Business Roundtable: What makes the Seacoast economy tick?
Friday, April 24, 2009NHBR’s editors recently met in Portsmouth with Seacoast area businesspeople to get their take on how the region’s economy is faring during the recession, and what their expectations are for the future. The participants were: •Christine Davis, executive director, Women’s Business Center, Portsmouth •Brian Gottlob, economist and principal, PolEcon Research, Dover •Janet Hand, executive vice president, Profile Bank, Rochester, and chairman of the board, Greater Rochester Chamber of Commerce •Dan Innis, dean, Whittemore School of Business and Economics at the University of New Hampshire, Durham •Dan Morrison, president and chief executive, Optima Bank & Trust, Portsmouth •Kirt Schuman, executive director, Greater Dover Chamber of Commerce •Tom Sedoric, investment adviser, PortsmouthQ. How does the economy seem to be doing on the Seacoast?Brian Gottlob: When we’re talking about the Seacoast I think of it as two different sections. There’s Portsmouth, and then the Rochester-Dover area, and they really are different. The Portsmouth portion has taken some lumps in the financial services area in particular in the last year or so. About 800 jobs or so have been lost. In contrast, in the Rochester-Dover area, Liberty Mutual is doing quite well. I think it’s dynamic – we’re shedding, we’re adding. Our net over the last year or so is that we’ve lost more than we’ve gained, and some of that reflects what’s going on in the national economy. But it’s a dynamic region. It’s an attractive region. It’s a region that, I think once the national economy begins to stabilize, will continue to prosper. This is an area that attracts individuals. People like to move here. We’re not getting that migration now, but I am very optimistic about the Seacoast over the long term. Dan Morrison: Just to follow up on that, the unemployment rate has gone up some, but it’s still substantially lower than the national rate. As for financial services, there has been some consolidation and mergers, but we just started Optima Bank & Trust a year ago, and we’re growing quite quickly. We’re hiring people. We’re giving new loans every day and we’re helping businesses survive. Janet Hand: Lots of times New Hampshire lags behind the rest of the nation. We hear about everything that is occurring, and it seems like we’re a little slower getting in to it. I don’t think we sometimes get into it the way other states do. We’re starting to see some effects as far as the banking industry. I know that last year we had to change some of our advertising campaigns to let people know we do have money to lend, because the media is out there saying the banks don’t have any money left so don’t bother trying to get a loan because you can’t get one. It’s very hard when a national picture is painted for financial institutions. Tom Sedoric: I think the silver lining on the economy is that New Hampshire has this Yankee mentality. Sure, there are budgetary problems, the pension system is underfunded, we’re still fighting about our school systems. But relative to California and New York and others I think we’re somewhat insulated. I am worried about our dependence on financial services. I think financial services is the overall employer and is going to shrink back to close to 12 percent nationally and historically it’s been 6 percent. It’s not quite as high here, but it’s still high. Dan Innis: We’ve seen a lot of entrepreneurs around here. I think that’s always been the case. You have the ocean, the mountains are an hour away, Boston is an hour away. You have a relatively attractive downtown section and tax structure. We all know that the in-migration of empty-nesters from Connecticut, Massachusetts and New York will continue, and businesses that service them will continue to grow, health care being one of them. Christine Davis: I think the state in general is diverse, that’s what’s helping New Hampshire as a whole. New Hampshire is an entrepreneurial state, and I think that helps us. I also think certain industries are going to get hurt more than others. I’m worried about the nonprofits. There’s so many in the state, and if companies are hurt even just a little they’re going to have to cut back on their charitable donations. One of the stats I heard just a little while ago was that as many as one third of nonprofits will either go under or merge. Hand: I work in Rochester. I spend a lot of time in Portsmouth — all of the theaters and arts, Strawberry Banke and their recent lay offs. They have just all gotten to the point that we would hate to lose some of these things. All the reasons on why people moved here was so they didn’t have to go to Boston for their entertainment. I don’t know what the answer is as far as we can keep them alive during these times.Q. When we’re talking about amenities, one of the biggest in the area is the University of New Hampshire, in particular the Whittemore School.Innis: There’s an obvious relationship with the economy — the number of students who graduate each year and are out there looking for employment. A lot of them want to stay in New Hampshire if they can find employment. I think a reason we lose many of the