'Uncertainty' remains New Hampshire's economic watchword

Therma-HEXX makes heat exchange systems that are installed under pavement, enabling everyone from pool owners to those leasing old mill buildings to save thousands of dollars in energy costs.

Conforme has created a smartphone app that will make it easier for painters and contractors to deal with the paperwork involved in new lead paint regulations.

Sensible Spreader Technologies uses GPS technology on snowplows so they will spread an expensive alternative to rock salt near sensitive watersheds and on vulnerable bridges.

One, or maybe all, of these niche startups — a bit high-tech, a tint of green — could be a part of the entrepreneurial key to start the stalled engine of the state's economy.

After all, when all is said and done, there will be some 15,000 new business filings in 2012, about 500 more than last year. Who knows which one could ignite the spark that fires things up?

Here's hoping some of them will, because at this point it doesn't look like any other sector will give the economy the spark it needs to be firing on all cylinders.

The Granite's State's economy, more so than the rest of the nation these days, is mired in uncertainty, and the so-called 'New Hampshire Advantage' is "withering away," in the words of economist Dennis Delay of the New Hampshire Center for Public Policy Studies.

The state initially sank when most of the rest of the nation plummeted headlong into Great Recession. New Hampshire's unemployment rate was among the lowest in the nation, its housing and foreclosure crisis not quite as severe. But now the state's economy can't seem to get moving again, and the rest of the country is catching up.

That doesn't mean that New Hampshire isn't looking pretty good, relatively speaking.

Public Service of New Hampshire just released its annual economic report, reminding everyone how well the state ranks compared to the rest of the nation when it comes to such benchmarks as tax climate (sixth), standard of living (first), college-educated citizens (ninth), income level (ninth) and manufacturing employment compared to population (10th).

But it's not so much a matter of where the state ranks right now, but how fast its economy is improving.

For instance, while the unemployment rate has been falling nationally, New Hampshire's jobless rate has risen, to 5.7 percent in October — three-tenths of a percent higher than October 2011.

Figures from November are still coming in, but help-wanted ads have been going down for the last few months (though are still above the previous November), reports economist Brian Gottlob, principal of PolEcon Research, in his daily blog, Trend Lines.

Others have noticed a similar autumn falloff right before the election.

"First six months, there was a lot of positive growth, and then, two months before the election, things got very quiet," said David Bellman, owner of Bellman Jewelers in downtown Manchester. "I think it's psychological. The uncertainty. I don't think it matters who got elected."

"It's somewhat unpredictable," said Tom Boucher, CEO of Great NH Restaurants Inc., which owns the Cactus Jack's, T-Bones and Copper Door restaurants. "I can't remember a time that has been so volatile. There is a lot of uncertainty before the election, and a lot of uncertainty afterwards."

Manufacturing

"Uncertainty" is certainly the frequently uttered word to describe the state's economy.

"It is an uncertain time," said Delay. "The only thing we know for certain, is that we are not going to get any help from Washington."

But, said Delay, there are other "things that propelled the state forward in the last decade, that have either slowed down or not done as well as the rest of the economy."

The state has gained roughly 4,000 jobs during 2012, but manufacturing employment, after a brief comeback in 2011, has fallen by 1.7 percent.

One reason? Exports, which increased 52 percent in the middle of the recession, have fallen by almost 20 percent in 2012. Exports of industrial machinery — including computers — were off by almost a quarter, and exports of electric machinery were down by 37 percent.

Those numbers are partly due to the fact that the domestic economy has picked up, said Justin Oslowski, director of the U.S. Department of Commerce's New Hampshire Export Assistance Center.

It also might be because a large project came to an end in Mexico — a nation that briefly displaced Canada as New Hampshire's top export destination. While Canadian exports continue to grow steadily, Asian exports have fallen steeply, and the European economic turmoil hasn't helped matters either.

Another mainstay of New Hampshire's economy has been the defense industry.

BAE Systems, the state's largest employer, got a series of contract awards for its Nashua facility totaling at least $235 million. The company has been using the money to upgrade its manufacturing facilities, in the hope of winning more contracts in 2013, said spokesperson Jeff Rose. But there hasn't been a large amount of hiring.

