The Hippo


Apr 24, 2019








Slowing job growth?
Economist sees signs that NH economy is cooling down

By Ryan Lessard

 The latest U.S. monthly job numbers are due out this Friday, and while one month’s data shouldn’t be taken as proof of any larger trends, some economists say that if there were fewer than about 150,000 jobs created in July, then we might be able to add that to a small pile of clues that job growth rates are starting to slow in the nation and the state, marking the end of a protracted recovery from the Great Recession and revealing the limits of the state’s available labor pool. 

Economist Brian Gottlob, principal of PolEcon Research, thinks we may be already starting to see the early signs of this cooldown in New Hampshire and that job growth may be further restricted in the Granite State by the lingering “skills gap” and the forces of regional labor competition.
Reading the tea leaves
We aren’t seeing dramatic declines in job growth. As Gottlob put it, the airplane is preparing for a slow descent, not a nosedive. In fact, we’re still seeing growth — but it’s mediocre growth compared to recent quarters, and it could be a sign that the economy is settling down.
For the U.S. economy as a whole, private-sector job growth appeared relatively high for much of the past recovery period.
“New Hampshire was different. We were worried for … several years about how slow our job growth was compared to the U.S. and other New England states as well,” Gottlob said.
But for the past year and a half or so, New Hampshire’s private-sector job growth shot up — largely unnoticed because public-sector job declines masked it in overall growth numbers — from just shy of 1 percent to a high of about 2.4 percent. But in some of the most recent months, growth numbers in the state and nation are looking like the start of a decline.
“Now, it’s been almost a year, you see it’s beginning a downward descent very slowly from what appears to be a peak of about 2.5 percent [nationally],” Gottlob said. “But it really seems like we peaked here in New Hampshire as well.” 
Gottlob characterizes the state’s job growth numbers in April as unremarkable; in May the seasonally adjusted growth figures showed a one-month decline — the first one-month private-sector job loss since the decline caused by the Market Basket strike in 2014; and June’s numbers showed strong growth. In April, 200 jobs were added, in May we lost 2,200 and in June we added about 4,000. Taking the three months together as a rolling average, Gottlob says New Hampshire added about 1,000 jobs, which is about two thirds of that “peak” we’ve seen in several previous quarters. 
While June seemed positive, Gottlob noticed a few caveats hidden in the details. For example, manufacturing — a key sector for economic health — saw no jobs added or subtracted. 
But state economist Annette Nielsen says there are plenty of positive signs as key sectors like transportation and energy showed encouraging growth. Construction saw 800 jobs added, one of the largest areas of growth. 
Nielsen cautioned against using just a few months as any indication of longer-term trends, though she concedes a slowdown is inevitable given the finite labor pool.
Labor constraints
“We’ve got a labor force issue [and] we’re at extremely low levels of unemployment,” Gottlob said.
Very low unemployment is often a sign of a labor shortage, and not only has New Hampshire’s fallen to among the lowest levels in the nation, its decline has happened at the same time we saw a spike in private-sector job growth. Gottlob says that suggests there’s already a very tight supply of labor.
“We were absorbing whatever available labor there was,” Gottlob said.
The state’s labor constraints may have played a role in the post-recession lag time for private sector rebound before last year.
“One of the things that make us different is … New Hampshire dealt with the … labor constraint probably sooner,” Gottlob said.
Massachusetts, conversely, did not experience such a delay in job growth over that period.
“The industries that were growing during that time period [nationwide] were ones that employed higher-skilled individuals and I just don’t think we really had that many, enough of them … in comparison to a state like Massachusetts,” Gottlob said.
Historical clues
In recent months, since there have been no significant increases in unemployment benefits claims, the apparent slowdown in growth is not coinciding with an increase in layoffs, which would be more troubling than the natural leveling off from a recovery period.
Given historical trends, Gottlob said, the state and country should expect to see the end of the recovery period soon. In fact, we’ve been expanding for seven years since the official end of the recession, longer than the typical five- to six-year recovery period.
While recovery trends are uneven from state to state, the leveling-off period is shared and correlates with nationwide trends. Gottlob said that since private-sector job growth seems to be sloping downward in New Hampshire almost parallel to U.S. rates, this could be the earliest inkling of that phenomenon.
Less help wanted
Whether fewer companies are expanding or much of the post-recession expansion has already played out is anyone’s best guess. But another sign that we may be approaching a slowdown in job growth in New Hampshire is a decline in help wanted ads.
