The forecast for the region is for the economy to continue to grow slowly with employment growth averaging 1.3%per year and overall economic (regional gross product) growth averaging 2.8% per year over the forecast period (out to the end of 2016). This is below the growth of 2% in employment and 3% in the overall economy required to significantly reduce unemployment and substantively expand economic opportunity in the region. The expectation is that the region will not return to its pre-recession employment level until 2015.

After a relatively strong first quarter of 2012 with 1.6% annualized growth in employment, employment growth in the region is not expected to be above 1% again until the middle of 2013 and then rise only slowly. It is not expected to reach 2% at any time during the forecast period. The regional unemployment rate is expected to remain below the U.S. average, but above 6% until 2015. Weakness in the housing market is anticipated to remain a deterrent to economic recovery. Declining or flat median housing prices are expected to continue in New England until mid-2013 and then increase only modestly.

All New England states are expected to have employment growth below the U.S. average over the forecast period. Demographic factors including lower labor force growth than the U.S. average contribute to slower employment growth than the national average. Economic performance will continue to vary significantly across the region. Rhode Island, New Hampshire and Vermont are expected to have the highest employment growth in the region over the forecast period. While Rhode Island is expected to have the highest rate of employment growth, it will continue to have the highest unemployment rate as it recovers from the most significant percentage employment decline in the region during the last recession. The Ocean State suffers from a poor business climate—including high taxes and significant state and local fiscal stress and uncertainty—and relatively low educational attainment and skill level, this includes relatively low skill among the so-called "middle skills" workers with more than a high school degree and less than a bachelors degree.  The state ranks 32nd in the nation in the percentage of adults with an associate degree.

The regional unemployment rate remains below the national average. This is a result of the region’s employment decline being less than the U.S. average during the recession and the region’s relatively strong recovery early on, after the end of the recession. The unemployment rate in New England is expected to remain flat due to weakness in the recovery before gradually declining starting in 2014—the current slow employment growth only matches the region’s labor force growth. Vermont and New Hampshire are expected to continue to have the lowest unemployment rates in the region, and Rhode Island the highest over the forecast period. By the end of 2015 Vermont’s unemployment is expected to be down to 4% and New Hampshire’s to 4.4%. New England’s highest unemployment rates are forecast for Rhode Island at 7%, Connecticut at 6.6%, and Maine at 6%. Massachusetts is expected to have a 5.5% unemployment rate at the end of 2015.

Matching workforce capabilities

As the national economy improves, albeit slowly, and some global markets expand and with them demand for manufactured products and high value-added services, the region’s economic outlook will be influenced by the matching of workforce capabilities and skills with the emerging needs of employers. Recessions and recoveries are typically periods of significant reallocation in the economy and in the labor market, and the current period in New England is no exception. The speed of employment recovery in the region will depend in part on the degree of match between the characteristics of available workers and the growing industries and newly available jobs.

In 2012, the fastest-growing New England sectors (based on percent change) include high tech (2.1%), professional and business services (2%) and private education and health care services (1.7%). These industries are expected to continue to increase employment at a faster rate than other industries over the forecast period. They include concentration of employment in many of the occupations that are expected to grow the fastest in percentage terms and in numerical growth nationally over the next decade, including biomedical engineers, market research analysts and marketing specialists, nurses, personal care aids, home health aids, physical therapists and postsecondary teachers.

Manufacturing employment in the region is growing—good news after a long period of decline. The growth, however, is slower than in some other sectors at 0.5% in 2012, and slower than it would be if there were not labor skill mismatches in manufacturing. Mismatches occur when there are differences in skills between workers and jobs available. The economy requires not only available workers to support employment growth, but also an available workforce with the appropriate skills to meet the needs of employers that are in a position to hire new workers.

Nationally, nearly one-third of manufacturing companies are suffering from some level of skills shortages. There have been specific reports across the region of advanced manufacturers with increasing global orders for their products who want to expand production and hire more workers but are limited in their growth in New England by a shortage of skilled machinists, computer and numerical control operators and engineering technicians and the retiring of older skilled workers.

There is reported lack of education and training in the areas of job-specific skills and basic skills, and a shortage of “middle-skilled” workers. Rapid increases in technology have left significant numbers of middle skilled and other workers ill-prepared, and new and changing technology will likely cause future mismatches.

All of the above holds true not only in manufacturing, but will increasingly be relevant in other important industries in New England including health care, high technology and professional business services. Employment growth in the region could very well be lowered by the limited number of middle- and also high-skilled available workers in these industries. Many New England companies that have survived the recession are well positioned to grow as the national economy improves, but will require appropriately skilled workers.

Education's response

All New England education institutions, and particularly community colleges, have been asked to help address skilled workforce mismatch concerns.

