Annual Preview: N.H. still expected to set region’s economic pace
Economists at the New England Economic Project are anticipating continued, albeit slower, economic growth for New Hampshire in 2007.
According to the NEEP forecast, Granite State manufacturing jobs declined at a 5 percent annual rate between 2000 and 2005 — a decline the economists expect will slow to a 1.2 percent average loss. But it’s expected that New Hampshire’s manufacturing output will continue to increase in the forecast period, as it has in the past five years.
Private service sector jobs grew at an annual rate of 1.2 percent between 2000 and 2005, and NEEP’s economists expect that rate of growth will increase to 1.8 percent annually in the forecast period.
But, according to Dennis C. Delay, director of special projects for the New Hampshire Workforce Opportunity Council Inc. and chair of NEEP’s New Hampshire forecast, residential housing, “the one sector of the economy that has been unflappable since 1996 is now showing undeniable signs of slowing, perhaps even contraction.”
“Residential housing, has put billions of dollars into consumer pocketbooks through sales of new and existing homes, refinancing and home equity loans in the last 10 years,” Delay said, “but it has finally begun to sputter.”
He added, however, that “we expect that housing will correct, but not collapse.”
And while New Hampshire’s economy as measured by per capita income growth, isn’t expected to outpace the nation’s, it still is expected to set the pace in New England.
In the six-state region, according to NEEP forecasters, the strongest economies are expected to be that of New Hampshire and Massachusetts — a “turnaround” for the Bay State, which has grown more slowly than the region in recent years and is now expected to grow more rapidly than the region for the balance of the decade.
The forecasters said employment in New England is expected to grow at a rate below that of the nation through 2010, and is expected to expand at an average rate of 0.8 percent per year, well below the expected national growth rate of 1.3 percent during this same period. Regional employment is not expected to return to its first quarter of 2001 peak level of 7.083 million until the fourth quarter of 2008.
Overall economic activity (real gross regional product) is expected to average 2.3 percent per year, compared to 3.2 percent nationally, and the region’s real per capita income is expected to grow well below the national average for the balance of the decade, 2.5 percent per year as compared to the national average of 3.4 percent.
NEEP analysts cautioned that the regional economic forecasts presented at today’s conference should be interpreted in light of potential risk factors that could result in slower regional growth than expected, particularly the region’s housing market.
As NEEP’s forecast manager Ross Gittell, James R. Carter professor at the University of New Hampshire’s Whittemore School of Business and Economics noted, “There is a relatively high downside potential of the forecast, mostly influenced by uncertainty in the housing market. A weaker and longer-to-recover housing market nationally and in the region than that in the forecast would have a significant negative influence on the New England regional economy.”
As for the U.S. economy as a whole, Mark Zandi, chief economist at Moody’s Economy.com, noted that growth has weakened appreciably during the second half of the year, and his firm “expects U.S. growth to remain below the economy’s 3 percent real GDP growth potential through next spring.”
He also said he expected unemployment to edge higher during the period, rising to near 5 percent. “Higher unemployment, along with continued low energy prices and tethered inflation expectations, will be sufficient to ensure that underlying inflation will peak in early 2007,” he said.