N.H. economy moving forward -- but at a snail's pace
N.H. economy moving forward -- but at a snail's pace
Despite what they're saying on the campaign trail about where the U.S. economy is going, the New Hampshire economy seems to be headed in the right direction. The question, however, is how long is it going to take to finally regain its solid footing? And will it continue to slowly improve or take a turn -- or a double dip -- for the worse?With the exception of the construction and government sectors, and maybe health care, the state's economy is crawling -- not marching -- toward a happier tomorrow: • Revenues collected through the state business profits and business enterprise taxes are up 5.5 percent year to date compared to a year ago. • Unemployment fell in November, by a tantalizingly small one-tenth of a percent, to 5.2 percent, only a half a percent below what it was last year. There has been some job gain, but it's only amounted to a few thousand jobs. • Housing has "stabilized" -- the word coming off the lips of New Hampshire Association of Realtors President Tom Riley's lips -- with both annual growth in sales and decline in value in the single digits. • Both bankruptcies (down 12.9 percent) and foreclosures (down 8.5 percent) have receded from their record levels in New Hampshire. But the new business created in that void has increased by an anemic 1.5 percent through October.The numbers, said Dennis Delay, an economist with the New Hampshire Center for Public Policy Studies, show the state's economy is "skating on thin ice."Delay said he expects the state's job growth -- which has been at a dismal 1.5 percent this year -- to stay at the same level for the next three years. If so, it would take until the second quarter of 2013 to regain all of the jobs lost in the recession, he said.So with possible trouble ahead, and certain trouble behind, Applied Economic Research President Russ Thibeault's description of the economy as "boring" might be the most hopeful adjective you can find.But that doesn't necessarily bother Rob Freese, senior vice president of Globe Manufacturing in Pittsfield. "Flat is good, though it makes me sick to say it as a sales and marketing guy."Globe sells protective clothing for firefighters, and in this age of austerity, the government - only a few years ago an alleged "stimulator" - is now seen as "a drag on the economy," in the words of Delay.Government cutbacks haven't meant fewer orders for fire suits, however. They have meant fewer massive road projects, shiny new schools and layoffs at the state, county and local government level.RetailThere has been talk of a retail surge, a housing spurt, perhaps even the possibility that small businesses will begin hiring again, but statistics haven't caught up with such sunny hopes, as seen in the results of some recent surveys of businesses by both the Business and Industry Association of New Hampshire and NHBR.The BIA, which surveyed some 300 businesspeople, found that 15 percent of respondents expected to hire more staff in 2012, while 5 percent said they will cut back. Some 43 percent said they expected increased revenues in the coming year, with 19 percent expecting declines. The BIA described the overall response as "cautiously optimistic."Likewise, NHBR's newly released survey of its readers -- conducted in early December, with some 150 respondents -- also showed some slight caution on the part of participants, who were primarily involved in small businesses.Some 30 percent said they plan on taking on additional staff, and 5 percent plan said they would cut their workforce. More than half planned to expand in other ways. Some 68 percent expected some revenue growth, and 54 percent saw some increase in the bottom line."Things are coming back," said Deb Brewer, owner of CrystalVision Inc., a Web application development firm in Portsmouth, who responded to the survey. She said her company had to cut their workforce from a dozen to five during the recession, but now she has plans to add an employee.Similarly, Graphicast - a casting firm in Jaffrey - was "hammered just like everyone else," starting in the fall of 2008, but now "we are pretty back to normal, even something better than normal," said President Val Zanchuck, another survey respondent.Zanchuck said he was able to maintain the same workforce (though at a lower pay, thanks to salary cuts and furloughs) because his customers used him to develop molds for new products, even if they weren't able to use them yet.Now, with a full and well-trained staff intact and the economy on the rebound, Graphicast is geared up to start putting those molds to use.ExportsDespite such sunlit stories, there are still dark clouds on the horizon, especially from Europe.It was the international market that sustained the New Hampshire economy during the dark days. In 2010, for example, the state's exports increased by 41.7 percent -- the biggest increase in the nation.The good news is that exports continued to grow in 2011. The bad news is that they have only risen by 4.3 percent. And even though most of those exports went to Mexico, Canada and Asia, the European crisis might be one reason for the slowdown, both directly and indirectly, said Dawn Wivell, the former New Hampshire foreign trade guru who is now a consultant with Firebrand International.The weak dollar helped fuel some of those overseas sales, she said. But now that the euro has fallen even more, that will make U.S. goods less competitive.Globe Manufacturing in Pittsfield - which had also sustained itself though increased exports during the lean years - has also seen more hesitation in its overseas partners, even though it has few sales to Europe because of high tariff barriers.But whether it really cut into trade "depends on the dynamics, on where the Europeans put their money," said Rob Freese of Globe Manufacturing.The New Hampshire High Tech Council is particularly concerned about exports, which accounts for almost all of the sector's sales, said Fred Kocher, the council's president."If the European market slows down, so will we," he said.Housing and constructionOther factors could undermine the recovery as well. While the housing market has stabilized, several news reports suggest another wave of nationwide