Thirty years ago, NH was a job creation machine. Between 1974 and 1984, NH jobs increased 55 percent, double the 25 percent growth rate experienced in New England and nationally in that same decade. In 1984, NH was the fastest growing state east of the Mississippi River, with the exception of Florida. Many in the Granite State wanted that phrase to be the state nickname, (but the acronym FGSEOTMRWTEOF just does not roll off the tongue well).
In 2014, NH’s job growth is, by comparison, anemic. Employment in the Granite State increased only 4 percent between 2004 and 2014, only slightly ahead of 3.5 percent experienced by New England as a whole and behind the national growth of 5.2 percent. As a nation, region and state, we are taking a long time to recover all of the jobs lost in the Great Recession.
Manufacturing’s Decline
Go back 30 years and 445,000 people worked in nonagricultural jobs in NH, with 123,000 of those jobs in the manufacturing sector. Today about 650,000 hold jobs in NH’s private and government sectors, with only 66,000 working in manufacturing, accounting for 12 percent of the state’s jobs today versus 28 percent in 1984. New Hampshire continues its transition from jobs dominated by blue collar professions to a knowledge and service based economy.
The evolution in technology during the past 30 years has dramatically reshaped NH’s economy. While there were computers in 1984, the Internet was barely in its infancy. The era of the personal computer was just starting. Instead of the Internet communications there were Bulletin Board Systems (BBS) that you could link to over phone lines, and 2400 baud modem was a tech leap at the time. America Online (AOL) would not start offering services until 1985.
Digital Equipment, NH’s second largest manufacturing employer in 1984 at 6,800 NH employees, was the leading manufacturer of mini-computers used by most medium-sized businesses that could not afford IBM’s bigger systems. But IBM, and then a small startup called Apple, was developing desktop computers that were destined to finally drive Digital Equipment out of business.
Of the largest manufacturing employers in NH in 1984, many no longer exist. Even those that do exist have half the number of employees compared to 30 years ago. Sanders Associates was the state’s largest manufacturing employer with more than 9,500 jobs in 1984. That company is now BAE Systems and employs about 4,000. Other large manufacturing employers at the time like James River Paper, Davidson Rubber, MPB Corporation and Nashua Corporation have all also gone out of business or been restructured.
The Rise of Tech and Health Care
Other sectors, though, have thrived in the Granite State. High-tech jobs are difficult to compare over 30 years because definitions of high-tech jobs changed in 2005. By one measure NH had about 52,000 high-tech jobs in 1984 (which includes jobs in the service sector like software and engineering), compared to about 63,000 high-tech jobs in 2014.
Health care was such a small part of the economy in 1984 that it was not standard practice to report health care jobs as a separate part of the service sector. In 2014, the largest employer in most of NH’s cities is the local hospital or integrated health care provider. Even in Coos County, which has traditionally been driven by manufacturing, health care is a larger contributor to economic activity in 2014 than manufacturing.
In 1984, NH spent about $1.4 billion annually on health care, amounting to less than 10 percent of NH’s GDP. Thirty years later annual health care spending in the state has increased tenfold to $15.4 billion annually, accounting for more than 20 percent of NH’s GDP.
Critical Mass.
South of NH, the “Massachusetts Miracle” was running on all cylinders in 1984. The providential combination of academic and financial forces in the Boston area made it an ideal location for the emerging high-tech industry and also bolstered the area`s leadership as a regional center for financial, educational and health services. That expansion benefited NH as well as high-tech companies looking for a low-cost, business-friendly environment moved across the border into the Granite State.
New Hampshire endured 20,000 people moving into the state annually, straining housing and transportation infrastructure. However, these new residents also added to state wealth. Although many of the restrictive zoning ordinances in place today were enacted in the early 1980s as a response to the rapid growth in population and housing construction, the benefit NH received from in-migration cannot be over emphasized.
First the flow of migrants fueled a boom in the housing industry. Looking back, 1984 might have been nicknamed the year of the condo, as those residences sprouted everywhere. New Hampshire was building housing at the rate of 10,000 units per year, and by 1987 doubled that output to 20,000 units per year. By comparison, NH will build a little over 3,000 new housing units this year.
The median home selling price in NH was just rising above $100,000 in 1984, on its way to $165,300 by 1990. House prices in NH fell during the recessions in the early 1990s and after 2007. In 2014, the median home selling price in NH weighs in at about $225,000.
Another benefit from in-migration was people moving into the Granite State were better educated and had higher incomes than NH’s early 1980s native-born residents. Even today the data suggests that the more education you have, the more likely that you were born in a state other than NH.
Wealth in the state grew much faster than the region and the nation as well. In 1974 NH income per capita was 8 percent below the national average but by 1984 state income per capita had risen to 8 percent above the national average. In 2014, NH is still a wealthy state, with income per capita 13 percent above the national average.
Budget and the Environment
While the state budget has grown substantially since 1984, the business share of state tax revenue has changed little. In 1984 the state collected about $400 million annually in unrestricted revenue, with about one-quarter of that amount coming from the Business Profits Tax. Ten years later the state enacted the Business Enterprise Tax, and in 2000 the state enacted the statewide property tax to help fund the education trust fund. Today the state collects about $2.3 billion in revenue each year, and business taxes still represent about one-quarter of state revenue.
New Hampshire’s environment has improved. The state still retains acres of wooded land, national forests and state parks. New Hampshire’s air and water are cleaner than in the 1980s despite having 300,000 more people in the state. And acid rain, which became a household term in the 1980s when unchecked emissions from industry and motor vehicles were blamed for causing environmental damage, has been beaten back to the point where it is no longer the threat to NH’s lakes and buildings.
New Hampshire has changed quite a bit in the last three decades. Manufacturing employment declined, while many new jobs were added in the well paid professional business services and health care sectors. That restructuring probably explains why NH’s relative per capita income ranking did not change in the last 30 years. The state endured the Great Recession and the not-so-great recovery. While NH still excels at quality of life measurements, like the recent number one state ranking from the Organization for Economic Cooperation and Development, NH’s ability to bounce back from economic downturns appears to have diminished, creating new challenges for the state.
New Hampshire in the past has relied on high levels of in-migration into the state to fuel economic growth. However that migration into the state has all but stopped, which in turn implies a different path for the state in the next 30 years compared to the past three decades. Simply promoting the results of state-by-state surveys where NH ranks well, like having a low tax environment or a high quality of life, may fall short of creating future economic growth.
Dennis Delay is the economist at the NH Center for Public Policy Studies, an independent, nonpartisan organization in Concord that pursues research on public policy matters. Delay is also the NH forecast manager for the New England Economic Partnership, a nonprofit providing objective economic analyses and forecasts. He can be reached at ddelay @ nhpolicy.org.