NH’s economic heat wave

Businesses sweat out workforce needs


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If only De Desharnais, vice president of Nashua-based Bastian Building, had a few more roofers, framers and siders, she might be able to clean up the backlog of ranch homes and condos the company has under contract. “We can hardly keep up,” she said.

The demand for household solar energy is so great that Granite State Solar in Boscawen quadrupled his square-footage, and it’s ready to add on another crew too — “if only we can find the employees,” said Eric Shifflett, the company’s co-owner.

And Dennis DiPaolo, owner of Seasonal Specialty Stores in Amherst, has to turn away requests to service pools. “It’s just too difficult to get good workers. We want to do it right,” he said.

This is the way it’s been for the last year. The state’s 2.9 percent unemployment rate in May is exactly the same as it was last May, only the tight labor major has now lasted longer.

After a prolonged recession, a 3 percent unemployment seems hot. New Hampshire has been at 3 percent or lower since November 2015. That’s not just hot anymore. It’s scorching. 

“Normally, it’s a great thing to have low unemployment, but you can argue it’s a problem not to attract enough labor,” understated Annette Nielsen, an economist with the state Economic and Labor Market Information Bureau. “The for-hire signs are everywhere.”

The ripple effect of this economic heat wave can be seen all over the state’s economy.

Construction and real estate

The housing shortage is at least partly a result of a shortage of construction workers, and that’s even with a nearly 10 percent increase in the construction labor force since last year — the largest percentage growth of any labor force in New Hampshire.

There is more housing to come, but is it enough? Housing permits year to date are nearly up a fifth over last year, which was up 10 percent over the year before. Still, housing inventory has gone down, not up. 

For May, monthly supply fell by 28 percent compared to May 2016. Homes for sale were down 27 percent. New listings in May went up slightly, by 6 percent, but year to date are down 8 percent.

Demand is up, because if it isn’t prices wouldn’t have risen about 7 percent year-to-date. Yet closings are down by 5 percent year to date (4 percent from last May), even as homes are being snapped up more quickly — they are on the market for an average of 82 days (year to date) as opposed to 93 in 2016. 

In other words, even though people want housing, they are buying fewer homes because there aren’t that many available.

Yet one of the reasons we don’t have enough workers is that we don’t have enough affordable housing for them to live in.

“We have 100,000 people who need to move into our state. How can that happen if they don’t have a place to live?” said Rachel Eames, a Concord Realtor and current president of the NH Association of Realtors. “We need people who can afford to live here.”

It isn’t just a matter of labor, but materials and restrictive zoning that make it difficult to develop new housing. 

Eames calls it an “inventory crunch” — the lowest number of homes available since 2015. 

Meanwhile, you have ”young people living with grandparents, or joining with other couples, saving money for a down payment to move out.” 

As for commercial construction, you can forget it. “Even the most boring vanilla building — you can’t build it for what you can resell it for. You just can’t afford to build a new building unless you got a customer that is willing to sign,” said Chris Norwood, president of NAI Norwood Group in Nashua.

Granite State Solar did sign. The company was leasing space in Boscawen, but was forced to expand to meet demand, despite low oil prices and the state’s lukewarm encouragement of renewable energy use compared to surrounding states. That’s partially because the price of solar is also going down, but also because homeowners who can’t move tend to improve where they are today. 

Things are so busy on that quarter acre of land, that the company’s 11 vehicles “felt like they were in a traffic jam in Boston,” said DiPaolo.

So the company built on a three-acre lot a 10,000-square-foot building — solar-powered, of course — in an industrial park in Bow. Now it just needs employees. Solar markets itself as clean tech, but it is mostly a construction company, and there “are not a lot of young folks in the skilled trades.”

“We have taken out radio ads, yard signs, Monster.com,” DiPaolo said, and to retain them the company offers “paid holidays, 100 percent payment on health insurance premiums, plus help on deductibles.”

Manufacturing

But the labor pains don’t just affect the trades. This is a problem that unites nearly all employers, whether they’re looking for kitchen help or engineers. Specialized labor is particularly harder to get. 

Take Bedford-based TRM Microwave, a company that provides microwave components for defense contractors like BAE Systems. TRM feeds indirectly off the U.S. defense budget, one of the few federal departments that would not be cut in President Trump’s proposed budget.

TRM expects to increase its workforce by 25 percent, or 15 employees. Replacing administrative workforce isn’t that difficult, but finding the right kind of engineer is, said Liz Morris, the company’s marketing manager.

“I set up a friend of mine, a highly skilled engineer in radiofrequency microwave, but it wasn’t a fit because his experience was in a different frequency,” said Morris. The company is forced to lure engineers from other companies, she added, “and that could be very difficult.”

