Archive for January 2013

It Seems You Can’t Turn White Collars Blue

January 8, 2013

Two contradictory trends are occurring in NH’s labor market and as Ricky Ricardo would say “somebody’s got some splaining to do”.   I see no other hands up in the room so I will take a brief stab at it.  The chart below shows that help wanted ads in NH rose modestly this year but the rate of employment growth in the state has been declining.

Help wanted and Emp Growth iin NH

It is easy to rest things on, and to take things off, the top of a flat head so here are a few off the top of mine that could be influencing these trends: 1) It could be that more jobs are being advertised in NH but are for companies with multiple locations – including NH and nearby states (I think this is not likely to be having much affect), 2) advertised jobs are not being filled because there are not enough applicants companies want to hire – “the skills gap” again (I think this is significant based on conversations I’ve had with companies), 3) the job growth numbers in NH could be revised upward with the upcoming benchmark revisions (I think this is likely but it may not be as significant as I thought a few months ago).

Regular readers know I write too often about the skills gap.  I like the issue because it gets at so many issues of fundamental importance to the future of NH’s and the nation’s economy – education and training, k-12 and post-secondary education, young people and their guidance and direction etc.  The skills gap is most often associated with very skilled scientific and technical occupations but in NH at least, any skills gap may be more pronounced in production and skilled “blue collar” occupations.  Based on the volume of  help wanted advertising in the state since the recession, the demand for those occupations has increased significantly compared to management, financial, business, technical and scientific occupations.

Help Wanted by Occup Since Recession

Despite the large percentage increase in help wanted ads in production and skilled blue collar occupations, employment in industries that employ those occupations has grown little.  It may be that there is a lot of ‘churning” in those industries (some businesses hiring and some contracting) resulting in little net employment gain but the anecdotal evidence (I am reluctant to rely on such evidence but it is the best we have at the moment) is that many businesses who would hire production and skilled, blue collar workers are unable to find individuals to fill their positions.

It has been a relatively recent (over the last several decades) transition for NH to a more technology intensive economy that relies less on production and skilled, blue collar labor.  Once the core of the NH economy it has been a long while since NH was seen a a land of opportunity for those who worked with machines and tools (other than just  computers) and once you have moved on  it can be very hard to go back – even when there is a reward for doing so.

Brother (or Sister) Can You Spare a Dime?

January 7, 2013

Tomorrow I will have the opportunity, along with several people a lot smarter than me,  to address the NH House Committee on Ways and Means to talk about some of the forces and factors affecting revenue growth at the state level.  I’ve forecasted (pretty accurately I think) the impacts of policy changes on state revenues for a number of clients and projects (here is one example I’ve written about in this blog).  Things like energy and gasoline prices that affect the disposable income  of NH residents and the willingness of out-of-state residents to travel to NH for recreation or shopping (energy prices can affect the price differential calculus for an out-of-stater coming to NH to purchase  goods or avoiding travel costs by purchasing higher-priced goods in their home states) are just a couple of examples that can make the difficult task of revenue estimation that much more difficult for NH lawmakers.  It’s a tough and thankless job and if I can help I am happy to.   It is especially difficult these days because the news on revenues is rarely good, as the chart below shows,  year-over-year quarterly state revenue growth ( from the state’s 8 largest “own source” revenues) has performed more poorly, for a longer period of time, than at any time over the past decade.

NH revenue growth

Some policy actions contributed to that (the decrease in the cigarette tax is an example – although that was only a small contributor to slower revenue growth) but the biggest reason is weak economic and job growth.

NH Job and Revenue Growth

Tomorrow I will present a number of charts and talk about a number of factors that influence various revenue sources but the bottom line is this:  until we have more than tepid employment growth, revenues aren’t going to grow significantly and forcing them to grow (via a major policy change) will not contribute to stronger job growth.  That isn’t the same thing as saying “any policy change (rate adjustment etc.) will harm job growth and revenue growth in the long run.”   NH’s unique fiscal system has survived far longer than many thought possible (and longer than many wanted it to survive) because of balance – those on the left of the political spectrum had to be satisfied with the state doing what it “needed to do”  rather than what it “wanted to do” and those on the right had to be willing to allow for some adjustments in tax rates and revenues to keep call for major policy changes at bay.  I think that worked pretty well for a long time but it only works when their is a modicum of flexibility and compromise in the policymaking process.    That, in fact, may be the best estimator of revenue growth moving forward and you don’t need an expert panel of wonks and nerds to tell you that.

Can We Be Different Like Everyone Else?

January 4, 2013

I was surprised to see the number of states that have allowed casino gambling.  In a prior post I focused on what I thought were the states that are perhaps most identified with casino gambling (Nevada, New Jersey, and Connecticut).  Twenty three (23) states and five since 2005 (if you count Massachusetts) now allow some type of casino gambling.  As the map below shows, the Northeast region of the country is the king of casinos.  I don’t know what that says about the Northeast but Vermont and New Hampshire are now the only states in the region that do not have some form of casino gambling. (a note about the data in the charts below:  I have taken reasonable steps in the limited time I allocate to this blog to provide accurate information – if anything appears inaccurate please let me know).

Note: Map is Updated thanks Curtis!

