pinball machines and a set of video games at Tri-Town News, a mom-and-pop variety store that still does its best business in cigarettes and tobacco.

By contrast to towns like Piedmont and most West Virginian counties, preliminary census figures showed dramatic population increases in the Eastern Panhandle: 26 percent in Berkeley County, 18 percent in Jefferson County and 12 percent in Morgan County.

To a large extent, that growth is the outermost ripple of the Washington area's economic and residential expansion. Construction workers and accountants alike trek the 80 miles or so from communities such as Harpers Ferry and Martinsburg to work in metropolitan Washington.

The draw in the Eastern Panhandle, officials said, is both quality of life and cheaper prices: The average home sells for $75,434, compared to $167,000 in Montgomery County and $170,800 in Loudoun County, according to the Eastern Panhandle Regional Economic and Development Council.

In the past few years, Berkeley, Jefferson and Morgan counties also have attracted an array of new employers from Arcata Graphics, a national publishing company, to discount outlet centers and the U.S. Coast Guard's computer center.

State figures show that in Berkeley County alone, the civilian labor force has grown from 19,860 a decade ago to 25,000.

For those who have spent their lives in the area, the change is stunning but welcome.

"Before, you could walk the street and you knew everybody. You knew everybody's business," said George Karos, owner of Patterson's Drug Store in Martinsburg and a member of the city council.

Now, new customers come in daily and marvel at the antique soda fountain and green marble lunch counter. Karos still serves "Jo-Jo's Sundaes," famous here for decades. Still, he said, "it's no longer the sleepy little town it used to be."

Martinsburg Mayor Senecal said that the panhandle's proximity to Baltimore, Washington and major highways means that "the growth is going to come here in spite of anything we do." But he also cited the problems that have accompanied that growth, from crime to traffic congestion along Rte. 9.

Geography underlies the peculiar pattern of economic fate in this state. Originally part of Virginia, West Virginia broke away when Virginia seceded from the Union in 1861.

The Eastern Panhandle, created for its strategic military value, is separated by a day's drive and a stretch of mountains and valleys from the political and geographic center of West Virginia.

People here remark often that the Eastern Panhandle is closer to at least five other capitals than it is to Charleston.

"You look at the weather map on Charleston's {local television broadcasts}, and the Eastern Panhandle doesn't even show," said Senecal. "They cut us right off."

The distance, both physical and psychological, is felt on both sides.

"There's a schizophrenia," said Joe Bob Goodwin, an attorney in Charleston and former chairman of the state's Democratic Party. "There are regional differences, and it's been difficult to bring the state together. It's a long way from here in southern West Virginia to the Eastern Panhandle."

The problems that resonate so deeply in the southern and western reaches of the state are not new, nor are they easily solved. More than 34,000 mining jobs have been eliminated over the past decade, cutting deeply into a work force that depended heavily on mining.

The public schools have lost nearly 56,000 students since 1979. And as young people continue to move away to find jobs, the state's proportion of elderly has grown to nearly 15 percent, among the highest in the nation.

"West Virginians are professionals in dealing with hard times," said Goodwin. "We've been doing it since the Civil War."

Charleston Gazette editor Don March said that in the '50s, Rte. 21, the highway followed by young people leaving West Virginia to find industrial jobs in Akron, Ohio, became known as one of the "3-Rs:" reading, 'riting and Rte. 21, a sad statement on the ingredients for success.

Now, Marsh said the pathway of choice has become Interstate 77, known as "hillbilly highway," to Charlotte, N.C. It is the route to low-wage service jobs in the South.

"Everything is just kind of deadened around here," Marsh said. "We're a Third World state, a Third World economy."

For as long as the state has been hurting, its political leaders have been promoting its virtues -- rural beauty, a friendly, proud populace and an inexpensive cost of living -- and predicting recovery.

George Manahan, spokesman for Gov. Gaston Caperton (D), cites figures showing West Virginia's economy grew faster than other states in the southeast last year and that employment has risen.

"The '80s were a decade of despair in West Virginia," he said. But despite the population losses, "we feel as if we've turned the corner."

Marsh is skeptical: "I've spent a professional lifetime hearing politicians say we're now on the road to recovery."

But on the subject of the state's beauty and pleasures, Marsh echoes the promotional brochures. And he wonders if there is only bad news in the new population statistics.

"What the hell's wrong with not having a lot of people?"