“The demand looks like it’s starting to decline based on help wanted ads,” Gottlob said.
For individual sectors, this can be a somewhat imperfect bellwether, but it can be useful in gauging larger employment trends.
According to Gottlob’s data, help wanted ads peaked in the state around the fall of 2014 with around 30,000 ads. That’s since declined to about 24,000, and ads nationwide have seen parallel declines.
Furthermore, as companies fail to find the workers they need, they may develop consolidated strategies that require fewer people.
No more proverbial bricks
Policy wonks and lawmakers have been talking about the “skills gap” in New Hampshire for years, and while rosy unemployment numbers seemed to drown out much of that talk over the past couple years, Gottlob said, it’s increasingly evident how that issue played out over the state’s recovery period and how more competitive labor markets in a certain state to the south may have played a larger role than some care to admit.
In short, New Hampshire may have run out of the proverbial bricks needed to continue bridging that gap. Take the need for STEM jobs, for example. The lauded growth in the professional and business services sector in June — where the greatest share of growth occurred — doesn’t tell the whole story. 
Gottlob said it includes two levels — one lower level with categories like waste management, administrative support, security, cleaning and temp help, and a higher level of “professional, scientific and technical” categories that include a lot of the specialized STEM jobs. 
“Often times those categories get lumped together and people make it sound like it’s all high-end jobs. It’s not. It’s really bifurcated,” Gottlob said.
In June, only 100 of the 1,600 jobs added in that sector were in those high-end fields. So the overall growth in this sector belies a relatively weak growth on the high end of it.
“If that starts to slow, that’s a key sign of the demand for high-skilled labor in New Hampshire,” Gottlob said.
This is particularly troubling to some economists as it may be a sign that demand isn’t just slowing, but the state may be approaching the limits of its ability to fill those jobs.
“I think we probably have been reaching that for a while,” Gottlob said. 
But Nielsen said it’s not just the relative split of the professional and business services sector’s subcategories we should be looking at. The high end is traditionally smaller than the low end since it includes less labor-intensive fields. But the historical trends tell a bigger story.
In May, when we saw job losses overall, that high end category saw no change over April. Yet in April it grew by 800, in March it lost 200 jobs (another overall job-loss month) and in February it added 400. 
Looking at just one job category isn’t proof of anything, especially since it can be muddled with the inclusion of non-technical jobs like lawyers and accountants, Gottlob said, but it’s noteworthy that this high-end category saw such relatively small growth in June in an otherwise strong month of overall growth.
And while it may be too soon to call that a sign of our inability to close the skills gap further, there is already some evidence showing why that skills gap isn’t getting filled.
NH’s brain drain
“I see a big discrepancy between the number of people who have those skills in this state and the number of people who are actually employed in those occupations and in those industries in our state,” Gottlob said.
In other words, many live here with skills we need but don’t work here. Gottlob speculates that many of them are likely commuting to Massachusetts, where pay is generally higher and cost of living is now commensurate to New Hampshire’s. 
Looking at the adult workforce age 25 and older, Gottlob noted that about 38 percent of them have bachelor’s degrees but only 31 percent of that age group employed in New Hampshire-based industries have a bachelor’s. 
According to Gottlob, this should have policy makers rethinking their strategy for solving workforce shortages and closing skills gaps solely with things like education and training initiatives, especially in STEM fields, and soft appeals for retention through non-profit organizations like Stay, Work, Play. Gottlob believes fixing the workforce pipeline is critical for solving some of the labor supply issues, but if we fail to consider neighboring competition, that pipeline might flow right over the border.
“We could be undertaking this huge effort to produce more people with the science, technical, engineering and mathematical skills and just be producing more to work in Massachusetts,” Gottlob said.
If a larger slowdown is indeed happening, it should be no cause for alarm as recovery period growth rates are unsustainable indefinitely. But given the more pressing labor issues New Hampshire faces, which this staggered recovery has shed some light on, Gottlob thinks it may be time to face and address the siphoning of our workforce out-of-state.
And if New Hampshire continues to fail to attract talent to move in from out of state, Nielsen said, it could have big ramifications in the longer term.
“In our long-term projections … [older demographics] are going to be a limitation,” Nielsen said. “If we assume … nobody else is going to come into the state, then 10 years out, there’s a lot of people retiring and you’ll likely have a hard time growing and expanding.” 

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