Posted tagged ‘NH economy’

Why The Drop in Avg. Weekly Wages?

April 11, 2019

In a presentation I gave to the NH Senate Ways and Means Committee I noted two important wage trends. First, the average weekly wage of NH workers today is actually a bit lower than it was in June of 2017. This does not mean that no worker’s wages are increasing.  Rather, it reflects the mix of industry and occupational job growth in NH.  Lower productivity and wage industries have added more jobs in NH than have higher productivity/wage industries.average weekly wages

Second, the weighted average weekly wage in the industries that added jobs in 2018 was $946 while it was $1,163 in the industries that lost jobs.    But it is not accurate to suggest this implies the NH economy is somehow being “hollowed-out” of higher paying jobs.  Data from the end of 2018 showed that there where 50% more job openings in the state in occupations that require a college degree (9,522) compared to jobs that don’t require a degree (6,132) at the same time there were 60% fewer individuals looking for a job and who have a degree than those looking for a job who don’t have a degree (5,532 vs 13,380).

openings an ed

Labor shortages are significant in all industries but higher skill jobs are much harder to fill so more lower skill/wage jobs are being added while higher skill jobs go unfilled, skewing the job growth mix and lowering wage growth trends in the state.  Other contributing factors to slower average weekly wage growth in include a small decline in the average number of hours worked per week by employees in many industries.

Not So Fast on NH’s Job Growth

March 14, 2019

The monthly payroll employment report gets a lot of attention. The monthly estimates are based on a survey sample of employers (differing from the monthly survey of households that is the source of unemployment and labor force estimates). Prior year monthly payroll estimates are revised early each year as more complete data (than the sample survey) are analyzed.  For a number of reasons (including the fact that newer firms are slow to get included in the survey) NH’s employment estimates more often than not have shown stronger (than first reported) job growth rates. Not this year. The new benchmark numbers have cut the state’s annualized job growth by more than half (to below 1%). The chart below shows the year-over-year growth rate in private sector employment in NH is about 1% (including government employment shows a slightly slower rate of job growth 0.8%).

Benchmark revisions

Early in 2018 I forecast NH’s job growth for 2018 would be about 0.6% (based on labor force constraints – not a weaker economy) and for several months I have been issuing a mea culpa for what looked like a significantly inaccurate employment growth forecast. While my sagacity is less challenged than I originally thought, I was more comfortable with NH’s employment trends when it was.

Presidential Campaign Impacts on U.S. Job Growth and Implications for NH

June 9, 2016

The May U.S. jobs report with downward revisions to the March and April job numbers was bad, not bad enough that you should start stocking canned goods and bottled water in your basement but bad nevertheless.  The impact of 35,000 striking Verizon Corp. workers on the May numbers is cited as one explanation for the weak report but there were 25,000 temporary workers hired by the company during the strike so the overall impact was actually fairly small.  Seasonal adjustment factors (the statistical procedure used to smooth regular annual fluctuations in employment data throughout the year– things like Christmas hiring, summer employment of youth etc.) seem to be more problematic in recent years and that may also be a contributor.   Of course it is possible that hiring was just weak, plain and simple.  Hiring will continue to weaken, I just don’t think job growth is really as weak, and the slowdown as rapid, as the May jobs report suggests.

Presidential Campaigns Appear to Impact Job Growth

The first rule of politics is to forget all of the rules of economics and that is more problematic now that the national political climate seems to increasingly influence real economic variables. Think of the impact that debt ceiling debates and government shutdown threats have had on economic activity recently.  With almost no focus in the current presidential election on sound economics and economic policies it is easy to see how politics could  contribute to a weak May jobs report (when the empirical evidence doesn’t provide a clear explanation for economic events it is hard to go wrong blaming politics and politicians).  But there is some evidence that presidential elections can temporarily depress job growth.  The uncertainty of a presidential election, especially in a year without an incumbent, and the people and policies that candidates may employ in their administration can give pause to businesses investment and hiring decisions. The uncertainty surrounding future economic and fiscal policies in a presidential election year should arguably be greater several months prior to the election rather than a month or two when the election outcome and policy directions become clearer.  I compared average private sector job growth (government employment should not be affected) in the U.S. during the months of June-August in presidential election years, to the average job growth from September (of the year prior to the election) to May (of the election year).   Since 2000, in each presidential election year the average private sector job growth from June-August significantly lagged average job growth over the prior nine month (Sept-May) period. The pattern held in 2008 but because the U.S. economy was in free fall for other reasons it is not included here.   In years with no presidential election this generally was not the case (years such as 2002, 2003 and 2007 when the U.S. was entering or exiting a recession are exceptions).

