Archive for the ‘economic development’ category

« Trend Lines home page

The Locus of Economic Activity in NH is Shifting

January 21, 2014

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.

NH Regional job growth

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.

Seacoast share of industries

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.

Changes in Ed Attainment

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.

Categories: economic development, Educational Attainment, job growth, NH, NH Economy
Tags: , , , , ,

Comments: 2 Comments

Educational Attainment, Economic Prosperity and Fiscal Reality

March 4, 2013

I write and speak a lot about the importance of demographics to community and regional prosperity.  Over the past several years I have written and spoken about my belief that communities wanting to increase the number and quality of employment opportunities available in their town increasingly need to recognize the importance of being an attractive place for skilled individuals with higher levels of educational attainment.  Employers in emerging and growing industries  locate in areas where the pool of talent (skilled, well-educated individuals) is “deep” or growing.   A community can still see employment growth even if it doesn’t have a lot of skilled, well-educated individuals if it is located in a region that does have enough of them but the impact on and benefits to the community will be very different.

It is hard to empirically test the importance of skill levels and educational attainment to job growth in individual communities but anyone involved with the location and expansion decisions of employers knows how important the availability of a skilled and educated labor force is.  Because the occupational needs of employers in different industries varies greatly, I, and others, often use the percentage of the population age 25+ with at least a bachelor’s degree as a surrogate for trends in the education and skill-level of the workforce in a community or region. It’s a good way to labelled an elitist, at least by those who don’t know anything about you.  I don’t think only college graduates can get good jobs but it is clear to me that trends in the educational attainment of the population of cities and towns is a pretty good indicator of how the economic fortunes of a community are changing. I’ve tested the relationship statistically and found that there is a  relationship between the change in the percentage of individuals age 25+ with at least a BA degree in a community and employment growth over the past decade.  There are a lot of factors that influence employment growth but over past decade communities that have had larger increases in the percentage of individuals with high levels of educational attainment generally have had better job growth (or at least less negative growth).  The relationship narrowly missed statistical significance when tested on NH’s 40 most populated communities.  Since the recession in the early 2000’s, there has been virtually no private sector job growth in NH (primarily because the last “‘great recession” wiped-out gains from the middle of the decade).  The chart below crudely divides NH’s larger communities into quartiles according to the change between 2000 and 2010 in the percentage of their population age 25+ that has at least a BA degree and the mean change in private sector employment between 2003 and 2011.  One caveat, the figures for 2010 used to calculate this is based on the three-year average of American Community Survey values and smaller communities have larger margins of error in the survey results.  It is just one of the challenges in documenting the relationship between demographics and economic performance at the community level.  Nevertheless, I think  the data point to a relationship were towns that are seeing increasing levels of educational attainment among their population are performing better economically than than those that are seeing less of an increase.

job growth and ed attainment change

It also says a lot about how the character of a community might be changing.  I live in city that has seen a significant increase in the percentage of its population with a BA degree or higher over the past two decades.  That change has contributed to changing expectations of the community (the type of services and amenities it offers).  That type of change creates a clash between the old and new that has and continues to characterize many communities.  In many ways I believe local tax cap debates are more about demographic and socioeconomic changes than they are about economics and fiscal policies.  But I digress.

Skilled individuals with higher levels of educational attainment have the most economic opportunities and they are the most mobile.  I think keeping and attracting skilled individuals with higher levels of educational attainment is an increasingly important economic development strategy for communities.  Looking at changes in educational attainment between 2000 and 2010 among NH’s largest communities shows some interesting patterns.  Not surprisingly, some of the communities that have done the most to restrain expenditures have seen the smallest increases in educational attainment levels (some towns like Durham had such high levels – 77%  – they have no way to increase much).

ed attainment change by town

Spending liberally is never a good thing but providing the services and amenities desired by skilled and educated individuals and families at a price (in terms of local taxes) lower than other communities is a good way to accumulate the talented workforce that can increase real prosperity in a community.  Just adding skilled and educated individuals isn’t enough for employment growth, particularly if a community doesn’t want to be a center of employment or is otherwise inhospitable to employment growth.   I don’t think a low tax price alone is enough to attract talent and I don’t think providing amenities and services without regard to price is enough either, but too often never the twain shall meet in striking a balance between prices and  services and amenities and longer-term community development objectives.  I don’t know many local budgets that can’t be cut but unfortunately the cuts usually come at the expense of those services and amenities most likely to help a community attract or retain individuals with the most economic opportunities and choices of where to locate.  When I say or write these things I risk being labeled a big spender or liberal.  In reality I am just documenting trends that seem pretty clear to me.  Nevertheless, my advice to others is never bring data to an ideological fight if you want to escape unscathed.  In an age of austerity, spending decisions need to consider both the current  fiscal reality as well as the longer-term implications for the economic prospects  of  a community.

