The New Hampshire economy needs more of just about everything, except it doesn’t need more jobs, more consumers or even more businesses.
Granite State businesses don’t have enough workers. They don’t have enough goods to sell. There aren’t enough houses or apartments for people to live in. In short, New Hampshire is short of enough supply to meet post-pandemic, pent-up demand.
“It’s all on the supply side,” said Brian Gottlob, director of the Labor Market Information Bureau for NH Employment Security. “We simply don’t have the supply of individuals and material for the economy to perform at its potential.”
“It’s insane, it’s absolutely insane,” said Jannette Desmond, owner of Kilwins, a sweetshop in downtown Portsmouth.
“We now have a twin pandemic,” said Amy LaBelle, owner of LaBelle Winery. “A pandemic of no employees and no supplies.”
Several years after the economic collapse caused by a real pandemic, the economy is booming by most traditional measures.
The unemployment rate is 2.3 percent, the lowest since 1988. There were 1,475 unemployment claims filed during the week of May 28, the smallest number in 25 years. Some 29,000 jobs have been created since last year, a 5 percent increase, bringing us close to pre-pandemic levels. There would have been more, if there were workers to fill them.
Indeed, the gap between job openings and job hiring is at the highest rate since 2000, when such data was first collected, and it’s wider than in any other state, except for Missouri and Minnesota, according to Gottlob.
But it’s not just about jobs. Businesses are making more money than before the pandemic, if business taxes are any measure. New Hampshire has collected over $1 billion so far, one month short of completing the fiscal year and still exceeding the previous fiscal year in its entirety.
Bankruptcy filings are the lowest they’ve been in a generation. There were 1,616 new limited liability companies filings in April, more than any month in the last five years and 600 more than May 2018.
Home sales slowed because there are not enough homes to sell — nearly 10 percent less than last May — but prices have not.
Despite rising interest rates, the median home price was $460,000 in May, a 14.6 percent increase from last year and $16,500 over the previous month. A minimum-wage worker in New Hampshire would have to work full time a little over a year to earn the amount of equity gained by the average homeowner received in 30 days.
Inflation
Wages went up about 5 percent between April 2021 and April 2022, but not enough to keep up with inflation, which was at 7.3 percent in the state during the same time period. The average gas price was $4.98 as of June 9 — 70 percent higher than last year. Diesel prices more than doubled to $6.185.
Fuel prices drive food prices, both at the grocery store and at your local restaurant.
“There is not one thing in this building that isn’t delivered from a truck that is paying the most ever for diesel,” said Tom Boucher, CEO of Bedfordbased restaurant chain Great NH Restaurants.
While fuel prices are at an all-time high, they aren’t compared to people’s income, according to Gottlob. In a recent blog post, he wrote that people had it worse in 2008 and or even 2011 to 2014, but that doesn’t seem to matter, since inflation impacts people differently, especially people with lower incomes.
That’s one reason people are feeling so gloomy. The latest survey of consumer confidence from the Business & Industry Association indicated that just 17 percent of Granite Staters surveyed said they think that next year will be better than last. Nearly half said their own finances are getting worse but that percentage grew to two-thirds among those with household incomes of less than $75,000 a year.
“It’s hard to say that an economy with 2.3 percent unemployment is weak,” Gottlob said. “Never has there been a discrepancy about economic data and how people feel. It’s really weird.”
Workforce
The supply shortage has affected every aspect of the state’s economy, but how much depends on both the sector and the company.
Manufacturing job growth, for instance, has been relatively tepid, at 1.4 percent, even though employers increased wages by about 5.5 percent. That isn’t because of any lack of demand. Everybody is looking for workers, which is still a bigger issue than the supply chain, said Zenagui Brahim, president of the NH Manufacturing Extension Partnership.
This is true of large manufacturers like BAE Systems, which is looking to add 800 workers, mostly engineers, at a new 200,000-square-foot facility in Manchester and more for its research and development arm known as FAST Labs, where it is holding a showcase on June 22. The company already has 6,000 employees.