UncertaintyJob growth in NH is going to slow regardless of political uncertainties given existing labor force constraints.  NH is essentially at full employment and the nation is close. The longer a recovery lasts the greater are the chances that job growth will slow.  Still,  there are more uncertainties regarding the presidential candidates and the policies that could affect business and the economy in this election than is typical in a presidential year so it is not unrealistic to think that politics is already affecting hiring and investment decisions.

Will New Hampshire Follow the National Trend?

State level job growth numbers for May will be released June 17th.  In a small state like NH monthly job growth can be especially volatile. Up or down  conclusions about a state’s economy should not be drawn from a single month of employment data.  A three month trend in private sector employment is a better reflection of the direction of a state’s economy and by that metric NH has been on a roll.  The chart below shows that after several years of below national average private sector job growth, the pace of job growth in NH is now at a level equal to the U.S. average.  Moreover, the growth trend for NH has accelerated while the rate of private sector job growth in the U.S. has decelerated.  The rate of private sector job growth NH is going to slow nonetheless,  just as it has in the nation overall.

private sector job growthI don’t think the private sector job growth trend has gotten enough attention in NH.  Many (including me at times) focused on several years of NH’s subpar total non-farm (including government) employment growth.  But as I have noted in prior posts, the percentage drop in government jobs in NH is among the largest of any state in the nation, masking some of the strength of hiring trends in NH’s private sector.  The chart below shows how both private sector and state and local government employment in NH have grown since each sector’s pre-recession peak.  Private sector employment in NH peaked in February of 2008 and after shedding 6% of those jobs during the recession NH has regained that many plus an additional 3%.  State and local government employment in NH did not peak until April of 2010.  It takes a couple of years for property valuations to reflect economic conditions so the largest declines in property valuations – and thus local revenues and employment- occurred as the recession had ended.  State and local government employment in NH is about 8.5% lower than at its peak, with local government shedding about 6,800 jobs and state government about 1,000 jobs.

public vs private sector growth

Labor Market Response in NH May Be Too Late

For too long in NH private sector job growth remained consistent at a subpar rate despite a large increase in help wanted ads in the state.  A combination of slow or no labor force growth and a mismatch between job opportunities and the skills of job seekers were the causes and not a fundamental erosion of NH’s business climate as I argued in this post.

NH US Help Wanted

But now help wanted ads in NH and the nation are slipping (chart above) and while the recovery isn’t over we are getting better more slowly.  Unfortunately, that is occurring just as the labor market conditions –  low unemployment, rising wages, and signs that NH is once again seeing net in-migration from other states, are all resulting in a more rapid expansion of the NH labor force, the key ingredient wages

the state has lacked in recent years to achieve a faster pace of  job growth.

NH Labor force growth

A Bumpy Ride for the Remainder of 2016

I am frequently in error but rarely in doubt and in this post  last fall I was confident NH would again exceed the U.S. rate of employment growth (it is still possible but not likely) and that NH would see a 2.5% increase in total employment in 2016 (that is not going to happen). In fairness, private sector job growth has been on a more than 2% growth pace for the year and I did include two caveats in my forecast last fall: first that labor force growth in NH would have to accelerate (in part due to a resumption in net in-migration to the state) and while the labor force is once again growing in NH,  it is at a pace that may not sustain the 2% plus growth that NH’s private sector is currently on.  Second, the decline in government jobs would have to abate – it hasn’t.  A month ago at a presentation at a local community bank I downgraded my job growth forecast for NH in 2016 from 2.5% to 1.8%.  With more recent national economic data – including the May jobs data and March/April revisions, readings from my PolEcon NH Leading Economic Index, along with the uncertainties produced by the nation’s political climate, I now believe the rate of growth will be just 1.2 to1.4 percent.

More on Shifting Economic Activity in NH

April 17, 2014

My post on the “Shifting Locus of Economic Activity in NH” back in January generated a lot of interest and emails. That post has more views than any other post on this blog over the past year and half. Admittedly that’s setting a pretty low bar as far as blog readership honors go. Nevertheless I want to thank my family as well as those with an interest in flying, swarming insects and an inability to spell “locust” in their search engines for making it possible.