foreclosures is coming, larger than the one already experienced.However, in New Hampshire all of the foreclosure and delinquency statistics seem to be going downward, though at various degrees.Year to date, 2011 foreclosures are 8.5 percent below the 2010 pace, auction notices are down 14 percent year over year, and delinquency rates have gone down for five quarters in a row.In New Hampshire, housing sales have been up - but only 1.2 percent through November - and the median price has declined by 5.6 percent year to date, although Realtors President Riley said that things have picked up "substantially" in the last 60 days. (In November, however, home sales declined slightly compared to last year, by 2.5 percent, according to the association's statistics.)Riley also found that commercial real estate is moving a bit more quickly. "They are not busting down the door, but they are walking through the door. Last year, the traffic was nearly nonexistent," he said.This activity hasn't led to much new construction - building permits have been only slightly higher in 2011 than 2010, while the number of construction jobs fell by 600. But there has been an uptick in remodeling, reported Greg Rehm, president of Liberty Hill Construction, Bedford."They are going great on my end," he said, noting that his firm has hired a new carpenter and opened a new showroom. Not only are sales up 36 percent, he said, the average project size has doubled.While some projects have been lost to financing snags, "those who can are grabbing some of the low interest rates," Rehm said.Still, Rehm said he still sees too many former builders of new homes competing against his company for remodeling jobs. And if construction is sluggish in New Hampshire, one of the better-off states, that is not good news for the lumber industry."As long as housing limps along, lumber limps along," said Jasen Stock, executive director of the New Hampshire Timberland Owners Association. The price of logs is up, but that's because the ground has been so muddy few loggers can get them out of the woods. Thus mills have to pay more to get wood to make lumber they have to charge less for -- not a great situation.Tourism and retailIt isn't as if the rural tourism industry is blooming in these rains either, though there has been some modest growth in that sector as well."We are not breaking any records, but we are back to where they were," said Mike Somers, president of the New Hampshire Lodging & Restaurant Association.In the winter of 2011, tourists spent 4.2 percent more, and in the spring spending rose 5.2 percent, according to the travel barometer put together by the state Division of Travel and Tourism.Rooms and meals tax income is virtually unchanged year to date through October, but the occupancy rate is up to 59.1 percent, from 55.8 percent in 2010, and the average daily stay and revenue per room is up 3.7 and 9.8 percent respectively, according to the barometer."We had a better year than last year," said John Augustine, owner of Dexter's Inn. The Sunapee bed and breakfast survived the recession with heavy discounting, but Augustine is now optimistic enough to build a heated outdoor pavilion for events and more parking for its cross-country skiing facility.Sales at The Common Man Family of Restaurants are up 4 percent this year, said CEO Jason Lyon, "and given the economy, we are certainly going to take it."Lyon, however, said he was worried about the lack of snow (as of mid-December) and was hoping that diners start to relax a bit more, and order the whole bottle of wine, not just a cocktail."They are a little more frugal with their money, more conscious of their decisions," Lyon said.Local statistics are particularly hard to come by in the retail industry, which of course recently concluded its peak season.The midnight openings on Black Friday appeared to have gotten things off to a good start, said Nancy Kyle, president of the Retail Merchants Association of New Hampshire."I think there is a pent-up demand for shopping," she said. "Buy local" is the biggest new trend in the industry, she said, benefiting Main Street, and perhaps hurting the malls, though Deb Stone, area marketing director for Simon Property Group, said that the parking lots were filled at the Mall of New Hampshire in Manchester and the Pheasant Lane Mall in Nashua."Compared to last year, this is excellent," she said. "But it's not the heyday, by any means."Health careHealth care is perhaps the most unsettling sector of the economy, and not just because of the uncertainty over the future of health care reform and the continued rise in health insurance premiums. (Indeed, in both the BIA and NHBR surveys, health care was cited as respondents' biggest concern, aside from the state of the economy itself. )Now there is the additional worry about the local health care industry itself - once one of the few secure sectors in a shaky economy. On the one hand, New Hampshire's population is aging, and the need for additional health care resources is obvious. On the other hand, there is a movement among both political parties to cut spending in health care.According to the New Hampshire Hospital Association, state Medicaid cuts have resulted in 1,100 fewer hospital employees since June, due to layoffs, attrition and early retirement,. But, according to the Department of Employment of Security, the health care sector added 1,900 jobs in that time, with 800 of the new positions coming from hospitals.Some of that may be due to some administrative expansion to prepare for health reform or growth in the more profitable aspects of the health care industry not related to Medicaid - such as sports medicine, sleep therapy or private home care. And some of the job reductions may not have found their way to the statistics yet.However you look at the health care jobs numbers, the people who were laid off "certainly feel like they lost their jobs," said Steve Ahnen, president of the hospital association.And given the whole controversy over health care funding, Ahnen said, the future of his industry "is very, very unstable."Perhaps that could be said of the entire economy.
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This article appears in the November 5 2011 issue of New Hampshire Business Review