At mid-year, NH’s economy remains strong despite inflation, housing and other challenges.

People who drive and analyze the New Hampshire economic engine agree that interest rates, inflation, housing and child care are the challenges facing an otherwise strong New Hampshire economy at mid-year.

“Overall, we’re in a very good position,” said Brian Gottlob, director of the state’s Economic and Labor Market Information Bureau.

Gottlob tracks, among other sources, data related to unemployment, size of and participation in the labor force, and tax revenue attached to rooms and meals.

“If you don’t have large numbers of people being laid off, then you don’t have big drops in income. And if you don’t have big drops in income, you don’t have big drops in spending. And if you don’t have big drops in spending, it’s almost impossible to have a recession,” he said.

While a recession-free economy is a relatively healthy one, there are factors that give Gottlob cause for concern, among them inflation, the housing market and the labor participation rate. Others agree.

Housing availability is at an historic low in the Granite State, said Robert Quinn, CEO of the New Hampshire Association of Realtors.

“We’ve certainly heard from business leaders — whether or not they’re small businesses, large businesses, CEOs of hospitals, health care facilities — and they all say the same thing: They want to expand, they want to hire new employees, but they are constricted because those employees cannot find adequate housing,” Quinn said.

Gottlob acknowledges that a 2.6% unemployment rate in the state is good. But the labor participation rate gives him a bit of a pause. The participation rate is a percentage of the working-age population that is either employed or actively looking for work.

The 86.7% rate he saw before the pandemic was good.

The current rate of 84% cited by Gottlob concerns him.

“When I see 84%, I say: You know, there’s still some slack in the labor market. There are still people in that prime working age group 25 to 54 that are somehow on the sidelines,” Gottlob said. “What is it that’s preventing them from not working or not being in the labor force?

“I know we have a low unemployment rate,” Gottlob added, “but I know there’s also a pretty good-sized group of people that traditionally are in the labor force and are working, and for whatever reason right now are not, and that’s kind of our challenge to get those people because we know there are job opportunities.”

Taylor Caswell, commissioner of the state Department of Business and Economic Affairs, hopes what he’s seeing in terms of positive in-state migration is more a trend, less a bubble.

Data show that the state’s population continued to grow in 2021 and 2022 because of a migration gain of people coming to the Granite State from other states and countries. That’s significant, because the in-migration makes up for the fact that the state’s death rate exceeds its birth rate.

A trend is important because it signals New Hampshire’s continued attraction as a state for younger people to settle, Caswell said.

“I think the question we haven’t answered yet is whether we’re still in a bump, or is this a trend,” Caswell said.

“If we keep seeing strong net migration numbers for another year or two, I would say we’re definitely hitting trend territory.”

But, he noted, the state needs to address two pressing concerns: the availability of housing and the need for affordable child care.

Inflation bites into restaurant profits

The numbers associated with taxed revenue from hotels and restaurants shows healthy growth over the first several months of 2024.

Q1 2024 revenue from the state’s Meals and Rentals Tax (aka the Meals and Room Tax) was $72.10 million compared to $70.90 million in the first three months of 2023. Calendar year results are also on the upswing. The total tax collected from meals and rentals in 2022 was $305.6 million, while the total collected in 2023 was $322.2 million.

But the numbers don’t reflect reality, according to Gottlob and Tom Boucher, owner of Great NH Restaurants.

While the tax receipts show a healthy hospitality industry, restaurant owners are struggling to keep up with the inflationary costs of their food and labor. Boucher relayed what he described as a “wonky” several months for restaurateurs with unsteady and unpredictable conditions.

“For the first part of this year, if you look at our entire company, we’re barely up 2%. And that’s not enough to cover the inflation that we’ve seen,” said Boucher, who owns the Copper Door in Salem and Bedford; T-Bones in Bedford, Hudson, Salem, Concord, Derry and Laconia; and Cactus Jack’s in Laconia.

He noted that people started 2024 with an appetite for eating out, making him confident that the industry was in full recovery from the COVID pandemic.

“In January I felt like, ‘Oh, we’re still back, and things are great,’” he said. Starting in February, though, it changed. “And it’s been just unpredictable,” he added.

He believes the inflation that affects the food he buys and the higher wages he’s paid is also affecting the consumer.

“Inflation is very far reaching. Obviously, one of the first places people cut out is things that they don’t have to spend money on. They don’t have to go out to eat, they don’t have to go to the movies, they don’t have to go on vacation,” he said.

“I really feel that this is what’s happening in the consumers’ minds. They’re feeling the pinch at home for everyday necessities, and inflation is finally catching up,” Boucher added.

Historically, Boucher has increased his menu prices to between 1.5% to 3% to cover the cost of the prices he pays for the food he prepares and the staff he’s hired. Since 2019, in total, he’s had to raise his menu prices by more than 20%.

“That’s insane to me. That’s just insane. I know that’s five years of time, but still, that’s more than 4% a year every single year consecutively. That’s just unheard of in my career,” he said.

Gottlob put the rise in the rooms and meals tax revenue in context.

“The definitely high inflation rate — in terms of accommodations and in terms of meals away from home — makes it appear as though that industry must be especially flush. And that’s not necessarily the case,” Gottlob said.

Patrons wait in line to order food during a friends and family event at Dave’s Hot Chicken in Manchester, which opened in January. Food inflation and rising labor costs have cut into restaurant profits nationwide. (Photo by Mike Cote, NH Business Review)

Where to live? Who will take care of the kids?

Gottlob and Caswell, with others joining them, put housing availability/affordability and child care at the top of their concerns as economic influencers.

“If we’re going to have people willing to consider working in New Hampshire, they need somewhere to live,” Caswell said. “I think we have, as we have always had, the aging population; they’re staying in their houses, they’re staying around. And so we need a net increase.”

The need was underscored by Dean Kamen, the inventor/engineer and excecutive director of ARMI, the Advanced Regenerative Manufacturing Institute, in Manchester. ARMI has been awarded millions in U.S. Department of Defense contracts to advance biofabrication — the production of complex biologic products from raw materials such as living cells, matrices, biomaterials and molecules.

The government contracts are expected to generate upward of 7,000 direct jobs and 37,000 indirect jobs in what is now being called “ReGen Valley,” Merrimack Valley’s version of Silicon Valley.

During a New England Real Estate Journal Summit at ARMI, Kamen challenged housing stakeholders.

“We’re in a room full of people that are worried about real estate,” he said. “I hope you are good at what you do. I hope you focus on building out enough infrastructure.”

The continued in-migration of a younger population is key to the state’s economic future, according to Gottlob. “We’re seeing more of the 25- to 34-year-olds moving into New Hampshire, but they’re not going to do it if they can’t find either a place to purchase or a place to rent, and both of those right now are at incredibly low levels,” said Gottlob.

Interest rates have an impact on housing (as well as capital investments by business), and Gottlob says the Fed hurts the economy the longer it keeps rates high.

“I think the longer they remain high, the more corrosive the impacts on the economy,” said Gottlob.

Caswell points to affordable child care and good early childhood education as additional challenges to growing the state’s economy.

“The populations that we’re seeking to attract, that’s a priority for them,” said Caswell. “If we want the younger population, we’ve got to be able to deliver better than we are on that.”

According to a World Population Review of child care costs in 2024, New Hampshire ranks 15th highest in the country at $11,114 per child per year. The national average is $9,994.82.

For an average married couple with a $119,313 a year income, that’s 9.3% of their income, according to the Review. For a single parent making an average $34,976, that’s 31.8% of their income.

“It’s higher in some cases than housing costs, so that’s not sustainable,” said Caswell.

There are a lot of ideas among the state departments on how to address the issue, according to Caswell. He sees a role for himself and his department as a facilitator. “I think what we’re going to end up trying to do is being a little bit more involved in trying to make these pieces go together,” said Caswell, “because everyone’s coming at it from a slightly different perspective, and I feel like that’s where we need to insert ourselves a little bit more assertively.”

Gov. Chris Sununu wants a different Medicaid distribution program that he says would give the hospital system the same amount of money each year, but a portion of the money — 9% — would be redirected toward community-based mental health and substance abuse treatment programs.

Eclipse boosts tourism shoulder season

The start of the summer tourist season got off to a dark start in April with the total solar eclipse.

New Hampshire was one of only 13 states in the path of totality, which motivated people to visit the northern reaches of the state where the view of the eclipse was the most complete.

The New Hampshire Division of Travel and Tourism Development reported a surge in visitation and economic activity, particularly from Lancaster north to Pittsburg and the Canadian border.

“The weather forecast on eclipse day led to huge crowds of people traveling here to witness the event in person,” said NH Travel and Tourism Director Lori Harnois. “We’ve heard from tourism leaders across the northern part of the state that this event was a huge success and a significant economic boost during what is normally a shoulder season.”

At the time of the eclipse, the state’s recreation scene was just coming off a challenging 2023-24 ski season, a key component to the outdoor recreation economy in the Granite State.

Jessyca Keeler, president of Ski New Hampshire, reported during its annual conference and trade show earlier this month that alpine skier visits for the 2023-24 season were down 4% from the previous season. (SkiNH is the statewide association that represents more than 30 alpine and cross-country ski areas in the Granite State.)

“While the 2023-24 ski season doesn’t make the top 10 for alpine visits, it does come in 14th overall, compared to the 40 years of data we have,” Keeler said, noting there were an estimated 2.17 million skier visits.

Nordic ski areas were especially challenged this past season, according to Keeler, with 14% fewer visits compared to the prior season.

Fickle weather greeted the start of the ski season — enough freezing for snow-making, little snow, warm days mixed with rainy days.

“It wasn’t entirely surprising given the fact that we knew it was an El Nino year, and El Nino years in the Northeast can be heavy on the precipitation,” Keeler said. “The question is whether it’s going to be cold enough to be snow, or if it’s going to be a little too warm and end up being rain. And as we all know, for the most part, we ended up seeing a lot of rain.”

The critical Christmas vacation week was largely a washout. Heavy rain, high winds and flooding during a storm dubbed “Grinch” the week before Christmas caused many ski areas in New Hampshire and New England to temporarily close. Some sustained serious damage to infrastructure.

Resorts were open for the Christmas week, but the effects of the storm “definitely didn’t do anyone any favors, and throughout the rest of the season we had, like I said, those ups and downs with the weather,” Keeler said.

A significant late March snowstorm helped heap snow back on the slopes, but, again, there were damaging effects with electrical outages that affected the ability of some resorts to operate.

As the effects of climate change become so consequential on recreation so dependent on very particular climate conditions, ski areas more and more are embracing features and amusements to attract visitors year-round. It can be the mountain coasters at Cranmore Mountain or Gunstock Mountain. (Attitash also has one but its off-season attractions are closed as it retools all its year-round features.) It can be scenic ski-lift rides to the mountaintop restaurant as at Bretton Woods. It can be bike trails and disc golf, zip lines and camping, weddings and tree canopy tours, and more.

Keeler believes that the ski industry has a bit of an advantage because it’s had to innovate with better snow-making and more in-season offerings in order to keep its winter side operations running.

“There is definitely the pressure of climate change on the ski industry,” Keeler said. “Really, any outdoor recreation industry is feeling it, whether it’s from warmer winters or shorter winters, or it might be more flooding and heavier rain precipitation events in the summer months or, honestly, throughout the year. I think everyone’s kind of feeling some pain from climate change.”

That said, state tourism officials predict 4.8 million people will visit the state this summer, spending over $2.6 billion.

Visitations are expected to grow by about 3% over last year, in keeping with national trends, which puts projected tourism visits at 2.5% over 2023. State officials in particular are looking north.

“The Canadian market is still showing some of the fastest growth. New Hampshire should see an added boost resulting from accelerated visitation from Canada,” Harnois said. “Canada is New Hampshire’s top international market, so this is very positive news for us, and we are anticipating a robust summer tourism season.”

NH ranks No. 3 for health care but lacks maternity care access in some areas

New Hampshire ranks in the top three states nationally in the 2023 Scorecard on State Health System Performance from the Commonwealth Fund.

The Commonwealth Fund, founded in 1918, is a private, nonpartisan foundation in New York City that focuses on health care policy and practice. Every year, the Commonwealth Fund’s Scorecard on State Health System Performance uses the most recent data to assess how well the health care system is working in every U.S. state.

In ranking New Hampshire third, the scorecard gave the state high marks in the categories of Access and Affordability, Prevention and Treatment, Healthy Lives, Reproductive and Maternal Health, and Racial and Ethnic Equity.

“The national recognition of the quality of New Hampshire’s health system is gratifying and mirrors our experience with our public health and health care partners,” said Lori Weaver, commissioner of the state Department of Health and Human Services. At the same time, she acknowledged there is room for improvement in some areas.

The scorecard cited need for improvement in the categories of Potentially Avoidable Hospital Use and Cost and Income Disparity, and it cited the lack of maternity care in certain parts of the state.

Gov. Chris Sununu lauded the results, saying, “We should all take great pride in this ranking, which shows that, when it comes to delivering compassionate care that prioritizes the individual and saves lives, New Hampshire is among the best of the best.”

The governor and hospital administrators were in a tussle at mid-year over Medicaid reimbursements.

The issue concerns what is called the Medicaid Enhancement Tax. Enacted in 1991, it is a state tax of 5.4% on hospital revenues. The state then repays the hospitals all of the taxes collected. By doing this, the state claims the same amount in federal matching funds.

Except in fiscal year 2021 at the height of the pandemic, revenue from that tax has steadily risen, from $182.8 million in FY 2014 to $301.9 million in FY 2023.

The governor, through legislation, wants a different distribution system. He says his proposal would give the hospital system the same amount of money each year, but a portion of the money (9%) would be redirected toward community-based mental health and substance abuse treatment programs, something he believes the hospitals aren’t doing enough of.

Under the governor’s formula, some hospitals would get more, some less.

For example, Elliot Hospital in Manchester stands to get $2.9 million more in 2025 than it received in 2023, while Catholic Medical Center in Manchester would receive about $350,000 less. Southern New Hampshire Medical Center in Nashua would get $1.5 million less, and Cheshire Medical Center in Keene would get $1.2 million less. Portsmouth Regional Hospital would get $2.7 million more, as would Monadnock Community Hospital. The Dartmouth Hitchcock Medical Center complex would get $1.7 million more.

Sununu argued before a legislative committee that the hospital system would get more money, about $12 million worth. He called it a “golden deal.”

But hospital officials say this would make a tough situation worse. Citing financial stress, Catholic Medical Center in Manchester in April laid off 54 employees.

“There is no data to suggest that this agreement (for hospitals) is a rich deal. None,” New Hampshire Hospital Association counsel Scott O’Connell told legislators in committee.

A worker at Mount Sunapee Resort in Newbury operates a snow gun. Alpine skier visits for the 2023-24 season were down 4% from the previous season, according to Ski New Hampshire. Resorts were challenged by a lack of snowfall and warm, rainy days. (Courtesy of Ski New Hampshire)

Median NH home price hits $515,000

For two successive months, first in March, then in April, the median price of a single-family home reached record highs. In March at $500,000, then in April at $515,000.

At the same time, the measure of affordability was at a record low, as was the inventory of available homes.

The latest survey involving rental residential property showed a statewide vacancy rate for a two-bedroom apartment of under 1% and an average rent of $1,764 a month. To afford the statewide median cost of a typical two-bedroom apartment with utilities, a New Hampshire renter would have to earn 137% of the estimated statewide median renter income, or more than $70,600 a year, according to the New Hampshire Housing Finance Authority, publishers of that 2023 survey.

“Housing, shelter is fundamental, and access to that housing is a critical need,” said Robert Quinn, the CEO of the New Hampshire Association of Realtors. “If you’re denied that, then it’s clearly going to impact the financial economy.”

Quinn acknowledges efforts by the state of New Hampshire to improve the situation. He points to InvestNH Housing, a 2022 $100 million allocation of the American Rescue Plan Act State and Local Fiscal Recovery Funds to accelerate the approval and construction of affordable workforce housing throughout New Hampshire. The state received $30 million in May from the U.S. Department of Housing and Urban Development to help address the state’s housing affordability crisis.

But the money isn’t nearly enough, according to Quinn, to address the state’s projected need of some 60,000 additional units by 2030 to adequately affect the shortfall.

“The only way it’s going to happen is if we turn to private property owners and allow them to meet the demand of housing, and too often we see government regulations that stop or restrict the ability of that private property owner to develop housing,” said Quinn.

The Realtors Association, along with other public policy organizations, has lobbied at the state Legislature this session for a variety of bills that loosen some of the zoning restrictions associated with housing development.

There is a flush of empty office space in the state.

Office buildings, as they are nationwide, are being abandoned in the Granite State as corporations look to right-size their square-footage needs in the postpandemic age of a hybrid workforce.

Colliers, the commercial real estate broker with offices in Portsmouth and Manchester, reported a 2024 first quarter office vacancy rate of 13.3%, down slightly from the Q4 2023 rate of 13.6%, but notably higher than Q1 2023 when it was 10.6%.

A bill known as the HOMEnibus bill would have made it easier for communities and developers to convert commercial real estate buildings into residential housing. It passed the Senate but got killed in the House earlier this month by 170 Republicans and 18 Democrats, many of whom worried about the loss of local control when it comes to housing.

Quinn noted that the Realtors Association, the New Hampshire Municipal Association, and the Business and Industry Association of New Hampshire (BIA) were all aligned in support of the bill.

This group also stood in support of legislation that would expand the ability of property owners to build accessory dwelling units. That, too, was killed by the Senate.

Quinn regarded as disingenuous the idea that “anyone who is holding public office in the state to argue that they want to see New Hampshire’s economy grow, and at the same time, not taking adequate steps to ensure that more housing is being built.”

Mood and the 2024 election

A strategist for Bill Clinton during his successful 1992 presidential campaign had this urging to staff: “It’s the economy, stupid.”

The health of an economy is a factor that continues to play out, particularly nowadays as New Hampshire and the rest of the country think about the issues leading up to the presidential general election in November 2024.

A May poll by the University of New Hampshire Survey Center, commissioned by the BIA, shows how much confidence in the economy can affect an election.

“Elections are often driven by economic conditions, and the way New Hampshire residents currently assess their financial conditions could spell trouble for Democrats,” said the BIA Report on Consumer Confidence.

According to the poll, 43% of Granite State adults believe their household is worse off financially than a year ago, 41% say their finances are about the same, and 16% say they’re better off. The survey said Republicans and Independents are more likely to be more pessimistic about the economy than Democrats.

Cost of living and inflation were most often cited to pollsters as the reason for their pessimism.

“New Hampshire’s economy remains strong thanks in large part to our strong employers and sound fiscal governance, but BIA continues to work on key priorities such as lowering the cost of housing, energy and child care while leading pro-business efforts to increase the number of well-paying jobs in the state,” said BIA President Michael Skelton.

Small businesses here in New Hampshire and across the country are largely on the fence when it comes to who to support in 2024, according to a May survey from Goldman Sachs 10,000 Small Businesses Voices.

Goldman Sachs said small business owners do not believe the following issues are being sufficiently addressed by candidates: inflationary pressures, small business tax policy, regulatory burden on small businesses, access to affordable capital and workforce training. It reported that 78% said a candidate’s small business policy position is an important factor as they decide how to vote in the 2024 elections.

“New Hampshire’s small business owners today are experiencing operating costs that are increasingly unaffordable,” said Dina Akel, owner of Viera Luxe in Nashua, as part of the poll’s release. “Small business owners are resilient, and most are enduring despite the challenges. As campaign season kicks off, small business owners want policymakers and candidates to focus on issues that improve the small business climate, because small business is America’s future.”

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The state needs to address two pressing concerns: housing availability and affordable child care.