 

As I noted in my first post on the topic, I believe there are a number of economic and demographic indicators that support my contention about the shift in economic activity. Still, there are some (many?) in the Granite State who disagree. In the spirit of giving the public what it wants and sparking debate, I present another of what will be several posts on the topic.
Some themes essential to my thesis are: that the ability to attract and retain talent (skilled individuals with higher levels of educational attainment) is the critical ingredient responsible for the shifting of activity in NH – as well as the key ingredient for producing a dynamic economy anywhere; and that communities offering amenities and services desirable to “talent” and at a relatively more affordable price are keys to attracting talent. I think price (the ability to offer desirable amenities and services at a relatively more affordable price lower than other communities that offer similar amenities) has been important. But I also think that patterns of economic activity in NH and throughout the country demonstrate that unless your community or state is sitting on a valuable store of fossil fuels or minerals, being cheaper isn’t enough to generate more robust economic activity. One interesting artifact of the debate over local government fiscal policies is the mistaken belief that communities spend more when they contain a higher percentage of lower-income residents. In fact, just the opposite is true – expectations for services, quality, and amenities, along with their costs, generally rise as communities (primarily cities – small and large) generate more economic activity and become wealthier. This typically creates a lot of conflict in communities that are experiencing new economic successes and associated demographic changes and can make sustaining a higher level of economic activity difficult for a community.
Getting back to the evidence that supports my contention about economic activity in NH, the previous decade has not been kind to NH or most states in terms of job growth. I documented the Seacoast’s increasing share of NH’s employment and in key industries in my prior post on the topic.  Here, and in future posts, I will look at some of the demographics of that job growth to support my thesis. The chart below shows the percentage change in jobs among individuals of all educational levels (age 25 and up) in different counties and the State of NH between 2003 and 2012, as well as the percentage of jobs held by individuals with at least a BA degree.

County Job Growth
Similar to my prior post, the chart shows that job growth has been higher in the Seacoast (defined here as Strafford and Rockingham Counties because of data availability while the prior post used data at the community level) than in either Hillsborough County or the State as a whole. More importantly, the chart shows that the rate of job growth in the Seacoast among those with at least a BA degree has exceeded the rates for either Hillsborough County or the State by an even wider margin. Strafford County has seen an especially large increase (largely in Dover – my domicile in the interests of full disclosure) but its much smaller employment base makes larger percentage changes easier to obtain. Again, however, it is not just job growth but the nature of that growth and the shifting of talent that is the key.
The Seacoast accounted for a higher percentage of the state’s net job growth between 2003 and 2012 (chart below). The percentage of the state’s net job growth accounted for by the Seacoast was 70% compared to 46% for Hillsborough County (note the percentages add to more than 100% because some counties had negative job growth during the time period).

Share of States Job Growth
Almost half of the net job growth in NH among workers with a BA degree occurred in the Seacoast. Hillsborough County still has a larger percentage of job holders in the state with a BA degree or higher (37% to 31% in the Seacoast) but that percentage has slipped by almost 1% over the time period, while the Seacoast’s percentage has increased by 1%. Still even shifts occurring at seemingly glacial speed are very powerful. I suppose it is possible that the Seacoast has just been more successful in adding jobs which overqualified BA’s are filling. Based on my initial examination of job growth by industry, I don’t think that accounts for the relative differences, but in future posts I will examine that and other possibilities.

Energy Prices Won’t Be Our Savior

March 24, 2014

For as long as anyone can remember New Hampshire (and most of New England and the Northeast) has had high energy prices compared to most other states.  We may narrow the gap some but as sure as tomorrow will be Tuesday, compared to most other states and regions of the country, our energy prices will be higher. There are a number of reasons for that and they can’t be adequately covered here so for now let’s move on to the real concern of this post.  Many will disagree with me about the prospects for relative energy costs in the state but even if I am wrong, and NH and New England could somehow be truly energy price competitive with the rest of the country, we are likely to be very disappointed in the resulting economic benefits.  I am all for lowering energy prices and doing whatever we can do to accomplish that.  Reducing energy costs will give households more discretionary income, ease the burden high energy prices place on many households, and benefit the cash flow of many businesses.  These are real economic benefits but based on op-eds and comments about how high electricity and energy prices are killing business, including by people and groups I like and respect, you might think that reducing the price of electricity will bring a new industrial revolution to the state.  The problem is, a new industrial revolution has been occurring and it is one that relies less on energy and is, in part,  a result of those high energy prices.

