New Hampshire’s economy has grown at a healthy clip since 2014. After tepid growth between 2011 and 2013, real gross state product, the inflation-adjusted measure of the size of NH’s economy, returned to near pre-recession growth levels in 2014 and sustained those levels in 2015 and 2016. Preliminary data suggests it continued to grow in 2017. But not all parts of the economy have fared well during the long recovery from the recession, and NH faces challenges that could limit future prosperity.
Household Income Stagnates
Personal income in NH grew by 3.5 percent between 2016 and 2017, the fastest in New England, exceeding the next-fastest growing New England state, Massachusetts, by 0.2 percent and the national average by 0.4 percent, according to preliminary estimates. Overall income growth is a good sign, but it does not necessarily indicate growing incomes for all workers.
Inflation-adjusted median household income remained about where it was prior to the recession in 2016, at $70,936, after dropping from a 2007 high of $72,081 and failing to rebound between 2008 and 2014, reaching a low of $65,637 in 2012. Higher median household income growth would indicate better conditions throughout the economy.
Contributing to that is the three sectors with highest job growth in NH between 2008 and 2016, which all pay below the private sector average weekly wage for 2016, of $1,043. The sector that created the largest number of jobs—more than 8,500—was health care and social assistance. That paid an average wage of $1,022. Accommodation and food services generated the third-largest number of jobs—about 5,400—with an average weekly wage of only $387. Although the finance and insurance industry sector’s economic output grew the most of any sector, it added a little over 1,200 jobs during this period.
With the fastest job growth in lower-wage sectors, even those employed may struggle to earn enough income to meet basic needs, let alone save for the future. As of 2016, about as many people remained in poverty, defined then as about $12,000 per year for a single person and $19,000 for a three-person household, as were in poverty prior to the recession, suggesting limited income growth. Despite having the lowest poverty rate in the country at 7.3 percent, about as many people remained in poverty in NH as lived in Concord, Laconia, Lebanon, and Portsmouth combined. In 2016, about a quarter of a million people in the state lived below twice the poverty threshold.
Another area of concern is a potential slowing in the number of jobs being added in the state. While most months between spring 2015 and fall 2016 saw over 10,000 more jobs than the same month in the prior year, data from 2017 show considerably smaller increases, suggesting fewer employees are being hired. Job growth may be slowing not due to lack of demand for workers, but due to labor force constraints. The state’s unemployment rate has been below 3 percent since the end of 2015, with a slowly shrinking quantity of unemployed workers since that time. The number of NH residents working or looking for work is, as of early 2018, only slightly higher than it was in early 2009, its peak prior to the end of the recession.
Labor force constraints are not unique to NH, but they are likely more of a challenge here than in much of the country. The 2017 ratio of employees to those eligible to work is higher in NH at 66.1 percent than for the nation overall at 60.1 percent, but it was only half a percent up from its lowest point following the recession. The same figure for the United States has grown by more than three times that amount since its 2011 low.
Removing Barriers to Growth
Aging demographics will likely lead to a smaller proportion of residents participating in the workforce as more retire, but there are other factors that create constraints. Limited housing presents challenges not only for growing the workforce, but for helping more Granite Staters become upwardly mobile. Rising housing costs reduce the ability of those in or near poverty to invest in themselves and their families, and may lead to higher childcare and transportation costs resulting from additional work hours or longer commutes.
Although many aspects of the economy are outside the control of policymakers, state policy can help reduce and remove barriers to future growth by investing in the individuals and the infrastructure, such as housing, that help increase productivity and lead to a better quality of life for all residents. With the economy growing, now is a good time to make these investments.
Phil Sletten is a policy analyst at the NH Fiscal Policy Institute, an independent nonprofit, nonpartisan public policy research organization based in Concord. Learn more at nhfpi.org.