It’s also true of small companies like Graphicast Inc. in Jaffrey, which mostly supplies medical equipment.
“We have the largest backlog we’ve ever had, and every month we are falling further behind,” said owner Val Zanchuk.
Graphicast has 25 employees, and could easily add five more, he said, but “we can’t find people, and even if you find them you can’t move them here because of the cost of housing.”
Mid-sized companies like Wire Belt Company of America in Londonderry, which has 110 workers, also is feeling a worker squeeze. “Getting production workers is like pulling hen’s teeth,” said CEO David Greer. He added that the company is also on “tenterhooks” over supply issues. “I’m just hoping we don’t run out of wire.”
The company uses that wire to build conveyer belts for such customers as food manufacturers, like Tyson. “We’re just paying whatever they are asking, because no wire, no sales, no company.” That means customers also have to wait longer for their orders and pay more for their product, all of which contributes to the price of chicken nuggets.
Despite the complaints about supply, imports to New Hampshire actually increased 21 percent in the first four months of the year, just slightly behind the national average, but the flow of goods from China has been declining ever since the pandemic. This year it fell by 3.8 percent. But imports from Canada rose 42 percent.
Some companies have stopped relying on overseas production. GenTent, a decade-old Brentwood firm, used to, but the “slow boat from China got slower” during the pandemic so the company turned to a domestic source, said Brian Thomas sales and marketing manager.
Housing
The interplay of labor and supply contributes to the housing shortage, which, of course, aggravates the labor shortage.
While new listings rose 4.2 percent in May, year to date they are down 9.2 percent. Not coincidentally, that’s the exact percentage closed sales declined. Homes, on average, are snapped up in 17 days, a week less than a year ago. And they are selling for 5.2 percent above asking prices.
When homes come on the market, “they go quickly, maybe instantaneously. It’s cooled slightly, but it hasn’t cooled on pricing,” said Alan DeStefano, president of the Lakes Region Board of Realtors.
A few years ago, you might have been able to buy a house on Newfound Lake for $750,000. Now they go for $1.2 million to $1.5 million. One recently sold for $2.5 million,” said DeStefano. The new owner, from Pennsylvania, bought the 12-acre property with 600 feet of shoreline with a multiplelevel lake home and boathouse, but ended up deciding to “tear this thing down and start fresh,” he said.
Another reason for the lack of housing supply, affordable or otherwise, is lack of supply of both labor and materials.
“You name it, we can’t get it. Insulation, drywall, siding appliances,” said Karen LaMontagne, assistant vice president of LaMontagne Builders in Bedford. If someone wants to order a house for one of the company’s lots they own, “we tell people to wait six months. It’s hard to give people an exact date at this point. We don’t know when we’ll get the materials.”
The company has 45 employees, she said, and “I could probably hire seven to 10 immediately and have them working.”
“It is a perfect storm,” said Ben Brown of Market Square Architects, a rapidly growing Portsmouth firm that mainly builds apartment complexes. The firm is already booked for the rest of the year, including a 700-unit project in Manchester. But schedules remain bogged down because of supply issues — first it was wood, then steel and now aluminum.
All this means the rental market remains tight as well — extremely tight. In 2021, the vacancy rate for a two-bedroom unit was 0.6 percent, pushing average monthly rent up to $1,498.
For commercial and road construction, “the No. 1 driver is diesel,” said Gary Abbott, executive vice president at Associated General Contractors of New Hampshire. Wood was a problem, but the price of plastic pipe has risen 25 percent.
“I’ve never seen this in all my years, inflation-wise,” he said.
And demand or both labor and materials is only going to go up once the federal infrastructure money arrives, in addition to the state’s addition of $66 million to help towns and cities build roads and bridges. And there’s also the $100 million in the newly formed InvestNH affordable housing program.
“I haven’t heard of projects not moving forward, but I have ideas of what’s going to happen,” said Abbott.
Fuel prices don’t just add to the cost of shipping lumber but also to the cost of harvesting wood in the first place.
“Diesel fuel is really impacting people working in the woods,” said Jasen Stock, executive director of the NH Timberland Owners Association.
