Economic Outlook for NH is Bright

The NH economy is in great shape. Businesses are adding workers at a pace not seen since 2001, rivaling Massachusetts for the fastest growing private sector within New England.

At a meeting of the New England Economic Partnership held at the Federal Reserve Bank of Boston today, economist Greg Bird shared a positive outlook on the NH economy.

“Unemployment has steadily declined and is nearing record low levels, signaling that nearly any New Hampshire resident who is willing and able can likely find work,” says Bird, who is with the NH Center for Public Policy Studies.

Bird notes, however, that signs of healthy economic progress are not being experienced throughout the state. New Hampshire cities and towns closely linked to the Boston metro economy are thriving but many parts of rural NH (Belknap, Carroll, Cheshire, Coos, Grafton, and Sullivan counties) have recovered very little, if at all, from the Great Recession of 2008-2009. 

Bird notes that the NH economy should continue to make strides in 2017.

With initial jobless claims (a proxy measure for layoffs) steadily declining and at an extraordinarily low level, the financial condition of NH businesses appears solid.

Additionally, positive economic indicators including consumer confidence, median household income, unemployment, state meals and rooms tax receipts and growth in residential housing permits signal that household finances are healthy and improving.

In NH, every private industry is experiencing growth. In particular, the construction, manufacturing, retail trade, financial services, and transportation/ warehousing industries appear in significantly better health within the Granite State than the rest of New England

This combination of sustained labor demand from businesses and higher wages suggests that NH residents’ wealth is increasing. This is substantiated by trends in state tax receipts, Bird says.

Revenue from the state’s meals and rooms tax and real estate transfer tax have grown at solid rates for the good part of four years, he says, and the state’s two business taxes (one on corporate income and the other on compensation, interest, and dividends paid out) combined to grow by a robust 16 percent in fiscal year 2016 and appear on pace for a solid performance in fiscal year 2017, bucking national trends. 

There is a cloud on the horizon however. “The New Hampshire labor market is tight now, and businesses will have even more difficulty in finding employees over the next few years,” Bird cautions, explaining that the labor shortage will constrain economic growth.

Whether in is construction, manufacturing, healthcare, or hospitality, every industry within the Granite State is currently finding it difficult to fill open job slots, due in part to low unemployment and to people currently not participating in the labor force not re-engaging.

In addition, Bird says, with many workers in their late 50s and early 60s, the economy will experience a wave of people who will either partially or totally disengage from the workforce.

This withdrawal is not expected to be offset by sufficient number of 20-somethings entering the labor force, he says. Population projections from the State of NH Office of Energy and Planning indicate that the state’s 20 to 64-year-old population will shrink for the foreseeable future.

Consequently, outside of a significant pickup in attracting out-of-state working age people to move and work here or convincing many current Granite Staters who work out-of-state to work back home, NH employers will essentially run out of people to hire, Bird says.

As a result, Bird forecasts that growth in the NH economy is anticipated to grind to a halt in 2019 and 2020.