Automation has not reduced the need for employment in TRM’s case, but it may have had an effect on other employers. Otherwise, how do you explain this fact: New Hampshire exports have grown 22 percent year to date, the fifth highest growth rate in the country. That growth is even more impressive, given the fact that there was no significant falloff in 2016 or 2015, which many other states in the top ten experienced. 

Most of that increase is in manufactured goods, like electronic machinery, exports of which increased by 50 percent, the aircraft/spacecraft parts, which more than doubled, and pharmaceuticals, which increased sixfold. 

It isn’t just trade. The state’s gross domestic product grew by 3 percent in 2016, according to statistics from the federal Bureau of Economic Analysis, making it the fastest-growing economy in New England and one of the fastest-growing in the country. And in 2017, the Federal Reserve says the state’s Economic Activity Index was the highest in the region — it grew 3.4 percent year to date, compared to a U.S. growth rate of 2.9 percent.

Yet, in both April and May, the state has about the same number of manufacturing jobs it had in the same months last year. The economy is apparently producing more, with basically the same number of workers, though they are working an average of an hour more, and getting paid about 50 cents an hour more, compared to last year.

Service sector

Of course, economic activity includes more than manufacturing. In fact, the service economy is where most of the job growth is.

The leisure and hospitality sector had the biggest increase in job numbers from May 2016 to May 2017 (2,900 or more than 4 percent) — accounting for almost a third of the jobs created in New Hampshire since last year. 

“Business is very strong,” said Tom Boucher, CEO of Great American Restaurants, who added that business is up 4 percent this year and grew 3 percent last year. The company is planning to open several more restaurants, and it isn’t the only one. So many restaurants are opening in Manchester, that Boucher said he is worried about a shakeout. 

Still, he said, “people are definitely dining more frequently,” even with “a pretty tough winter, with some hefty snowstorms.” 

Ski New Hampshire, of course, welcomed the snow, which was about the same as last year, but came just at the right time. All told, there was a 29 percent increase in skier visits from last year. 

But aside from a strong Memorial Day weekend, it’s too early to tell how tourism is doing this spring. Hotel occupancy has been flat — New Hampshire is at 62.7 percent so far — only a third of a percent more than last year, and people are spending just $3 more than they did last year. But those are pre-summer figures.

Website visits for the first five months of the year are down by about 15 percent — not a good sign. But international web visits are actually up 18 percent, despite the political turmoil surrounding travel bans, laptops and terrorism. This could be bucking a national trend, but reports on foreign travel are mixed.

One study by Foursquare indicated that international tourism in the U.S. declined 11 percent in the six months following Trump’s election, while it’s up 6 percent internationally. But a U.S. Travel Association survey said that April’s figures show a 4 percent annual increase. 

Other industries

As for other service sectors, the health care and educational sector has grown by 2,400 jobs, or a 1.9 percent increase, while professional scientific and technical services gained 1,500, also a 1.9 percent increase.

Business services could include anything — large public companies, payroll management firms like Bottomline Technologies in Portsmouth to Affinity LED Lighting in Dover, which primarily helps municipalities and businesses switch over to higher-efficiency lighting.

Things are so busy that Affinity decided to manufacture its own lighting, which means adding five employees, bringing the workforce to 13. John Branagan, a lighting specialist with Affinity, said he overcame the labor shortage by niche marketing: The firm hires veterans, who make “a great workforce. They need minimum training because their professionalism is fantastic.”

Retail is another matter, however. The sector actually lost 1,100 jobs over the last year. This could be a fluke in the April and May statistics, but the trend hasn’t been good nationally for large department stores and brick-and-mortar chains.

Norwood said the commercial real estate market for big-box stores has cooled off. Indeed, his company helped transform an old Lowe’s in south Manchester into a movie theater. 

The hottest market, Norwood said, is in industrial warehouse space, with bays 24 or even 30 feet high. “We start talking about cubic storage, rather than square-footage,” particularly around the airport. A lot of this warehouse craze is driven by online sales, he said. 

Of course, there are some things you can’t order online, like a pool. And at Seasonal Specialty Stores, business has been brisk.

“2015 was the best year we ever had, until 2016,” said DiPaolo. Weather, more than the economy, will dictate how 2017 works out. He can’t find the people to service pools, but he is making sure he gets back the in-store summer help who worked last year by using school scholarships, bonuses, flex time, catered lunch and Kool Pops in the freezer.

Pay has gone up, he said, “but if you want to keep good help, it’s way more than the money.”  

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