Stuck in Neutral, Demographics, and

A Sustainable Future?

New Hampshire Joint Engineering Societies

October 6, 2011

Dennis Delay Economist NHCPPS

“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

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“…to raise new ideas and improve policy debates through quality information and analysis on issues shaping New Hampshire’s future.”

Board of Directors Todd I. Selig, Chair David Alukonis Michael Buckley William H. Dunlap Sheila T. Francoeur Stephen Reno Stuart V. Smith, Jr. Donna Sytek Brian F. Walsh Kimon S. Zachos Martin L. Gross, Chair Emeritus John D. Crosier, Sr., Emeritus

New Hampshire Center for Public Policy Studies

Want to learn more? • Online: nhpolicy.org • Facebook: facebook.com/nhpolicy • Twitter: @nhpublicpolicy • Our blog: policyblognh.org • (603) 226-2500

Financial Markets Becalmed for Now

"TED" RateDifference Between 3 month LIBOR and 3 month US T-Bill

0

1

2

3

4

5

6

Jan-

94

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LTCM Y2KTech Bust

SubPrime Shock

Lehman Failure

10/10/08

Calculated Risk has the clearest picture of the problem we face:

Source: Chart from Fed Bank of Boston

NH – Less of a decline, more recovery.

Index of Total NonFarm Employment

93.0

94.0

95.0

96.0

97.0

98.0

99.0

100.0

101.0

102.0

Jan-0

7

Apr-07

Jul-0

7

Oct-07

Jan-0

8

Apr-08

Jul-0

8

Oct-08

Jan-0

9

Apr-09

Jul-0

9

Oct-09

Jan-1

0

Apr-10

Jul-1

0

Oct-10

Jan-1

1

Apr-11

Jul-1

1

Dec

200

7 =1

00

US NH Manchester

New Hampshire

Manchester

United States

NH’s Great Recession was in the early 1990’s

Monthly NH NonFarm Employment, January 1969 - July 2011

0

100

200

300

400

500

600

700

01/6

9

01/7

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1

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9

01/0

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5

01/0

6

01/0

7

01/0

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01/0

9

01/1

0

01/1

1

Th

ou

san

ds

of

Job

s

Grey boxes represent recessionary periods

10% Job Loss

5% Job Loss

3% Job Loss

Smart Manufacturing and High Tech Still Leads the Economy!

Sources: Bureau of Economic Analysis

New Hampshire Total Compensation Paid by Selected Industries(Thousands of Dollars)

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Manufacturing + High Tech

Healthcare

Retail Trade

Finance

Construction

Education

Real Estate

Anecdotal evidence from the Fed Bank of Boston, September 7, 2011

Business contacts in New England continue to report mixed results.

Some manufacturers cite slowing demand while others continue to enjoy strong sales, retail activity is mostly flat, tourism is up, staffing and software and IT services firms note continued growth, and real estate markets remain sluggish.

Respondents say input cost pressures have eased somewhat since the last report.

Firms are doing little hiring. Contacts in all sectors note that the outlook is increasingly

uncertain.

Residential Real Estate Continues to Languish

NH Single-Family Residential Home Sales and Price (MLS)Source: NH Association of REALTORS

0

5,000

10,000

15,000

20,000

25,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

Units sold Median Price

Median Home Price

Number of Units Sold

Decline from the Peak:Sales -40% from 2004Price -21% from 2005

2011 YTD thru July

Home Prices Return to the Long Term Trend:

NH Single-Family Residential Home Price (MLS)

Source: NH Association of REALTORS

$134,749

$141,372

$152,500

$170,158

$188,089

$206,266

$227,807

$237,976

$226,354

$216,598

$187,954

$170,164

$169,787

$157,174

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Median Price 2000 Inflation Adjusted

Median Home Price

Inflation Adjusted Price

New Hampshire Home Building Not as Frantic as in the 1980’s

Monthly Housing Permits in New Hampshire January 1969 to July 2011

0

5,000

10,000

15,000

20,000

25,000

01/0

1/69

01/0

1/70

01/0

1/71

01/0

1/72

01/0

1/73

01/0

1/74

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Twel

ve M

onth

Ave

rage

At A

nnua

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Grey boxes represent recessionary periods

NH Foreclosures Have Peaked?

NH Monthly Foreclosure Deeds

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100

200

300

400

500

600Ja

n-05

May

-05

Sep

-05

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May

-06

Sep

-06

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07

May

-07

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-07

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-08

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-08

Jan-

09

May

-09

Sep

-09

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10

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-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Source: NH Housing Finance Authority

Actual Trend

The Local Revenue Impact: Wherefore Workforce Housing?

