Slow growth for New England for the next few years, forecast says
The New England Economic Partnership on Wednesday released its four-year economic forecast, as it has done every six months for the past 30 years, and the news is not bad, but it’s also not that good.
The report assumes a compromise will be reached in Washington on tax rates and spending cuts — the looming fiscal cliff — and predicts continued slow growth in New Hampshire and the rest of New England through 2016.
Employment in New Hampshire is not expected to bounce back to pre-recession levels until the end of 2014, while housing prices are not likely to return to their peak until after 2016, according to the NEEP analysis, scheduled for presentation today during the 2012 Fall Economic Outlook Conference at Bryant University in Smithfield, R.I.
“Job growth in the New Hampshire recovery remains slow,” said Dennis Delay, an economist with the New Hampshire Center for Public Policy Studies and the forecast manager for the New Hampshire portion of the NEEP forecast. “New Hampshire had 650,000 non-farm jobs in 2008, as the recession began taking hold, and the state will not see that many jobs again until the last quarter of 2014. So we’re talking about a six-year recovery to get back to the same level of jobs in New Hampshire that we had prior to the recession.”
The New Hampshire Division of Employment Security reported 626,800 non-farm jobs in the state as of Nov. 14.
A full recovery in housing prices is likely to take even longer, he said, although the decline has clearly stopped: “The best thing you can say about housing is that it’s stabilized, such that people feel confident about coming back into the market and buying a home.”
Historically low interest rates, and the perception that prices have leveled off and may even be rising, are contributing to an increase in sales. Another factor fueling the increase is the large number of foreclosures that pushed more households into the rental market.
“The foreclosures are forcing people to move from home ownership to renter status, and so we’ve seen huge annual increases in rents, on the average of about 4- to 5-percent, even 7- to 8-percent in some markets,” Delay said. “You are getting to a cost point now where some people, depending on the house they want to get, find it cheaper to buy a house than to rent. I think that’s what’s driving a lot of sales.”
But the number of foreclosures remains persistently high, he said, citing N.H. Housing Finance Authority foreclosure data that shows 3,100 foreclosures in the first 10 months of the year. With two months to go, the total could easily reach 3,600, not that far off from the peak number of 3,953 in 2010.
“Even though we are now seeing sales volume increase by 20 percent over 2011, you are not seeing substantial gains on the price side,” Delay said. “There’s just too much inventory and not enough demand in the marketplace.”
Delay said a gain of 11.6 percent in the median sales price of New Hampshire homes reported by the New Hampshire Association of Realtors for October 2012 compared to the same month in 2011 does not suggest an imminent upswing in home prices.
“I’m standing my housing projection,” he said. “You can’t just take one month’s worth of data; you’ve got to look at what the average has been over the year. I just don’t expect we are going to see 2006 housing prices until well past 2016. It’s going to take more than a decade to recover.”
The Realtors association reported a median sales price in New Hampshire of $265,000 for 2006, compared to $202,500 for the first 10 months of 2012.
The New England forecast is based largely on projections from Moody’s Analytics, especially in regard to the likelihood of the country going over the fiscal cliff. Moody’s is predicting a 55-percent probability of compromise, versus only a 15-percent probability of going over the cliff.
The Economic Outlook report also predicts that the number of manufacturing jobs in the state will be basically flat or fall slightly each year over the next four years, after declining at a 3-percent annual rate for the last five years.
The fastest rate of job growth between now and 2016 will be in leisure and hospitality, followed by professional and business service jobs. Education and health service jobs will continue to grow, but at a slower rate than in previous years.
The forecast repeats many of the warnings about the longterm prospects for the state’s economy that were voiced three months ago when the N.H. Center for Policy Studies released a report titled, “From Tailwinds to Headwinds: New Hampshire’s Shifting Economic Trends.”
More people are leaving New Hampshire than are moving here; the number of residents in the work force has declined as the population has aged; and the state is losing the educational edge it once enjoyed over other states.
“New Hampshire’s present economic advantages appear largely to be fueled by decadesold demographic trends that have run their course,” the report states. “The question now facing the next governor, Legislature and other state policymakers is how to prioritize the options in redesigning New Hampshire’s economic blueprint.”
The New England Economic Partnership is an independent, nonprofit organization whose members include utilities, government agencies, businesses and universities across the six-state region. Its economic forecasts are released every six months, in the fall and spring, with a spring conference at the Federal Reserve Bank of Boston and a fall conference at different locations throughout the region.
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