Categories: Demographics, economic development, Educational Attainment, Fiscal Policy, job growth, NH
Tags: , , , ,

Comments: Be the first to comment

Where Never is Heard a Discouraging Word

February 27, 2013

Without an accurate assessment of where you are you can’t chart a course to get to where you want to be.   In the context of efforts to strengthen regional and state economies, however,  plotting your coordinates seems especially difficult.   For decades New Hampshire (including me) has become accustomed to hearing that its economy is “doing better than most other states”  and that we can expect to grow faster than a majority of states and all other states in the Northeast.  I have blogged here several times about how that is not currently the case but because about five people read this blog there isn’t much fallout.  But  when someone like me suggests, in a public forum,  that NH is lagging and that superior growth is not currently the case for the state, you can expect some incredulity and push back.

State 12 Month Job Growth

When you speak in a community and present lots of data that suggests it is lagging even more, then you can expect the push back to more likely come with a closed fist.  And when that community is close to where you live, well  it’s probably best to get an unlisted phone number.  I’m no prophet but if I were I  think it would  probably be impossible to be one in your own land.  I like to be the bearer of good news but when the data doesn’t suggest good news is warranted I don’t change the data or the news about it that I bring.  Long ago I learned that being right too early will feel a lot like being wrong.  I don’t know who was more offended by my presentation yesterday at a local chamber of commerce, people who feel I know nothing about their community, the people who think I know nothing about New Hampshire, the people who think I don’t understand the U.S. economy, or the people who think I know nothing about any of these.   An informal tally to-date suggests about an even split.

I am not a twitter user or follower, I am only marginally able to follow my own thoughts and activities throughout the day, but if I were and if I were able to expand the size of a tweet, this is how it would summarize my remarks at the chamber forum:

Economic growth is increasingly associated with concentrations of skilled, well-educated individuals and any state’s, region’s, or community’s longer-term prosperity is likely to be correlated with its ability to attract and retain these individuals.  The ability to keep and attract this demographic is as much a requisite for job growth as it is a result so any region’s development strategy should attend to its capacity to appeal to this  demographic and look to leverage the associated economic benefits .  Understanding the direction of these trends in your community or region, likely tells a lot about recent and future economic performance.

If you happen to discover oil or shale gas under your state or community that tweet applies a lot less.  In addition, small communities can see strong growth from just one or two businesses, but with some exceptions and over the longer-term,  I think the summary holds true.   I am a first generation college graduate and my beginning, and likely my ending, doesn’t warrant even a whiff of elitism of any sort.  But making an association between educational attainment and economic growth apparently implies a disparaging of those who are not college graduates, just as the notion that NH’s economy is growing more slowly than some of the states that we are accustomed to regularly outperforming apparently implies an indictment of “the NH way” compared to to other states.

One or two years of weaker economic growth is not a signal of apocalypse, but its not a bad idea to wonder if it is and to consider ways to avoid it.   For me, the apocalyptic story  for NH would be that, over the longer-term, we become a slow employment growth state that is also a higher cost-of-living state.

State Cost of Living

High costs and slow employment growth have characterized too many states in the Northeast as well as California and they have all suffered as a result.  But at least in California you still have nice weather.

Categories: economic development, Educational Attainment, job growth, NH
Tags: , , ,

Comments: 3 Comments

Striking an Economic Strategy With Maslow’s Hammer

January 22, 2013

The great psychologist Abraham Maslow is famously quoted as saying:  “When the only tool you have is a hammer you tend to see every problem as a nail.”   Maslow gave us all too much credit. When we (NH) have a hammer and know how great it is, we not only treat everything as a nail, we actually perceive everything to be a nail.  We (me included) develop a blindness to “non-nail” problems and creative problem solving takes a back seat to picking up that hammer and smashing the problem.

