Economic Conditions in New Hampshire and New England Yolanda Kodrzycki Vice President and Director, NEPPC Federal Reserve Bank of Boston Joint Economic Briefing New Hampshire House and Senate Finance and Ways and Means Committees January 7, 2011

The Federal Reserve Bank of Boston promotes sound growth and financial stability in New England and the nation. The Bank contributes to local communities, the region, and the nation through its high-quality research, regulatory oversight, and financial services, and through its commitment to leadership and innovation. The New England Public Policy Center promotes better public policy in New England by conducting and disseminating objective, high-quality research and analysis of strategically identified regional economic and policy issues. When appropriate the Policy Center works with regional and Bank partners to advance identified policy options.

New Hampshire is the only New England state with trend employment growth substantially above the US growth rate. Source: Federal Reserve Bank of Boston and Bureau of Labor Statistics/Haver Analytics

NH and NE fared slightly better than the US in the recession. Nonfarm Payroll Employment - Indexed to Pre-Recession Peaks National RecessionNew England Source: Bureau of Labor Statistics and NBER/Haver Analytics New HampshireUnited States

Among the New England states, NH had the smallest job losses in the recession … Source: Calculations Based on Bureau of Labor Statistics Data

… and the strongest job gains in the expansion to date Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics

By employment, NH and NE’s largest sectors are trade- transportation-utilities, educational and health services, and government.* *Educational and health services includes private only. Government comprised of federal, state, and local jobs. Local government includes K-12 public education. Shares of Nonfarm Payroll Employment in 2009 Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics

Manufacturing, professional and business services, and financial activities are high-paying sectors. Their shares of employee compensation are higher than their shares of employment. Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics Shares of Total Employee Compensation in 2008

NH had smaller percentage job losses than NE and the US across almost all sectors during the recent recession. Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics New EnglandNew HampshireUnited States

Industry patterns during the recovery do not yet paint a consistent picture. Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics New EnglandNew HampshireUnited States

NH has a higher job creation rate than NE and the US. Job creation rates are low by historical standards. Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics National RecessionNew EnglandNew HampshireUnited States

Job destruction rates are declining to near-normal levels. Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics National RecessionNew EnglandNew HampshireUnited States

Unemployment has fallen more in NH and NE than nationwide. Source: Bureau of Labor Statistics/Haver Analytics US NH National Recession NE

Many workers are still working reduced hours. Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics National RecessionUnited StatesNew Hampshire

House prices shown some signs of stabilization according to one widely-cited source. Source: Federal Housing Finance Authority/Haver Analytics National RecessionNew EnglandNew HampshireUnited States

Foreclosures in NH and NE have remained below the national rate. Source: Mortgage Bankers Association/Haver Analytics US NH National Recession NE

Federal Reserve officials expect solid US GDP growth, elevated unemployment, and low inflation in Source: Federal Open Market Committee, Summary of Economic Projections for the Meeting of November 3-4, Bureau of Labor Statistics and Bureau of Economic Analysis/Haver Analytics. Table shows central tendencies among the Federal Reserve Board governors and Federal Reserve Bank presidents. Note: Projections are fourth-quarter–to- fourth-quarter growth rates except for the unemployment rate, which is the fourth quarter level. PCE = personal consumption expenditures. ActualForecast CY 2009 Q4 CY 2010 Q4 CY 2011 Q4 CY 2012 Q4 CY 2013 Q4 Longer Run Real GDP growth (%) to to to to to 2.8 Unemployment rate (%) to to to to to 6.0 PCE inflation (%) to to to to to 2.0

Despite some positive indicators, Fed did not change its policies at the December meeting. Incoming information (since November meeting) increased Fed’s confidence in the economic recovery. Fiscal package likely to boost real GDP in Housing sector weaker than expected, and oil prices and value of dollar higher than expected. Progress toward the dual objectives of maximum employment and price stability likely to remain slow. Target range for federal funds rate maintained at 0 to ¼ percent. Likely to remain “exceptionally low” for extended period. Purchases of longer-term Treasury Securities (about $75 billion per month through mid 2011, for total of $600 billion) Source: Federal Open Market Committee Minutes of the Meeting of December 14, 2010

Fed identified three major downside risks to near-term growth. Fallout from weakness in the housing sector. Banking and sovereign debt problems in Europe. Fiscal position of US states and localities. Source: Federal Open Market Committee Minutes of the Meeting of December 14, 2010

Summary New Hampshire and New England economies hit hard by the recession, but not quite as hard as U.S. economy. Recovery taking hold in NH and NE, and more gradually nationwide. Many opinions on what can and should be done to accelerate the improvement. Fiscal problems of state and local government will likely exert a drag on the recovery.