Energy BTUs per GS

Energy prices are becoming less important to the success of the New Hampshire economy all the time.  As the chart above shows, the energy content of what the state produces has been declining for decades.  More of what we produce relies less on energy content and the lower energy intensity of the NH economy indicates a lower price or cost of converting energy into GDP.  Reducing the price of an input that is becoming less important each year to the output of the NH economy is not a prescription for revitalizing the NH  or any state’s economy.

To cite just one example, high energy prices have hurt but certainly didn’t kill the pulp and paper industry in New Hampshire.  Industrial electricity rates in Georgia are almost exactly one-half (5.97 cents/kwh) what they are in New Hampshire (11.97 cents/kwh avg. as of Dec. 2013) but Georgia lost 10,000 pulp and paper jobs (40% of the industry in that state) over the last 11 years.  Industrial electricity rates are 40% lower in Wisconsin and Pennsylvania than they are in New Hampshire and those states lost 11,000 and 10,000 jobs respectively in paper-making industries.  California lost more than 13,000 jobs in the paper industry, Illinois 12,000, Ohio 10,000 etc., etc. etc., to the tune of about 200,000 jobs lost across the country and in states with both high and low energy prices.  So if you thought that lower electricity prices would reverse that  industry you would be wrong.

I hope NH does lower electricity prices and if we do, congratulations, we will have won a battle for the 1970’s and 1980’s.  Maybe then we can turn our attention to the battle for the future.   If you want an example of a NH paper company that is fighting (and winning) today’s and tomorrow’s battles consider Monadnock Paper, you can read an excellent online Forbes article about them here.

The future is as much or more about reducing energy intensity as it is about lowering energy prices.  In fact, while lowering energy prices would have been great for NH circa 1980, it might also have delayed the long-term economic adjustments and reductions in energy intensity needed for our state and region to thrive. An industry that can’t thrive in NH because of energy prices is an industry that probably could not thrive in a global economy for a number of other cost-related reasons.   Maine’s industrial electricity prices are about one-third lower than they are in the rest of New England and I don’t think it is a coincidence that Maine is the only state in the region with an economy as energy intensive as the rest of the nation (chart below). Maine’s reliance on more energy intensive natural resource industries hasn’t served that state’s economy well in recent decades.

state by state energy intensity

Our state’s (and our region’s) comparative advantage will never be natural resources or lower costs such as electricity.  For the most part, state economies have been adjusting to account for that fact in what has been at times a painful but necessary adjustment.  As the chart below shows, states with high electricity prices also generally use less electricity per dollar of gross state product.

Eelectricty prices and energy intensity

Although it can, becoming a less energy and electricity intensive economy does not just mean ‘de-industrializing” or becoming a more services-oriented economy.  The dollar value of what New Hampshire’s manufacturers produce continues to climb in real dollars, they just do so just using less electricity every year.  As the chart below shows, the electricity content per dollar of manufacturing output in the state continues to decline and it is not a coincidence that our manufacturing sector has been evolving from traditional to more advanced manufacturing.

electricity content of manuf

Although much of this trend in manufacturing  has to do with the loss of more energy-intensive industries and the emergence of newer, less energy intensive industries, as Monadnock Paper demonstrates, some is also about traditionally energy-intensive industries adapting to the state’s less competitive energy climate.   In either case, the NH economy and individual businesses are way ahead of energy policies in the state.  The question is whether energy policies can catch-up enough to help facilitate the energy and economic transitions and adaptations that are occurring in the state’s economy

The Incredible Shrinking Labor Force

January 10, 2014

The employment growth report released today by the U.S. Bureau of Labor Statistics was disappointing for sure (74,000 job growth when 200,000 was the consensus estimate) but December employment numbers are more prone to seasonal adjustment errors because of the large amount of hiring that occurs prior to the holidays and this year presented even more issues because of the shortened time between Thanksgiving and Christmas (Thanksgiving was on the 28th, its latest possible date).  December’s employment growth may still be disappointing but my bet is that December’s numbers will be revised up in future months.  Help wanted ads have been increasing for the past six months and the labor supply/demand ratio has been falling.  Unless there is an even bigger “skills gap” than many think, that implies stronger job growth than was reported in December.

