economic conditions in new hampshire and new england yolanda kodrzycki vice president and director,...

Economic Conditions in Economic Conditions in New Hampshire and New New Hampshire and New

EnglandEngland

Yolanda Kodrzycki Vice President and Director, NEPPC

Federal Reserve Bank of Boston

Joint Economic BriefingNew Hampshire House and Senate

Finance and Ways and Means CommitteesJanuary 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 New Hampshire is the only New England state with trend employment growth substantially with trend employment growth substantially

above the US growth rate.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 NH and NE fared slightly better than the US in the 2007-09 recession.2007-09 recession.

Nonfarm Payroll Employment - Indexed to Pre-Recession Peaks

National Recession New EnglandSource: Bureau of Labor Statistics and NBER/Haver Analytics

New Hampshire United States

Among the New England states, NH had the Among the New England states, NH had the smallest job losses in the 2007-09 recession …smallest job losses in the 2007-09 recession …

Source: Calculations Based on Bureau of Labor Statistics Data

… … and the strongest job gains in the expansion and the strongest job gains in the expansion to dateto date

Source: Calculations Based on Bureau of Labor Statistics Data/Haver Analytics

By employment, NH and NE’s largest sectors are trade- By employment, NH and NE’s largest sectors are trade- transportation-utilities, educational and health transportation-utilities, educational and health

services, and government.*services, and government.**Educational and health services includes private only. Government comprised of federal, state, *Educational and health services includes private only. Government comprised of federal, state,

and local jobs. Local government includes K-12 public education. and local jobs. Local government includes K-12 public education.

Shares of Nonfarm Payroll Employment in 2009


Manufacturing, professional and business services, and Manufacturing, professional and business services, and financial activities are high-paying sectors. Their shares financial activities are high-paying sectors. Their shares of employee compensation are higher than their shares of employee compensation are higher than their shares

of employment.of employment.


Shares of Total Employee Compensation in 2008

NH had smaller percentage job losses than NE and NH had smaller percentage job losses than NE and the US across almost all sectors during the the US across almost all sectors during the

recent recession.recent recession.


New EnglandNew Hampshire United States

Industry patterns during the recovery do not yet Industry patterns during the recovery do not yet paint a consistent picture.paint a consistent picture.


New EnglandNew Hampshire United States

NH has a higher job creation rate than NE and NH has a higher job creation rate than NE and the US. Job creation rates are low by historical the US. Job creation rates are low by historical

standards.standards.


National Recession New EnglandNew Hampshire United States

Job destruction rates are declining to Job destruction rates are declining to near-normal levels. near-normal levels.



Unemployment has fallen more in NH and NE Unemployment has fallen more in NH and NE than nationwide.than nationwide.

Source: Bureau of Labor Statistics/Haver Analytics

US

NH

National Recession

NE

Many workers are still working reduced hours.Many workers are still working reduced hours.


National Recession United StatesNew Hampshire

House prices shown some signs of stabilization House prices shown some signs of stabilization according to one widely-cited source.according to one widely-cited source.

Source: Federal Housing Finance Authority/Haver Analytics


Foreclosures in NH and NE have remained below Foreclosures in NH and NE have remained below the national rate.the national rate.

Source: Mortgage Bankers Association/Haver Analytics

US

NH

National Recession

NE

Federal Reserve officials expect solid US GDP growth, Federal Reserve officials expect solid US GDP growth, elevated unemployment, and low inflation in 2010-2013.elevated unemployment, and low inflation in 2010-2013.

Source: Federal Open Market Committee, Summary of Economic Projections for the Meeting of November 3-4, 2010. 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.

Actual Forecast

CY 2009Q4

CY 2010Q4

CY 2011Q4

CY 2012Q4

CY 2013Q4

Longer Run

Real GDP growth (%) .2 2.4 to 2.5 3.0 to 3.6 3.6 to 4.5 3.5 to 4.6 2.5 to 2.8

Unemployment rate (%) 10.0 9.5 to 9.7 8.9 to 9.1 7.7 to 8.2 6.9 to 7.4 5.0 to 6.0

PCE inflation (%) 1.4 1.2 to 1.4 1.1 to 1.7 1.1 to 1.8 1.2 to 2.0 1.6 to 2.0

Despite some positive indicators, Fed did not Despite some positive indicators, Fed did not change its policies at the December meeting.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 2011-12• 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 Fed identified three major downside risks to near-term growth.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

SummarySummary

• 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.

economic conditions in new hampshire and new england yolanda kodrzycki vice president and director,...

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