What does ’09 have in store for the N.H. economy?
When it comes to economy, it’s certainly not the season to be jolly.
Consider that so far in 2008:
• Twelve auto dealerships have closed
• The jobless rate of 4 percent is growing
• Bankruptcies have increased by a third
• Foreclosures are up by a half
• There have been fewer business startups
• The state has suffered a net loss of 1,400 jobs
• 14,000 fewer cars have been sold
• The tourism industry is slowing
• New-home construction is down
• Lending by angel investors has decreased
• Home sales have fallen by a quarter, and there’s a two-year inventory remaining to be sold
But the New Year does bring hope. Retailers’ “Black Friday” wasn’t so bleak in New Hampshire.
Exports are up. Local banks are lending. And a federal economic stimulus package appears to be coming down the pike, or rather will be used to repair it. Who knows? Another snowy winter might even send Santa skiing down to the shopping malls in time.
But more often than not, you will hear words like these, from Scott Holloway of Holloway Buick Pontiac GMC Cadillac in Portsmouth: “The economy has fallen off the cliff in the last couple of months.”
But is it really fair to ask a car dealer about the economy, when General Motors is teetering on the edge of bankruptcy? Maybe we should be talking to Deb Stone, marketing director for the Simon Malls in New Hampshire.
“We’re hopeful,” Stone said shortly after Thanksgiving, when price-slashing brought shoppers to the Mall of New Hampshire in Manchester, the Pheasant Lane Mall in Nashua and the Mall at Rockingham Park in Salem. “It’s not all gloom and doom.”
But a lot of it appears to be. Let’s begin with what started it: the housing market decline. Unlike the previous bursting of the high-tech bubble, this recession “was tied to housing,” said economist Dennis Delay, deputy director of the Center for Public Policy Studies. “And housing is a very long cycle. It takes a long time for the balloon to deflate.”
Fortunately, said Delay, New Hampshire’s bubble is not as big as those in other areas of the country, and it started deflating earlier. Still, he said, it should be two more years before housing prices start bouncing back in New Hampshire.
According to Real Data Corp., which tracks real estate transactions in the state, there were some 6,350 foreclosure notices in the New Hampshire Union Leader in the first 11 months of the year. That compares to 3,600 through November 2007. Not all of those properties were actually sold at auction, but in October 333 of them were. That’s nearly 10 times the number back in October 2005.
Not everybody’s home is heading for foreclosure but nearly everyone’s house has declined in value. According to the New Hampshire Association of Realtors, the average price of a New Hampshire home in November was $215,000, a 17 percent decline from the previous November. And 653 homes sold that month — a 24 percent decline from a year earlier.
“The market is in correction,” said Jim Lyon, a Conway Realtor and president of the association. “There is a heavy supply of houses, and buyers are scarce and price conscious.”
The market for new homes is skimpy as well. Housing starts fell 28 percent from October 2007, which was 23 percent below the October 2006.
Kendall Buck, president of the Homebuilders and Remodelers Association of New Hampshire, doesn’t see things getting better anytime soon. An economic stimulus package that provides money for some of his remodelers to weatherize and insulate won’t do the trick, he said.
“You need a major federal incentive program to buy and build homes,” he said.
Credit and confidence also are affecting the purchase of the next-biggest consumer purchase, according to Peter McNamara, president of the New Hampshire Automobile Dealers Association.
While the sales slump first hit American manufacturers, now even Toyota’s sales are down by 30 percent. More than a dozen New Hampshire dealerships have gone out of business in the last year, McNamara said.
Holloway is among those that have remained open, but not without cuts in sales staff, marketing and the service department.
Holloway places none of the blame and much of the praise on local banks and credit unions. The credit crisis has been felt mainly on Wall Street, with only one bank with branches in New Hampshire – the Bank of the America – actually taking any bailout money.
Banks stayed cautious during the credit boom, even as they lost market share to mortgage companies, dealer financing and nonbank commercial credit, who took more risks.
“The auto business left us — we didn’t leave it,” said Jerry Little, president of the New Hampshire Bankers Association.
It is hard to say how this crisis in credit and confidence is going to affect the retail industry this season. Nationally, the news is not good. The International Council of Shopping Centers, blaming both tightening credit card requirements and consumer wariness to take on more credit, reported that retail sales in November fell 2.7 percent — the worst November in three decades.
But in New Hampshire, the Retail Merchants Association of New Hampshire had a more upbeat assessment. More than half of its members reported sales during the Thanksgiving kickoff weekend as better or equal to that of the previous year.
