The Locus of Economic Activity in NH is Shifting
I gave a presentation last month during which I argued that the locus of economic activity in New Hampshire is shifting to the Seacoast. That is a provocative statement destined to offend the population centers of Manchester and Nashua and quite likely the individuals elected to represent them. Provocation isn’t my intent, it rarely is, but is often the result nevertheless. This shift will take years to become more apparent but the evidence for its occurrence appears across a range of important economic and demographic metrics. Over the past decade, private sector job growth in the combined Portsmouth and Dover/Rochester NECTAs** has outpaced growth in either the Manchester of Nashua NECTAs. The Seacoast is home to only about 15% of private sector employment, but that percentage is growing. The shift is not really about the job growth numbers because the Seacoast will always have smaller employment numbers than will the population centers of Manchester and Nashua. It is about how so much more of the innovation and transformation that is occurring among businesses and industries in the state’s economy is occurring in the Seacoast region.
Alone, the increase in private employment in the Seacoast relative to the Manchester and Nashua regions would not be that significant. Rather, it is the increasing share of innovation and growth in key industries that the Seacoast is capturing that indicates the locus of key economic activity is shifting. As the chart below shows, the Seacoast region has marginally increased its share of New Hampshire’s private sector employment since 2004, but it has, in relatively short time, substantially increased its share of finance and insurance industry employment, information industry employment, as well as both health care and manufacturing employment. Annual town-level data stops in 2012 but with the coming addition of technology dependent, international companies like Safran, the manufacturing trend appears to be continuing. The one key industry where the Seacoast has not gained share is in professional and business services. This is a large, important, and growing sector of the New Hampshire economy. In most states, key professional and business services firms often locate in the state’s largest city. Major NH Law firms, engineering firms, advertising agencies, and many of the other industries that comprise this sector still seem to prefer to be centrally located and have their main offices in the state’s largest city, Manchester. Having a main office anywhere other than the largest city seems to signal, to some, that a business is “regional,” that it does not serve the entire state or the larger New England region. The Seacoast is also capturing a smaller share of retail employment, which is surprising given its location along two state borders. It is not that retail is declining in the region but rather that it has grown faster elsewhere in the state.
Manchester and Nashua are still home to more companies in key industries than is the Seacoast and that will be true for some time, maybe always. Still, there was a time when the Greater Nashua and Manchester areas were the technology and manufacturing center of New Hampshire and almost all important developments in manufacturing and technology industries occurred there. These regions remain the technology leaders by numbers, but more key developments and new companies in technology and manufacturing are occurring in the Seacoast. The development of the Pease Tradeport into a premier location for industries of all types, along with the presence of a major research university (UNH), have played important roles in the shift. But what is really sustaining the trend is the ability of the region to attract the talent (skilled individuals with higher levels of educational attainment) that companies in emerging, growing and higher value-added industries desperately need. As I say far too often, brains are the most valuable resource in the 21st century. Skilled, well-educated people have the most economic opportunities and they are the most mobile members of society. Where they choose to locate, robust economic growth is likely to follow. Examining Census data indicates that skilled individuals with higher levels of educational attainment have increasingly chosen to live in the Seacoast, and that has provided a key source of competitive advantage to the region. The chart below shows how the population of individuals with a bachelor’s degree or higher has changed in some NH cities over the past two decades. The chart shows that on a percentage basis, Portsmouth and Dover, by far, had the greatest increase of individuals over the age of 25 with a bachelor’s degree among their populations. Somersworth, although beginning with a lower concentration of individuals with a bachelor’s degree, had the next largest percentage increase in subsequent decades. Among the largest cities in the Seacoast, only Rochester has not seen a substantial increase in its population with a bachelor’s degree or higher.
If the Seacoast continues to increase its concentration of “talent,” then the locus of economic activity in the state will continue to shift toward the region. Communities in the region continue to attract skilled individuals with higher levels of educational attainment because, to varying degrees, most have been able to provide a mix of services and social, cultural, and civic amenities, at a price more affordable than communities in other states. But if being the “cheapest” place to live were the key, the Seacoast would not be thriving. Rather, it is the combination of services and amenities at relatively more affordable price (providing a good value) that has been attractive. Many communities and regions are looking to thrive. Like all regions in New Hampshire the Seacoast has heard, and for the most part heeded, the call for fiscal restraint (although you can never spend too little for some or too much for others), but most of its communities have looked for ways to continue to provide or increase the quality of their services and the amenities (natural, built, civic, social and cultural) they offer. It is more difficult for urban areas to attract and retain the skilled individuals with higher levels of educational attainment that are increasingly the key to a vibrant economy because urban cities have to find ways to provide and encourage a level of services and amenities to compensate individuals for living in cities that have the problems associated with urban environments.
Most of the focus of economic development strategies is on creating policies to ensure a “good business climate.” I think that is important and I also think NH has a pretty good business climate. With so much concern over population and labor force growth and demographic changes in NH, more emphasis needs to be placed on creating a good “talent climate” as well as a good business climate. I don’t know that the Seacoast of NH has sought to do that but the demographic and economic data suggest they have done so regardless. The result has been a competitive economic advantage. On a smaller and slightly different scale you can say the same thing about the Hanover/Lebanon area which serves as a nice control group to assure the importance of amenities don’t just mean having an ocean nearby.
** NECTA = New England City and Town Area, a grouping of towns into a connected labor market area, akin to a metropolitan or micropolitan statistical area.