"The workforce has remained stable," he said. "It's difficult to make decisions with sequestration staring you in the face."

For non-news junkies, sequestration (the end point, along with higher taxes, of the so-called "fiscal cliff") are automatic federal spending cuts that would include the Defense Department. The cuts would go into effect Jan. 1, 2013, if some budget compromised is not reached by then.

Health Care and Education

While the sequestration cuts would hurt defense-related companies, they could positively decimate the state's hospitals, already weakened by federal and state cutbacks. For them, sequestration would mean a 30 percent cutback in Medicare payments, said Steve Ahnen, president of the New Hampshire Hospital Association.

And while health providers do look forward to expanded coverage under Obamacare, "the challenge is getting from here to there," he said.

Indeed, education and health care employment — the other main bulwarks of the economy through the recession — have fallen 2 percent from 2011.

Population growth, particularly children, has slowed. Tim Long, the president of Meridian Construction, has noticed that. Meridian builds schools, and it hasn't built too many of them lately. The Gilford firm employed 52 workers in 2006. It now employs 20.

"Capital spending is down, and it hasn't really recovered," said Long

That's partly because the school-age population is shrinking, but it's also partly because austerity has gripped the nation, from the top all the way down.

Long has had to go to Vermont and New York to find work, and is gearing up for industrial projects.

Despite all the talk about government spending being out of control, there was no growth in government jobs in the state from one October to the next.

This is apparent at University of New Hampshire, where the lack of government support helps make it the most expensive state school in the nation.

But learning for learning's sake is not what is at stake here. Several of those aforementioned young risk-takers got a hand up from educational institutions.

Therma-HEXX — now in its third year, and ready to double its small staff of five — didn't get its funding through a loan.

"Banks aren't there for a startup, no way, no how," said CEO Robert Barmore.

Instead, the company took off with a $115,000 award through the Green Launching Pad, a public-private partnership at UNH.

Similarly, Andrew Jaccoma developed Sensible Spreader Technologies while pursuing his MBA at UNH. His idea won the Whittemore School's Holloway Prize Innovation-to-Market Competition, giving him $10,000 startup cash, plus services from the law firm Pierce Atwood, the marketing company PixelMedia, and office space from the New Hampshire Innovation Commercialization Center.

Of course, no one is sure what will be the next hot thing technologically that could move the state forward. But, said economist Russ Thibeault of Laconia-based Applied Economic Research, "the one thing that will get this state going, is that there isn't one thing. It's the diversity of the economy, rather than the large firms in the state."

Housing

One thing is almost certain: The housing crisis that got the nation and New Hampshire state into the recession appears to be finally turning around.

The statistics are pretty consistent. Sales year-to-date are up by more than a fifth, with one month to go, according to the latest data from the New Hampshire Association of Realtors. That's about 13,000 sales, a return to prerecession 2006 levels, notes NHAR spokesman Dave Cummings, who call it "an established trend."

And for the last two months, the median price of a home, which had been falling for several years, actually has gone up by roughly 10 percent, meaning the average price has remained unchanged from the previous year, $203,000.

"Ultimately, the inventory has leveraged the balance to the sellers, as opposed to buyers," said Cummings. "If we continue to see prices climb we wouldn't be surprised, because that seems to be where this trend is going."

However, New Hampshire's housing market never fell into as deep a hole as so many markets around the country, so it is starting to lag when it comes to appreciation.

For instance, the Federal Housing Finance Agency's analysis of repeat sales (based on third-quarter data, before the latest median price boost), shows that New Hampshire was one of the few states where values depreciated, according to another blog post by economist Gottlob.

According to Gottlob, there are some fundamental factors, such as slow population and job growth, that are holding back a bigger housing rebound in New Hampshire.

Bill Burke, a licensed broker from Keller Williams Realty's Bedford office, has noticed the housing turnaround.

His office has reported more than $250 million in sales so far in 2012. While the progress has not been universal, he said, "in Bedford, everything under $700,000 is now in a "seller's market."

The upswing has translated into new home construction and a big uptick in renovation work, since a large part of that work happens when a new person moves into a home.

"We are going to conclude our best year yet," said Greg Rehm, owner of Liberty Hill Construction, also in Bedford. "I've never seen this kind of work on our board. Where we once did kitchen and bath, now we are doing the whole first floor."

