NEW HAMPSHIRE ECONOMIC OUTLOOK

Ross Gittell, James R Carter Professor, UNH

Outlook Overview: The Context for discussion of the NH economy – The US Outlook

In 2010 the national economy started to recover and then in the Spring and Summer lost its momentum… with debt troubles in Europe, fading stimulus spending and caution by businesses to hire and consumers to spend… so a slow recovery

Signs of improving US economy for 2011 --- strong corporate balance sheets, export growth, federal tax and economic stimulus “resolution”, Fed Reserve’s actions to keep interest rates low,  improved stock market

Threats – international financial markets (will debt troubles spread in Europe to Spain and Portugal and elsewhere), rising energy prices, gridlock in DC, state and local fiscal deficits, potential housing market destabilization

How well (or poorly) NH economy performs in 2011 depends largely on National and Global economies and that is why I remain cautiously optimistic about the NH economy in 2011

Outlook Overview: New Hampshire

New Hampshire less of a decline than US average this recession and stronger recovery than US and one of top 5 states, best economy in Northeast, 4th lowest unemployment rate in nation, more than 4 percentage points below US average

NH well diversified economy.. growing professional & business services, growing “green” jobs, improving leisure and hospitality, low unemployment, high median and average income, relatively low income disparity.. In top ten on many quality of life and health of population measures

Opportunity.. make sure NH has skilled labor supply and other fundamentals to help established and entrepreneurial ventures grow during recovery period

NH can lead New England economy recovery and have one of have one of best performing economies in the nation

Threats to NH – trying to “fix” what is not broken… NH economy is one of strongest economies in the nation.. Reasons include skill and education of workforce, relative (to nearby and competitor) states low costs, quality of life and character of our state and communities.. Should think how new legislation will affect this….

NH has had stronger growth than Bordering States and US average since 1980. Key to long term growth is differential growth coming out of recessions .. Will this happen again?

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NH and Border States & US Total Employment Percent Change 1980-2009

MAMENHVTUS

NH and New England Economic Outlook: What happened??

This recession unlike previous recessions, New England and NH employment declines less than US decline in percentage terms

This was not the first Great Recession in NH and New England. Late 1980s- early 1990s recession, had about double the percentage drop in employment (10 percent compared to less than 5 percent)

And the recovery from this recession started …. sooner and stronger in NH and the region than in US

Unemployment peaked in the NH 2010-Q1 at 7% (up from 3.4% in 2008-Q1).. But well below the US peak close to 10%

Across New England Percentage Decline Total Employment Peak-to-Trough. NH & MA declines well below US average

NE CT MA ME NH RI VT US

-10.0%

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-4.8%-5.2%

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Employment % changes Peak-to-Trough during Recession, US, NE, NH. Real estate related industries and manufacturing had most pronounced percent declines

Total Const. Manu. Trade Info FinanceProf. and Business

Ed. and Health

Leisure and

Hosp. High Tech

NE % -5.2% -29.6% -17.2% -7.9% -8.2% -9.2% -7.8% 3.3% -3.3% -6.3%

US % -6.1% -26.1% -19.5% -8.0% -9.9% -8.2% -9.1% 3.7% -3.8% -4.6%

NH % -4.6% -30.6% -19.0% -6.5% -2.7% -13.0% -6.4% -0.4% -4.4% -9.7%

Housing Prices Peak-to-Trough. Median Price Percent decline… NE rate of decline below US average but still significant. High variance across region. RI steepest decline, VT least decline

NE CT MA ME NH RI VT US

-45.0%

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-34.7%

Peak Unemployment Rate NH Lowest in Region, Well below US peak. RI only state to have rate above US

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NEEP NH Forecast Overview

The NEEP forecast is for the NH economy to lead the region in growth. Growth will be above the US average through 2012

But.. Currently the nation is struggling to sustain recovery …

Double-dip in housing prices expected to continue in US and NH until early 2012

The full recovery in NH in total employment back to pre-recession peak (2008-Q1) not expected until 2012-Q2 .. this is year before recovery in US is expected 2013-Q2

NH unemployment rate is expected to slowly decline .. but still be above pre-recession level at end of forecast period 2014-Q2

Total Employment annualized % chg 2006 to mid-2014. NH leads NE but growth not expected to be above 2% until 2011-Q3. NH growth above US till 2013

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% Change Total Employment Trough-End of Forecast NH only state in region expected to have employment growth above US average

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11.6%

6.8% 6.7%

9.8%

Why NH’s relatively strong recovery?