NH’s relatively low state and local tax burden, especially compared to other states in the Northeast, has and should continue to provide the state’s economy with significant competitive economic advantages.  In an era where “talent” – skilled, well-educated individuals are the resource businesses are most in need of, our state’s fiscal structure has been a magnet for higher-skill, more highly-educated and more mobile individuals and families.  So why does it currently not appear to be offering a competitive advantage (based on job growth and population migration data)?   The question is whether our fiscal system will be enough of an advantage in today’s economy to assure the kind of growth and prosperity the state became accustomed to over much of the past several decades.  Based on the screams of joy I heard last week, the answer for many in NH is a resounding yes.  The news that Massachusetts’ Governor Patrick is proposing to raise income tax rates in that state has been greeted by many in New Hampshire as if the cloud that is NH’s slow job growth is about to be lifted.  Once those new Massachusetts tax rates are enacted NH’s schools and students will perform better, our electricity prices will drop, our young people will choose to enroll in the  newly affordable colleges in NH,  and our communities will be safer, cleaner and offer more and better services at ever lower prices.  For too many in our state,  the future of  NH’s economy is largely determined not by what we do as a state, but by the mistakes that other states make.  I’m no Doc Rivers or Bill Belichick but I don’t think their game plan is ever solely predicated on the other team’s mistakes.   Great states, like great teams, can succeed even when the other “team”  is playing their best.

The monthly state job growth numbers for December, released late last week, continue a disappointing trend that should have NH businesses, policymakers, and citizens asking whether Maslow’s hammer is the only tool to use in shaping an economic strategy for NH’s future.

Annualized Emp. Growth

In the case of economic policy in NH, the “nail” is the high taxes which we have been pounding with our hammer for decades.  For the most part,  NH has successfully pounded that nail well below the surface.  As the chart below shows, state and local taxes as a percentage of personal income in NH are well below the U.S. and neighboring state averages.  Occasionally the nail it pops-up but is usually driven down.  Note that while it did rise for a time during the recession, this was a result of a slow and declining income growth rather than a rise in taxes.

State and Local Tax Burden

The problem is that our love of the “hammer’  as our primary economic tool appears to result in us using a longer and longer nail set in an effort to achieve the same levels of economic success as we have in the past.   Governor Patrick’s proposal to raise Massachusetts’ tax rates may benefit NH, I hope it does, but if it increases the use of our hammer, to the exclusion of other tools,  the benefits may be illusory.  A low tax burden is a great asset but the skilled, well-educated, individuals that drive economic success for the most part (it is certainly not unanimous)  also want the amenities and services that people free from want generally like to enjoy – things like good schools, civic, cultural, social, natural  and recreational amenities.  People want to pay as little as possible for these amenities for sure (and in many cases they expect them for free), but they want them nevertheless.  I think NH’s advantage is really been about providing ‘value” as much as it is about providing just a low tax burden.  As long as we can provide the services and amenities that people want, at a tax price lower than other places, we should be a magnet for the kind of individuals that will help our state thrive.

Our state’s hammer is and will continue to be a great tool, but not for every job, and not if it is used indiscriminately.  Every increase in a tax or raising of a fee isn’t an end to the “NH advantage.”  It wasn’t during the 1980’s or 1990’s when the state was growing remarkably even as taxes and fees with tinkered with (and even one or two major changes) by both Republican and Democratic administrations.  The key is knowing the true economic consequences of changes to different fiscal policies, which ones really hurt or help the economy and which ones have little impact  and by how much.

I like NH’s hammer and I have argued how it has been a great tool in helping us build a house that withstood the ill winds that blew through the Northeast region for decades.  I hope NH’s basic fiscal structure doesn’t change.  But we have become so comfortable wielding our hammer that in our casual over-reliance on it we may just be pounding on the thumbs of those who would live in the nice house with which it was built.

Categories: economic development, Fiscal Policy, job growth, New Hampshire, Policy, taxes
Tags: , , , ,

Comments: Be the first to comment

%d bloggers like this: