Retail, hospitality perk up, but workforce shortage still lingers
On the surface, New Hampshire had a good year economically in 2023 given stern predictions for, at best, a mild recession had become conventional wisdom by the end of 2022.
The lack of a recession could provide a healthy runway for 2024 as the state continues to solidify its recovery from the COVID pandemic.
A few numbers to consider
In October, the state seasonally adjusted unemployment rate was 2.1%, a .01% increase from September but a .08% decrease from October 2022. There are an estimated 743,160 Granite State residents employed and 16,300 unemployed. By comparison, the U.S. employment rate was 3.9% in October.
Earlier this year, the U.S. Bureau of Economic Analysis determined that New Hampshire’s gross state product passed the $100 billion mark for the first time in 2022. The GSP reached $105,414,400, an increase of more than $5 billion from the 2021 standard of more than $99 billion.
Inflation was a top concern entering 2023, but the inflation growth eased as the year progressed.
According to the U.S. Senate Joint Economic Committee, the top-line consumer price index — also known as core CPI, and it doesn’t measure often volatile food and energy sectors — topped 3.2% in October, down from the previous 12 months’ measure of 7.7%. The core inflation rate does measure food and energy and was at 4.0%, down from the previous 12 months of 6.3%.
According to the American Automobile Association, prices were $3.23 a gallon of gas Dec. 5, down around 10% from the price of $3.54 on the same date in 2022. “Gas prices have a huge impact in discretionary spending,” said Curtis Picard, president and CEO of the Retail Association of New Hampshire and Maine.
“It’s clear that inflation slowed growth, but the economy continues to surprise,” said Phil Sletten, research director of the New Hampshire Fiscal Policy Institute in Concord. He said the Congressional Budget Office had forecasted a paltry 0.6% GDP growth nationally for the third quarter, but it turned out to be a robust 5.6% growth instead.
“New Hampshire is a small slice of the national economy and, in many respects, it’s doing fairly good,” Sletten said.
The state has certainly benefited from tens of millions of dollars in federal funding from the Inflation Reduction and American Rescue Plan acts for projects including renewable energy installations and installing broadband for residents in parts of the state without reliable, fast internet access.
But there are no shortage of concerns including wage growth often not keeping up with inflation and stagnant workforce growth burdened by the twin headwinds of the persistent affordable housing shortage and child care options.
And despite an abundance of positive news, a recent U.S. Census Bureau survey found that 33% of residents had some to great difficulty keeping up with usual expenses. Inflation and the end of pandemic aid for many low-income residents had led to a spike of 10% of food insecurity in the state, with as many as 200,000 children living in food-insecure households.
Joanie McIntire, soon-to-be president of the NH Association of Realtors (Courtesy photo)
Retail
The year for retail in 2023 turned out better than many forecast, according to Picard.
“I think overall we did a little bit better than expected,” he said. Inflation, high energy costs, supply chain problems and staffing issues battered the industry coming out of the pandemic but, with a 3% to 4% expected growth in retail sales expected nationally in 2023, Picard said the post-pandemic recovery is approaching the normal of 2019, with inflation and softening energy prices leaving consumers with more discretionary income to spend.
“Inflation has slowed, and we hear that workforce issues have improved and that more establishments are fully staffed,” he said. “I would take normal.”
Normal, during and post-holiday, would be a good benchmark. The National Retail Federation reported during the pandemic in 2020 that more than 166,700 jobs were directly related to retail — which in their broad definition includes restaurants and bars — and pumped an estimated $7.5 billion into the state economy. This sector is also the largest employer by far in the state.
Picard believes the economic fundamentals are good enough for a strong 2024.
Restaurants and lodging
“Frankly, it’s been a surprisingly strong year,” said Mike Somers, president and CEO of the New Hampshire Lodging and Restaurant Association. He’s also “cautiously optimistic” about 2024.
According to the association, there are an estimated 33,500 eating, drink and lodging establishments that employ more than 54,000 people. “There was a bit of softness earlier in the year with inflation and continued high operational costs, but we are seeing more visitors to the state, and restaurants are full and busy,” he said.
“Full and busy” has been good news for the state economy and state coffers. NH Business Review reported in March that “2023 state and local taxes generated by hotels will come in at $145,911,378, an impressive 13.8% higher than the $128,169,021 collected in 2019. The increase translates to over $17 million more in 2023 than before the pandemic and includes a 0.5% cut in the rate, to 8.5%, in October 2021.”
Somers said the industry continues to recover slowly from staffing shortages. “There are a lot of job vacancies. It’s a little bit better but still a challenge,” he said.
Among many variables, favorable weather reports (less rain, more sun and particularly more snow) remain strong indicators of volume across and up and down the state. The state is bullish on the winter season.
The state Division of Travel and Tourism announced in early December that 3 million visitors will spend as much as $1.5 billion and surpass pre-pandemic levels of 2019 for the first time.
Early-season snowfall has helped. Jessyca Keeler, president of Ski NH, said the 2022-23 ski season ended on a high note following late-season snow storms that drew skiers to the more than 40 ski areas in the state. “We’ve seen capital improvements of all sizes,” Keeler said about investments in updating their lodges, expanding lift and snow-making capacities.
Though staffing challenges remain — especially for highly sought-after technical positions — the easing of inflation and lower gas prices boosts discretionary spending. “Overall, we’re doing pretty good and in a much better place than we were at the height of the pandemic,” Keeler said.
Chris Norwood, president of NAI Norwood Group (Courtesy photo)
Real estate
Stuck in neutral is likely the best that can be said about the residential real estate market in New Hampshire. This solidifies a trend that accelerated with the pandemic and is equally national in nature.
Joanie McIntire, who will be president of the New Hampshire Association of Realtors in 2024, offered a telling example. She checked her listing service one day in late November and said that “there are 1,510 single-family homes listed. Every month in 2014, there were at least 10,000 single-family homes on the market.”
The National Association of Realtors reported that October home sales nationally dropped 14.6% from October 2022 and the median sales price was around $391,000, an increase of 3.4% from the previous year. Rising inflation and the high interest rates that came with Federal Reserve quest to fight inflation and a lack of inventory did not help.
According to figures from New Hampshire Association of Realtors, the October median price for a home sale in New Hampshire was $477,000, an 11.1% increase from the same month in 2022. Also in October, there were 1,083 sales, a 16.7% decrease from 2022.
McIntire, who started her career in 2008 during the midst of the housing crisis and has seen her fair share of market ups and downs, does not offer predictions for 2024.
“I bring sellers and buyers together for a fee,” she said. But she doesn’t see an “easy path forward to a balanced market” as long as the housing shortage and higher interest rates persist. McIntire did say she was concerned about one thing in particular: “I think we are losing workers because of the lack of inventory.”
On the commercial side, the economic churn continues. Major chain stores such as Bed Bath & Beyond and Christmas Tree Shops went out of business, vacating their spaces, while the Massachusetts-based shoe company New Balance broke ground last month on a $70 million manufacturing and administrative facility in Londonderry.
“There are some troubled waters if interest rates remain high,” said Chris Norwood, the president of NAI Norwood Group, but the sector is relatively healthy and busy overall. He said the trades and industrial spaces are doing better, and how one views current conditions may depend on whether they are a passive investor or not.
As for vacant retail spaces such as departing major chain stores, he said the amount of “adaptive reuse” with recreation, health care and other innovators is filling potentially empty buildings.
Office space “is not as dead as the headlines would have you believe,” he said, in part because pre-pandemic New Hampshire developers protected themselves by not overbuilding, and companies are adapting to new modes of work-from home, office and both.
‘No easy fix’
Phil Sletten at the New Hampshire Policy Institute said that a robust, skill-diverse and expanding labor force is needed for the state to continue economic growth — especially as the population continues to age and older workers leave the workforce.
Affordable housing is one of the biggest impediments to sustained economic vitality in the state. (Sletten also believes that affordable day care is equally important and connected, because it keeps people and their talents out of the labor force.) The lack of inventory, high prices and the lowest rental availability rates in New England are taking its toll.
“This is a problem 15 years in the making,” Sletten said. There is no easy fix for a predominantly market-based problem, as housing is costly to build and it could be years before it makes an impact. But unless the current dynamics change, “I don’t see a scenario where workforce constraints turn around dramatically.”
The issue has been around for years, but it appears it is gaining traction across the state. A recent Report on Consumer Confidence by the state Business and Industry Association found that 73% of those surveyed believed the affordable housing crisis is “very serious,” a rise of 12% since an earlier report in February.