Sources: NH Department of Revenue

NH Equalized Property Value and Tax Rate

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20

40

60

80

100

120

140

160

180

200

1978

1979

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Bill

ions

$0

$5

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Property Value Tax Rate

Property Values (left scale)

Tax Rate (right scale)

Demographics

We’re still growing – but slower

Percent Change in NH Population

8.5%

13.8%

21.5%

24.8%

20.5%

11.4%

6.9%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1950 1960 1970 1980 1990 2000 2010

Source: New Hampshire Center for Public Policy Studies, analysis of U.S. Census data

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Understanding the past to see the Future: Here come the baby boomers ….

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Are we old? Not yet, but getting there …

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Seniors spend more on health care, less on pensions and insurance

Percent Change in NH Per Capita Consumer Spending due to Age Structure Change

9.4%

2.5% 3.6%6.3%

14.3%

0.1%

-5.3%

-11.8%-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

Health Care Entertainment Insur &Pension Education

Change 1990-2005 Change 2005-2020Simulation using the Consumer Expenditure Survey

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Health Care Market Impacts?

Smart Manufacturing and High Tech Still Leads, but Health Care Gaining!

Sources: Bureau of Economic Analysis

New Hampshire Total Compensation Paid by Selected Industries(Thousands of Dollars)

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

Manufacturing + High Tech

Healthcare

Retail Trade

Finance

Construction

Education

Real Estate

Sustainable Consumption

The Success of the Climate Change Strategy

Source: Stratfor.com

The Success of the Climate Change Strategy

Source: US DOE

Greenhouse Gas Emissions (Metric tons of CO2 Equivalent)per Dollar of US GDP

400440480520560600640680720760800

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

A new strategy Sustainable Consumption:

“The use of goods and services that satisfy basic needs and improve quality of life while minimizing the use of irreplaceable natural resources and the byproducts of toxic materials, waste and pollution.“ Sierra Club

Sustainable Consumption is more than conservation

Development of a personal ethic that has subscribers using as little energy and as few products as possible to achieve their desired standard of living. Changing people's attitudes toward what

has "value" and what does not. View technological developments in terms

of whether they are safe in the long run.

Key elements of Sustainable Consumption:

Taxing consumption. Taking a life-cycle view of a product's

costs. Increasing individual consumers' attention

to these issues. “Choice Editor” role by government and/or

business

Sustainable Consumption seeks to change values

Reduces the value of a good to a particular individual, and increases the value one places on that good's wider social implications. Sustainable consumption asks people to

place the community ahead of the individual.

Sustainable Consumption new views of technology

Problems industrialized societies face are caused by the unintended consequences of solutions to the timeless problems of food, heat and shelter. Consumer products that improve our

quality of life actually have a negative impact on health -- and therefore on quality of life.

Sustainable Consumption compact florescent bulb

Decreases energy use, but contains mercury. False choice in substituting one set of

problems for another. Like nuclear power (obvious). Solar power uses toxic chemicals Wind power alters landscape, bird kills.

Sustainable Consumption In Practice

Intelligent Community Vehicle System for shared hybrid and electric cars. Regional Greenhouse Gas Initiative Micro-generation. Impact of the sustainable consumption

movement is likely to be one-sided -- a continual press for conservation.

Could price have something to do with it?

Source: DOE

US Energy Expenditures as a Share of GDP

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1970

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Are we worrying about the right things?

Source: NHCPPS

Share of New Hampshire GDPEnergy, Healthcare and K-12 Schools

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1970

1972

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1976

1978

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1990

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1996

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2008

2010

Healthcare Energy School Expenditure as % of GDP

Final Thoughts on a Sustainable Future:

Neither of the two extreme principles—do nothing until we are absolutely sure it’s safe; do nothing until we are absolutely sure the alternative is dangerous—makes economic sense, or any other kind. Weigh the costs, the benefits, and the

probabilities as best all three are known, and don’t be obsessed with either extreme tail of the distribution.

New Hampshire Scores Well

New Hampshire's Economic Scoreboard for 2010New Hampshire's ranking among the 50 states and New England.(Rank of '1' is best; for example 1 is lowest tax rate, highest income, etc.)

National New EnglandCategories Rank RankFavorable Tax Climate (state and local burden on income, 2008) 1 1Standard of Living (by inverse of poverty rate 2009) 1 1Most Livable State (CQ Press, 2010) 1 1Safest State (Lowest crime rank, 2009) 1 1Child and Family Well Being (Annie E. Casey Foundation, 2010) 1 1Education – Adults with High School Degree or better (2009 ACS) 4 1Healthiest State (CQ Press, 2010) 5 2Per Capita Income (2009) 10 3Education – Adults with College Degree or better (2009 ACS) 9 4