In addition, some mills are “cutting back the number of shifts just because they don’t have bodies,” he said.
Transportation and energy
One sector that benefits from the rise in energy prices are companies that provide alternative fuel.
“I’ve been here seven years, and I’ve never seen this number of leads,” said Eric Kilen, senior solar advisor at Granite State Solar in Bow. “That’s directly driven by high electric rates.”
The demand for heat pumps “has been astronomical over the last several years,” said Dana Fischer, manager of utilities and electrification of the eastern region at Mitsubishi Electric Trane HVAC US, which serves New Hampshire. “Everybody has difficulty keeping units on the shelves.“ There has been a huge spike of interest in electric vehicles (EVs), said Larry Haynes, CEO of Grappone Automotive Group in Bow. “We just can’t get any,” he said.
EV scarcity is everywhere, but it is particularly acute here because manufacturers give priorities to the states surrounding New Hampshire, because those states’ policies encourage their sale and New Hampshire doesn’t.
Buying any kind of new car is tough. For the last two years, most people have been buying new cars unseen, since there are very few on the showroom floor. “The days of walking in and having your pick of 500 to 1,000 vehicles to choose from is not the way it is right now and won’t be for the foreseeable future,” Haynes said.
Appliances are also hard to come by as well.
Just ask David Souter, owner of Baron’s Major Brands, a Concord-based chain of appliance stores.
“Oh my gosh it’s been incredibly challenging. We tell construction companies to buy ahead, and we hold them,” he said. But there is a cost for sitting on all those appliances. “We have to double our warehouse space.”
“When someone calls and says they have 50 GE refrigerators, I say ‘I want them,’ and they say, ‘But we didn’t tell you what it is,’ and I say, ‘I don’t care what it is, we’ll take it.’” And with shipping delays, he gets hit by increasing prices. “You give the consumer the old price and then you have an increase, you can’t go back to the consumer and charge them, so we get whacked.”
Hospitality
“It’s amazing how busy our restaurants are,” said Boucher, who is doubling the bar space of his CJ’s Great West Grill in Manchester and T-Bones Great American Eatery in Salem. After bemoaning the challenges, he added, the good news is the customers are spending like crazy And it looks like it’s about to get busier and crazier.
The state broke records last summer and fall, according to the NH Division of Travel and Tourism Development. Winter and spring weren’t so bad either. In the first four months, hotel occupancy rose 53.4 percent, nearly 13 percentage points more than last year. Over Memorial Day, 98 percent of state park campgrounds were full, despite a rainy Saturday.
The DTTD is predicting another record summer, with a projected 4.6 million visitors who will spend over $2.2 billion.
But the industry already has its hands full as it is, since they don’t have as many hands as they would like. Boucher has been able to keep all of his nine Great NH Restaurants fully open. Not so for LaBelle Winery. LaBelle’s Portsmouth and Amherst restaurants are only open five days a week. At Derry, even though they have a golf course, they are only open for lunch two days a week. And they still can’t even use the full dining room because of lack of staff.
“We are limiting the tables we seat, which is terrible for business but, more important, good for service,” said owner Amy LaBelle.
She does have the staff for weddings, which are booked out for the entire year. Business functions are starting to come back albeit more slowly.
Ed Butler, co-owner of the Notchland Inn in Hart’s Location, could use 10 staffers to handle the summer season, but he only has six.
“I’m becoming a very good breakfast cook,” he said with a laugh.
Kilwins in Portsmouth closes at 10 p.m., even though the next hour would bring in the most business. Her staff is stretched thin as it is.
“I’m OK with that,” said owner Janette Desmond. “I’m happy that my staff is happy. I want to keep them, so I want to keep them happy.”
“I’m not going to freak out about the economy,” she added. “It’s a cycle. This too will pass.”
Bob Sanders can be reached at bsanders@nhbr.com.
The gap between job openings and job hiring is at the highest rate since 2000.
One sector that benefits from the rise in energy prices are companies that provide alternative fuel options.