It isn't that there has been more demand. There is less supply. The builders who had previously built new homes, and had stooped to renovation, are abandoning the field as the market improves.

"They want to build homes, and I say go ahead," Rehm said.

It also means more work for designers like Piper Turgeon of Londonderry, whose 3-year-old Eco Chic Interior Designs is starting to get some traction. Customers are starting to utter what she called those "four most expensive words — while you're at it."

And it means more people are taking out mortgages.

"We have never been busier, and it is not all refinancing," said Quentin Keefe, owner of Regency Mortgage in Manchester. "In fact, purchase transactions account for about 65 percent of our business right now. There is no doubt in my mind that this is indeed the beginning of a recovery."

Retail

It's too early to tell how retail's big holiday season will shake out, but thus far both statistics and anecdotal evidence are promising.

Retail trade was the strongest sector in terms of job growth in 2012, with the Merrimack Premium Outlets bringing in more than 800 jobs alone.

"When was the last time a mall opened anywhere in the country?" exuded Nancy Kyle, president of the Retail Merchants Association of New Hampshire. "That is pretty amazing."

Then factor in the addition of anchor stores, like Lord & Taylor opening at the Mall at Rockingham Park in Salem, an increase in the duty-free tariff for Canadians, toss in the most shopping days between Thanksgiving and Christmas that the calendar will allow and top it off with extended Black Friday shopping hours, Small Business Saturday and Cyber Monday, and you have Kyle predicting a 4.5 percent increase in retail sales over last year.

While that's what might be happening at the malls, down on Main Street — or, rather, Elm Street in Manchester — "business has been good, not great," reported Bernie Marchowsky, marketing director at George's Apparel. He also used the word "uncertainty" to describe the situation.

"What happens when we go over this cliff thing?" he said. "Will more money be spent on computers as opposed to clothing?"

A recent New England College Poll indicated that the retail season in New Hampshire might be a mixed bag.

While nearly half of respondents said they believe the national economy will do better, most (57 percent) said that their spending this holiday season will be no higher than last year.

But about a fifth said they would be spending more. And besides, what people say and what they do may not be the same thing.

Hospitality

First of all, it's not the weather — or even global warming — it's the economy, stupid.

Remember last year's snowless winter (and so far – as of this writing – this one as well)? A 47 percent decrease in snow cover hurt the ski industry, no doubt about that. Attendance fell off by 11.6 percent compared to 2009-10, according to the state's Travel Barometer, and that recession year was enough to make a resort owner ski off a cliff.

But get this, also from the barometer: New Hampshire hosted slightly more trips in 2011 than the previous winter and out-of-staters spent 3.4 percent more.

Besides, if you can't ski, you can shop and eat. Retail sales were up 5 percent, and rooms and meals tax revenues have increased 9.6 percent.

For the first 10 months of 2012, rooms and meals revenues are still up, albeit by 3.4 percent, giving some statistical evidence for the slowdown, noticed by Tom Boucher of Great NH Restaurants.

But Marie Ishac-Hanna, co-owner of Washington Street Cafe & Catering in Concord saw things differently.

"We had had an extremely busy summer and had to turn some business down. We even had to put in an addition in order to accommodate a new walk-in cooler and freezer," she sad. "Now with the election behind us, the element of uncertainty is behind us."

Restaurants have been saying business is a bit better than hotels, said Mike Somers, president of the New Hampshire Lodging and Restaurant Association.

The state's occupancy is at 59.3 percent so far in 2012, less than a percent higher than in 2011. And increased average revenue per room wouldn't buy you a cappuccino at Starbucks.

But it's something. It's certainly good news for Kimberly Beals' North Conway-based Corporate Communications Inc., who depends on 150 clients who depend on tourism, many of whom advertise in the 450,000 maps she distributes throughout the North Country.

She reported an increase of 31 percent in her advertising business and 15 percent in her publications, but then again, she said she had been growing steadily even through the recession. And maybe even because of the recession.

That's because, she said, she relies entirely on freelancers.

"So many great and talented people have lost their jobs in this economy," she said. "It has helped small businesses like mine."