“Traffic has been the same,” agreed Stone, referring to the Mall of New Hampshire in Manchester. Stone attributes some of that traffic to a new “smart shopper” program implemented by Simon Property Group, the mall’s owner. Shoppers can go to their computer and print out all sales and coupons offered by a mall’s stores before heading out to shop. A half-million shoppers have used the program since the beginning of the year, contributing to the year-to-date total of 11 million visitors, roughly the same as last year.
Still, several storeowners did report a fall-off. “It’s definitely weaker than last year,” said Steve Johnson, president of Bay Street Discount Inc. in Ossipee. “October was flat and November was down.”
People are coming in to the stores, but then might back off on a purchase, he said. He pointed to one purchase of a refrigerator that was nixed by a husband who decided to tinker with the old one until it no longer worked. But the price of big-screen TVs has fallen so much that sales have gone up.
“People are hunkering down,” he said. “They figure that’s their entertainment for the winter.”
According to Johnson, things would be better “without the news media blaring that we are in recession. People buy into that attitude.”
Decline in jobs
People are finding other ways to entertain themselves besides watching TV. The early heavy snowfall definitely helped last year’s ski season. But summer tourism was down slightly.
There were 2 percent fewer visitors to New Hampshire, thanks to rainy weather and a gloomy economic forecast. Spending was up by less than a percent. The average occupancy rate fell by 5.5 percent, and attendance at attractions decreased by 3.6 percent.
It’s no wonder that tourism-related jobs – which almost always grow year to year – are down by 1,000 in 2008.
But exceeding that is the continued decline in manufacturing. This year, 1,200 manufacturing jobs have disappeared since last October, according to the state Department of Employment Security. (A report in the publication Manufacturing News put the New Hampshire loss at 1,554 jobs.)
Paper manufacturing experienced the largest employment drop, falling 15 percent after Wausau Paper closed its doors in January.
Construction also lost some 1,300 jobs, and it wasn’t limited to homebuilders. Local and state government put off public works projects in an effort to make up for declining revenues.
What used to be a labor shortage has turned into bit of a glut, as contractors try to keep their workers busy.
“There are an awful lot of bidders for the same projects. People who are looking for projects,” said Gary Abbott, executive president of the Associated General Contractors of New Hampshire.
He looked hopefully to a federal economic stimulus package that may double the amount of federal aid to highways, which he said would jump-start road construction next year.
Another bright spot has been an increase in exports, which increased some 28 percent as of September, as manufacturers took advantage of the relative weakness of the U.S. dollar.
Exports to Mexico more than doubled since last year, putting it past China as New Hampshire’s biggest export market, next to Canada. Exports to the Philippines increased tenfold as the country was laying down cable to increase bandwidth.
Will it last? Economies around the world (and their currencies) also have weakened since September. Still, the interest in exporting among New Hampshire companies has not fallen off, said Dawn Wivell, director of the International Trade Resource Center in Portsmouth.
She said the push to export is the result of “a combination of the weak dollar, growth overseas and concern about the economy in the States.”
Still unemployment reached 4.1 percent in October — the latest figures available at deadline.
The figure is far below the national average of 6.5 percent, but almost everybody expects both figures to rise. For instance, some 80 percent of those surveyed in a study by the Business and Industry Association of New Hampshire said they expect that staffing levels will remain the same in 2009, with 11 percent expecting the number of workers at their companies to decrease — the lowest confidence level in four years.
In the past, layoffs have led to the creation of new businesses, as workers with time on their hands and a little severance in their pockets turn into entrepreneurs. But year to date, new businesses are down three percent from last year.
Meanwhile — despite a three-year-old law designed to reduce the number of bankruptcy filings – those filings have risen by 32 percent since last year.
Yes, there is still commercial credit for qualified borrowers, but getting qualified has become more difficult. Non-bank credit has been drying up for startups and new businesses trying to expand. At a conference earlier this month, for instance, Jeffrey Sohl, director of the University of New Hampshire Center for Venture Research, said that both venture capital and angel investing have been off substantially in the United States and New Hampshire.
All this doesn’t bode well for an early end to the recession.
“We haven’t seen the worst yet,” said economist Russ Thibeault, president of Applied Economic Research in Laconia. “All the turmoil on Wall Street has yet to filter to Main Street. We are still on the downward slope of the curve. We haven’t hit the bottom.”
Bob Sanders can be reached at firstname.lastname@example.org.