The best thing about the report was that it helps focus more attention on the nation’s incredible shrinking labor force, a problem that significantly lowers the potential economic growth of our nation’s economy.  Too many media reports on the nation’s and NH’s economy focus almost entirely on the unemployment rate.  That is especially true in New Hampshire where, because of our demographics (a lower percentage of harder to employ populations are in our state’s labor force), we always have a lower unemployment rate than the U.S.   No matter how weak job growth is in New Hampshire, many will cite our lower than the U.S. unemployment rate as a sign of economic strength.  Some reporters (hat tip to John Nolan of the Rochester Times) have avoided confusing job growth with the unemployment rate but too many in our state confuse the two.

The problem of smaller or slower growing labor force is an important and vexing one for New Hampshire and the entire U.S. A smaller or slower growing labor force implies slower economic growth because the output of the economy grows when more people are producing, when more capital (equipment and machinery) allows the same number of people to produce more, or when knowledge/technology/skill levels improve and allow greater productivity per worker. So unless productivity is increasing to compensate, a shrinking or slow growth labor force means slower economic growth.

There are several reasons a labor force can shrink or grow more slowly. Some related to economic conditions, some related to demographics, and some (such as the current situation) seem to have an unexplained element. Nationally, population trends have meant slower labor force growth as lower birth rates over the past few decades and as baby boomers reach ages where labor force participation starts to decline. NH benefited from strong population growth in the 70’s and especially 80’s and 90’s. That provided a strong boost to our economy, especially since much of that pop. growth was the result of in-migration from other states by skilled, well-educated individuals (a good characterization of our in-migrants from other states is a two wage earner, married couple family, probably both college educated with children). That migration added tremendous talent to our labor force and made NH an attractive location for many business looking to employ skilled workers.

The labor force grows or shrinks by population growth in the working age population, or by changes in labor force participation (those of working age who choose to be in the labor market or not). NH and the U.S. have seen slower population growth in the working age pop., but more disturbingly, both have seen a decline in the labor force participation rate.  Yes NH still has a relatively higher participation rate but the trend decline is similar to the U.S.  The graph below shows the decline in participation among individuals aged 25-64 (to minimize schooling and retirement decisions as possible causes).

nh us labor force particpation 25-64

If your working age population isn’t growing, having high labor force participation rates is critical for economic growth.   NH has had very high participation rates compared to the U.S. because of our favorable demographics (few people who traditionally have lower levels of participation – minorities, those without a high school diploma etc., and because our population overall has higher levels of educational attainment that is associated with labor force participation).  Women in NH especially tend to have higher participation because of higher levels of education and lower fertility rates (child-bearing lowers labor force participation).  I have written many times on gender and employment (search on gender in this blog) and the “feminization of the workforce” is a theme (non-pejoratively as the father of daughters) I believe is continuing.   As the chart below shows, virtually all of the decline in the labor force participation rate in NH is a result of a reduction in the rate among males.

male female labor force participation

Labor force participation always drops during recessions as workers get discouraged and drop out.  What is especially troubling today is that labor force participation continues to be weaker even as the economy has improved. Some has to do with demographics as more of the working age population ages into groups with lower participation rates although participation among those with higher levels of educational attainment seems to have held-up best. The best explanation of why labor force participation has continued to be lower than in the past is that the skills required by the economy have been changing, making many workers less qualified than before and creating more discouraged workers. I think that is part of the issue but I don’t think the “skills gap” could have so abruptly hit the labor market to cause participation rates to fall so much over the last half-decade. The skills gap has been a more slowly growing phenomenon.  Among older men without a post-secondary degree, participation has been declining for decades.  The skills mismatch between the supply of labor among males and the demand has been ongoing for decades.  Did it peak so suddenly in the past decade to create a permanent decline in the male workforce?  I don’t think so, additional factors are contributing.  I remember in the 70’s when the first real oil crises hit (related to Middle East wars) and a lot of job losses resulted, especially in mill towns like the one I festered in as a youth.  Someone whom I thought was wrong about almost everything said to me at that time “a man should never be ashamed of any job he takes to feed his family.”   I didn’t think much about that back then, but today it seems especially appropriate, even as it appears to be increasingly a relic of an outdated ethic.  Economic conditions today aren’t the result of people not wanting to work and a labor market where many individuals are working at jobs that don’t fully utilize their skills is not desirable.  Changes in and the performance of the economy are  obviously largely responsible for declining labor force participation.   Still, with so many troubling indicators for males  – especially younger males (educational performance and attainment, household formations etc.)  emerging over the past decade or more , I can’t help wonder how much of the decline is the result of a lost ethic among my gender.


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