folks is they can’t find that entry-level position that works for them. But a big chunk of them do stay here. We reach out to companies in a lot of ways, through student projects, faculty that might do consulting with companies in the region. The part-time MBA program in particular is helpful to companies. And we do a lot of executive development, helping companies in the region further educate the people that are with them, which adds value to the company and helps the people that work there feel appreciated. The university employs thousands of people, and the impact is really tremendous. The reach of the university is enormous in terms of what we contribute. I think sometimes we forget about that here in Portsmouth because it’s sitting there in Durham and we just don’t see it and think about it. The reach is really quite extensive. Gottlob: I think one of the things that really separates the region is the amenities that are here, but I want to make the point that we have to be careful. It’s not just the beauty and the culture, because you can be York County, Maine, a beautiful place that has attracted all kinds of people, but they haven’t attracted jobs. There has to be the business climate. Kirt Schuman: In Dover, our economic development efforts, our community development efforts, don’t openly acknowledge that we have the large university with talent six miles away. That’s a resource that many communities throughout the country feel so fortunate to have, to be close to such a major university, and it’s just not integrated in the local level in the planning and development. Innis: I think the whole range of education is important — the community colleges are important. It’s bigger than just UNH. Hand: In Rochester, I’m involved in a program at the technology center at Spaulding High School. It’s a great school, the technology center is unbelievable and the reciprocal agreement that Dover, Spaulding and Somersworth have is amazing as far as what we can do at each location based on the students’ interest. Whether it’s cosmetology or culinary or woodworking. Spaulding High School, for whatever reason, has such a diverse area that they serve. Just based on the school and the technology and the teachers and their sports programs it’s just amazing.Q. Let’s talk about entrepreneurship – that’s a big part of the Seacoast economy.Davis: At the Women’s Business Center, since Jan. 1 we’ve grown from 300 to 375 members today. You can interpret it in a couple different ways, but I think that what we’re seeing is people putting their energy into having a successful business as opposed to having a part-time business or a hobby. They really try to grow it — whether it is because of a cutback or a layoff, but we’re seeing a huge increase in demand for membership and counseling and our services. Schuman: That’s something we’ve noticed too over the last couple of months. Whether it’s the situation where someone has been kind of passionate about doing something on the side or their life circumstances changes, it becomes, “OK, this is my chance to start something of my own.” With the chamber, we’ve noticed an increase in membership from these part-time people, the people who are saying, “Now’s my opportunity I’m going to take a go at this.” Morrison: I think that it’s just so diverse. There are different types of entrepreneurs. It’s not just the high-tech entrepreneur anymore. And entrepreneurs follow their passion and that’s great because for awhile it concerned me that we thought they had to be like Bill Gates and that’s not what most entrepreneurs are. I think the definition of an entrepreneur is much broader now. Sedoric: I’ve seen a lot of businesses popping up to support our demographics, as we know our state’s aging population presents a challenge too. Fortunately, the majority of that population is relatively affluent not necessarily in the North Country, but the southern parts of the state. I think there are two or three companies started that make support available to people who want to stay in their homes, into their 80s and 90s, and can afford those services. Davis: They like to say New Hampshire is a high-tech state, but when I think of New Hampshire I think of it as a craft state. People are in business at local farms and coffee shops, selling honey, candles and making handmade furniture. We see a lot of that with our members too, people who are doing food-related services — the popcorn lady and the soy candle lady. Morrison: That’s one thing about New Hampshire — there are a lot of traditional craft-related things, and next door there are high-tech and financial and businesses. Sedoric: Don’t we still have the sixth or seventh highest per capita income in the country? We probably didn’t get there by crafts. A lot of the people came here because the tax environment was certainly ample, although there is that craft arts crawl. Schuman: “Craft” is an interesting word. It can be the fun homespun stuff, but craft can also mean an adherence to making things very well. It’s the potential quality and paying attention to that detail which is something that’s inherent in New Hampshire businesses. It’s not always going after the easy thing, it’s holding yourself to a standard and sticking to it.Q. We haven’t talked about tourism yet.Sedoric: It hasn’t been getting a lot of press yet, but I think there’s going to be a lot of “going green” types of tourism here too. More liberal-minded people are living here. I wouldn’t be surprised to see this area pop quicker. We were stupid enough to build a house in this environment and had a really hard time trying to find someone to put up solar panels because they were all overworked. Schuman: It’s definitely something we’re going to have to start emphasizing in Dover. We definitely have an emerging tourist and culture community. The new Children’s Museum has been going gangbusters since it opened. We’ve had 60,000 visitors in five and a half months of their opening. Their largest day in Dover doubled the largest day they had when they were in Portsmouth. Fortunately, we’re right on the crest of this wave we think is coming. There’s definitely work we need to do to get stores and restaurants to work with catering to these visitors. It’s great to have people come and enjoy the new museum for two hours, but we need to brand that – “Now that you’re here, come spend another two hours doing this and make it a trip.” Hand: I’m not sure that’s it’s gotten quite up to Rochester. Can Rochester become a destination? I really don’t think so, but we want to be a place where people can come for the day to have an event. The work that is now being done on the Opera House and continuation of that facility, which is very unique, is going to help. And there’s the Rochester Fair, and we have the facilities like Governor’s Inn; they just ran their dinner theater and sold out every weekend for each event. So there are attractions that are held there that are of the quality and nature that will attract people to the area. And as it becomes the attraction along with more affordable housing then people will not feel the need to go to Portsmouth for an event because there is something happening right there. Gottlob: Unless it’s a community where people want to live, people are not going to want to visit. If they want to live there, that is a sign that you are doing things right. I spoke at the Rochester chamber tax cap forum and told them they’re just going to shoot themselves in the foot. You just eliminate that possibility of making the city the kind of place that will make people want to live there and visit.Q. We’ve talked about how the Seacoast economy seems to be in a better position than most other economies. Does anyone here have an opinion on when we might look back on this period and say, “Well, we made it through that one”?Innis: Nobody seems to know. There are a lot of predictions out there. I’ll give you my opinion, since you asked for an opinion. I think we’ve probably seen the bottom, at least that’s what all the major indicators seem to be saying. There will be at least a few more layoffs and that sort of thing coming, but I think by the end of this year we will see a significant upturn beginning. The real question that’s out there is, what will the inflationary impact of the government spending programs be and how will that affect the economy? That’s a big question mark that I don’t think we’re going to know the answer to until we get there. Morrison: I agree. I think we’ve seen the worst of the recession. But, along with the stimulus you need confidence. What really made this recession particularly go downhill last summer and fall was the press and government leaders saying, “This is going to be terrible. We need to do something about it.” It scared everyone, and they stopped spending. That’s what made it worse. In February or March, when the government passed the stimulus, we started to spend money again. Sedoric: I would like to think that we’ve seen bottoms in markets, and markets are the indicators. But I think it took generations of leverage to get us into this mess. We’re talking 30 to 40 years, and, sadly, it’s going to take that long to see us get out of this completely. We’re dealing with historic changes that are evolving right now. There’s an analogy – you lived in a house and all the plumbing blew out. You have toxic waste on the floor, mold all over the walls, you still have to feed your family and go to work in the morning and stay in the same house while you’re re-plumbing. That’s what we’re going through right now. And those things don’t happen quickly or easily or overnight. We need to prepare people for this and this grinding kind of opportunity. I actually think New Hampshire will weather it better than most places because of its entrepreneurs and it is fiscally conservative. But we’re at a major historic changing point. Morrison: I said we may have hit bottom, but I didn’t mean to imply that we’re going to bounce right back. I think you’re right it’s going to be a much slower recovery than we’ve seen historically. This started in 2005, 2006 — part of it was we did lose affordability. After 2005, it became harder to sell a house and buy another one. But I think it’s been overblown in terms of a threat here. If you go down to Massachusetts, and you say, “Would you like to move up to New Hampshire?” an awful lot of people would say yes in a heartbeat – if I could sell my house.