Significantly fewer layoffs and business closings in 2010 than 2009 and at the same time there is some modest growth in employment across different sectors. 

The sector that is growing the most on a percentage change basis is professional and business services which is a fairly broad category that includes engineering services, accounting and also computer and software services. 

NH benefits relative to other states from having a well diversified economy, low costs, and well educated population

And NH has had less of a housing market and price decline than many other states, and less than in early 1990s in NH

Trough-to-2014 Q2. NH growth % change basis expected to be highest in Prof & Bus Services, Construction, Leisure & Hospitality, High Tech and Health Services.

Median Housing Price Trough to End of Forecast (2014) “Recovery” of NH Median Price is expected to remain 11% below peak

NE CT MA ME NH RI VT US0.0%

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30.0%

20.9%20.1%

24.7%

13.8%14.7%

20.2%

11.9%

15.2%

Fiscal Shadow Over the Economy

The dark shadow over the economic recovery are the looming federal and state fiscal crises

It will first hit government sector …1% decline in NH expected .. from now till mid-2011 loss of nearly 1,000 jobs

And it will have impact on all sectors …. and public services and infrastructure

New Hampshire Looking Forward How can the state come out of

this past recession strong again??

NEW HAMPSHIRE IN THE INNOVATION ECONOMY

NH Science & Technology

• Overall, New Hampshire ranks well in the science and technology indicators and this has contributed to strong economic performance over the last three decades

• Among the toolkit variables, New Hampshire is at the median or better on over two-thirds of 60 indicators This is significant and impressive. There are many strengths and highlights in the innovation system in the state.

• The state ranks among the top 20 percent (or top 10 of 50 states) on one-quarter of the inputs.

High Tech Intensity and Per Capita Income – the relationship across 50 states .. NH in the leading group

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New Hampshire’s innovation economy is being challenged by increasing competition from other states and internationally

1. High-technology employment in NH is lower than it was in the early 1990s

2. NH has been steadily dropping in high-technology concentration since the mid-1990s (ranked 9th in 2008 compared to 4th in 1995)

3. During the “technology bust” in the early 2000s, NH was the worst performing state in employment percentage change

4. Recovery of NH’s high-technology industry since the bust has been relatively weak and below the median of states from 2003-2008

Because of New Hampshire’s S&T strengths, improving its innovation system will involve building on the state’s existing and proven strengths

SWOT Analysis – Summary NH Strengths

Among the New England states, only Massachusetts has a stronger innovation system than NH. NH’s greatest innovation system strengths include:1. Existing high-technology industry base 2. Skilled general workforce (not S&T specific) 3. Growing R&D strength of the academic sector4. Increased industry investment in R&D5. A more supportive funding environment for

high-technology start-ups than is generally appreciated

SWOT Analysis – Summary Weaknesses

The most glaring weaknesses for the state are: Relatively low concentration of start-up and

high-growth (“gazelle”) companies High dependence on corporate and business

taxes Tax “Trap” when start-ups are growing, adding

employment, increasing financing but not profitable

Underdeveloped university technology commercialization (e.g., could play a greater role in technology-based economic development)

Underdeveloped S&T-specific workforce

US Economy at critical point NH Economy strong relative to US average and most other

states NH economic outlook highly dependent on US economic

performance The trend in NH is positive … but it will be difficult to

sustain if there is continued weakness in the national economy

Deficits and fiscal challenges will most likely put a “drag” on economic recovery

Slow growth period in NH and nation most likely… NH can enhance its growth and the growth of well-paying

employment opportunities by building on existing innovation system strengths

Summary