Economist: N.H. jobs picture a gloomy one beyond 2010
While a growing number of signs point to New Hampshire’s economy beginning to emerge from the deepest national recession since the Depression, it will take several years for employment figures to reach less painful and more acceptable levels.
That prognosis comes from Dennis Delay, New Hampshire forecast manager for the New England Economic Partnership and economic consultant for the New Hampshire Center for Public Policy Studies. Delay’s forecast – which will cover the years through early 2013 – will be released along with those for the rest of the region later today at a conference at the Federal Reserve Bank of Boston.
Delay, who spoke in a conference call Monday with reporters from around the state, said that, “from a technical perspective,” the national recession is over, and there are corresponding signs in New Hampshire that there is “some bottoming occurring” in residential real estate sales and some other indicators.
But the employment picture is far from rosy, he said.
Delay said he expects to see unemployment continue to increase over the coming months, and “it’s probably not going to be until the third quarter of 2010 before we see job creation really start to increase.”
According to Delay, the unemployment rate is expected to rise from the 7.2 percent reported in September to just under 8 percent in the second quarter of 2010 before gradually dropping back to about 6 percent in the latter part of 2012 and early 2013.
“This will be another jobless recovery, both for the nation and for New Hampshire,” said Delay. “Even though the signs again point to increasing production, and the economy will certainly be expanding, we certainly will not be seeing a corresponding increase in jobs for nine months to a year.”
It’s been a long time since an unemployment rate of 6 percent in New Hampshire could be considered an improvement, said Delay.
He said that, prior to the last recession that began in the fall of 2001, the New Hampshire jobless rate was 3 percent before eventually rising to 4.7 percent at the end of 2002. The rate eventually recovered, reaching a low of 3.6 percent before the start of the current recession, he said.
This time, however, “even as the as the economy starts to recover, we’ll be looking at elevated unemployment rates through 2012 to 2013, and 5.5 to 6 percent will become the new normal.”
Delay said many of those lost jobs will come in the manufacturing sector. “We had about 80,000 manufacturing jobs in 2005, and we won’t get above 70,000 manufacturing jobs, even in 2013.”
Also showing long-term job losses is the construction sector, which at its peak in 2006 employed 29,000 people, a number that has dropped to about 21,000 this year and is expected to decline further to about 18,500 in 2013.
Delay said that while it looks as if the downturn in residential construction has leveled off in the state, “we’re probably going to see more bad news in commercial real estate, and that will keep us from attaining the level of construction jobs we saw at the peak.”
Another sector taking a big economic hit, he said, will be in the trade, transportation and utilities category, which covers retail employment. Before the recession began at the end of 2007, New Hampshire had about 142,000 jobs in the category. Delay said he expects about 140,000 jobs to be generated in the sector by 2013.
The financial services sector, which covers real estate and financial services activity, also won’t return to its peak level of activity by 2013, he said.
There are a few brighter spots, according to Delay. At the top of the list are education and health services, which is expected to grow from 105,000 jobs in 2008 to 119,000 jobs in 2013. Hospitality also is expected to see an increase, from about 64,000 in 2007 to 69,000 in 2013.
Another hopeful sign for the job market will come in professional and business services, a category that includes consulting, temporary services firms and information technology jobs. Delay said he expects an increase from about 66,000 jobs in 2008 to about 74,000 in 2013.
As for other aspects of the economy, Delay said the housing market seems to be “close to the bottom in terms of sales and in terms of construction.”
He said new residential construction is currently at a 2,000 units-per-year pace, although a normal construction rate in that industry is usually 6,000 a year – “when the economy is growing at a moderate pace,” he said – and that level won’t be reached until after 2013.
Delay said home prices should continue to decline moderately into 2011 before gradually turning around. “But prices in New Hampshire will not reach the peak values that we saw in 2004 and 2005 at least through this forecast horizon,” which runs through 2013.
Delay reiterated that the recovery in New Hampshire should be “a little faster” than other states in the region and nationally – “mostly because we didn’t sink down as far as either the region or the nation.” According to Delay, the United States as a whole has lost 5.5 percent of its job base since December 2007, while in New England the region has lost 4 percent of its job base. In New Hampshire, the loss is about 3 percent, he said.
“This is a bad recession – there’s no doubt about it,” said Delay. “But in comparison to the region and the nation, it’s as if the U.S. caught pneumonia and New Hampshire caught a cold – a very bad cold, but generally New Hampshire has gone into this period a little bit stronger than the U.S. as a whole and is likely to emerge more quickly.”
Delay did say the severity of the downturn was something he didn’t predict in his forecast in the spring of 2008, when he foresaw a low-point unemployment rate of 4.3 percent. “A year and a half ago, I would have expected by 2011 that there would be 686,000 jobs in the New Hampshire economy, but now it looks like there’s going to be 640,000 jobs.”
He added: “I’ll be the first to say it, the forecast that I did a year and a half ago was, in retrospect, wildly optimistic compared to where the economy is going to be in the next three years. Make no mistake about it – this recession is twice as long as the usual post-World War II recession, and in point of fact we’re not going to get back to the old trend line even in the next five years. We have settled on a new set of significantly reduced expectations.” – JEFF FEINGOLD/NEW HAMPSHIRE BUSINESS REVIEW