 Competitive Casino Map

I think whether or not to become more like other states in the region is an important and ongoing debate in New Hampshire, whether it be about our revenue structure, which stands out in the region, or our political, legislative, and regulatory structures which to a lesser degree do as well.  I’ve long argued that the state was able to buck the region’s unfavorable demographic and  economic trends because it was somewhat unique in the region.  Some who disagree with me on that argue that the state should, in the case of casino gambling, refuse to become more like the rest of the Northeast region.  While others who agree with me on the benefits of NH’s uniqueness are arguing that NH should have casino gambling because other states in the region are doing it.  Consistency isn’t what it used to be or perhaps I just confuse consistency with rigidity.  It is also possible that I am misreading the whole consistency and change aspect of the debate.  Could it be that gambling is consistent with NH’s fiscal traditions but inconsistent with its uniqueness in the region?  I don’t expect there will be a lot of testimony on that at any public hearings on casino proposals.  For those more interested in the pedestrian issue of how much state revenue we can expect, below is a chart that shows how much states currently take in from casinos (in very broad categories).  Interesting to see that Pennsylvania is now the champion in terms of state revenues from casinos.  That state is, in large part, responsible for the decline in revenues in New Jersey.  Things are definitely changing in NH and the upcoming debates over whether or not to allow casino gambling will, I think, tell us a lot about the direction of that change.

State Revenue from Casinos

The Sun Will Come Out Tommorow

January 3, 2013

I have been uncharacteristically and uncomfortably gloomy in my assessment of the NH economy lately, but I still hold out hope that New Hampshire’s job growth numbers for 2012 will be revised upward early in 2013 based on the volume of help-wanted advertising in the state and reported growth in aggregate wage and salary income in the state.  Even if that doesn’t happen there are encouraging signs that job growth will accelerate.   PolEcon’s NH Leading Index increased this month to a value of 13.0, down slightly from 16.7 the prior month, but it has registered its highest three-month reading since early in 2010.    At least some uncertainty around the  “fiscal cliff” that caused many firms to postpone hiring has been removed.   The U.S. Treasury debt ceiling still needs to be raised this month and a repeat of the last debt ceiling antics could produce another big drop in business and financial market confidence, but overall, the national and NH economies appear poised to see accelerating job growth as 2013 progresses.

Polecon NH  Leading Index

PolEcon’s NH Index of Leading Indicators is a diffusion index consisting of nine state and national indicators of economic activity designed to predict changes in the rate of employment growth in NH.  When index scores are above zero, more of the leading indicators are moving in a positive direction and the NH economy is expanding. The Index has a strong statistical relationship with changes in NH employment, Index scores lead changes in the rate of NH employment growth by 3-6 months.  Using statistical techniques, Index scores can also be converted into a probability that NH will be in  a recession sometime within the subsequent six months.

Leadin Index Components

The Most Important Ideological Debate of 2013

January 2, 2013

It is hard to fix a problem that you don’t  know you have.  That seems to be the case in NH where I still hear “NH has fared better than most states since the recession.”  I disagree and the U.S. Bureau of Labor Statistics is on my side.   Just before Christmas the Bureau of Labor Statistics issued its  monthly report on November employment and unemployment in  the 50 states.  Once again the news was not good for New Hampshire.  Most media reports chose to report that NH’s unemployment rate dropped slightly during the month without noting that the number of jobs located in the state declined in November (John Nolan of the Foster’s Daily Democrat and Rochester Times was a notable exception).

Nov 2011 to Nov 2012 Job Growth

Compared to employment in November 0f 2011,  November 2012 employment in NH was lower by1,700 on a seasonally adjusted basis and lower by 2,500 on a not seasonally adjusted basis.  Only five states have fewer jobs located in their state in November of 2012 than they had in November of 2011.  As I have suggested before, NH’s job growth goes a long way toward explaining why the state’s housing market isn’t seeing the same recovery in prices that appears to be occurring in many other states.

50 state Job Growth Nov 11 to Nov 12

I am hoping that in 2013 policymakers focus much of their debates (ideological or otherwise) on policies that strengthen the NH economy.  I hope that most of those debates encourage the introduction of solid empirical evidence in support or opposition to any proposals (I tried last year but could not find any data or methodology to determine the impact that allowing pistol duels in the statehouse would have on job growth) and are absent the vitriol and ad hominems that characterized so many debates last year.  Policies that can influence job growth can easily accommodate the needs of the two-party system to make the  sort of ideological arguments and distinctions that they feel are needed to influence elections.

Whether job growth is slower now than in the past because employers are not willing to add additional workers (supply side arguments) or because they are not able to find enough or enough qualified workers  (the human capital and “skills gap” argument) is among the most important issues to understand in setting both national and state-level economic policies.  If employers are unwilling to add employees that are readily available,  then the efforts to spur job growth focus more on factors affecting businesses (tax rates, regulations, costs etc.).  If job growth is constrained because employers are unable to find enough or enough qualified workers to fill open positions, then the focus of efforts to spur job growth will be more effective if they look to influence demographic trends, increase the skills of the labor force, and/or better match the skills of workers  to the needs of employers.  In reality this is not an either or question because inadequate attention to the needs of either employers or the workforce will produce sub-optimal economic growth. I’ve tried in this blog to introduce some evidence related to the human capital argument for job growth trends and I will bring some supply side evidence in the future as well.
Ideological or not, respectful and civil or not, recent trends in NH’s job growth and the implications for future growth have to be the first and most important policy debate of 2013.


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