In New Hampshire, Great Bay Community College is partnering with suppliers in the aviation industry to train workers in advanced composite manufacturing. This will help create 400 new jobs in the Granite State. This is part of an advanced manufacturing initiative throughout the Community College System of New Hampshire in which the state’s seven community colleges are focusing on advanced manufacturing programing aligned with industry in their local areas. The Connecticut Community College System (CCCS) is providing education and training focused on the transmission and distribution sectors of the energy industry. CCCS is offering online Electric Power Technology classes to students enrolled in the Connecticut Community College System who are pursuing an associate degree in Technology Studies. Central Maine Community College (CMCC) has expanded programing in machine tooling, including computer numerical controlled (CNC) machining in partnership with aerospace, military and infrastructure metal parts manufacturers.

The challenges in the current economy provide opportunity for education institutions to more tightly align their programs and curriculum with sectors of the economy that are growing. With its strong educational infrastructure, New England has an opportunity to do this better than other regions and to continue to have its educational advantage be an economic advantage.

Ross Gittell is NEEP forecast manager and chancellor of the Community College System of NH.

• There are 200,000 fewer children in New England today, compared with 10 years ago—a 6% decline.
• The number  of married couples with children has declined by 10% since 2000—and they now account for fewer than one in five New England households.
• The number of single parents has grown by 9% since 2000, but they represent less than one in 10 New England households.
• New England has lost more than a half million residents (570,000) in the prime childbearing age range of 25 to 44 since 2000—a 13% decline.
• The highest growth among New England residents over the next decade will occur among people ages 65 to 74.
• All six New England states are on the list of the nation's 10 oldest states in terms of median age.

These trends are the focus of a special New England Economic Partnership (NEEP) conference titled: Millennials, Baby Boomers and New England’s Future.

The conference will be held, appropriately, at the University of New Hampshire at Manchester on Friday, Nov. 18, at 8:30 a.m.

For registration, please visit www.neepecon.org. (NEEP will offer nonprofits, government organizations and universities a discounted fee of $99.)

The forecast is for the regional economy to continue to grow slowly through the first half of 2011 and then pick up some modest strength, according to the Spring 2011 Outlook from the New England Economic Partnership (NEEP). Just as in the second quarter of 2010, the region experienced a dip in growth in the first quarter of 2011. The region is expected to pick up in growth in the last half of 2011, increasing in growth in overall economic from 1.7% in the first quarter of 2011 to 2.6% in the second quarter of 2011 and with above 3% growth in the third and fourth quarters of 2011.

New England continues to slowly recover the jobs lost during the recent recession. But total employment in the region is not expected to reach pre-recession (first quarter 2008) levels until early 2014. This is about the same time as the expected employment recovery in the nation. With slow labor force and population growth, the regional unemployment rate is expected to remain below the national average, but above 8% until mid-2012.

Median housing prices are not expected to start rising for another 12 to 18 months. The continued decline in housing prices affects consumer confidence and spending and has delayed the economic recovery.

All major sectors of the regional economy were affected by the recession and experienced some decline in employment with the exception of health services. The leisure and hospitality industry in the region was the first to recover its employment loss during the recession and is expected to be followed by professional and business services and high technology. The other major so-called “supersectors” of the economy—manufacturing, trade, construction and finance—are not expected to recover the employment they lost until after 2014.

Looking at percent change from employment troughs in 2009 and 2010 to the end of the forecast period (the fourth quarter of 2014), the strongest sector of the regional economy is expected to be professional and business services, increasing by over 12%, by leisure and hospitality, also growing by 12%, and high technology and education and health services, rising by over 11%. (See Fig. 1.)

Finance, trade and manufacturing industries are expected to have weaker recoveries from their employment troughs. Government employment is expected to be adversely affected by fiscal pressures at the federal, state and local levels and decline through the middle of 2012 and then increase at a low rate of growth to the end of the forecast period.

Figure 1: Percent Changes in Sector Employment, Trough to 2014 Q4, U.S. and New England

Across the Region

Economic performance will continue to vary significantly across the region. New Hampshire is expected to continue to have the strongest employment growth in the region. Connecticut is expected to have the weakest employment growth in the region and Rhode Island the highest unemployment rate.

Massachusetts, Vermont and New Hampshire during the recession had the lowest percent declines in employment of all the states in the region at 4.5%, 4.2% and 4.2% respectively. (See Fig. 2.)

Figure 2: Percent Changes in Total Employment, Peak to Trough: U.S. and Six New England States

In terms of forecasted recoveries from troughs to the fourth quarter of 2014, Vermont and New Hampshire are expected to have the highest growth in total employment at 7.5% and 7.9%, respectively. (See Fig. 3.) Of these forecasted rates, no New England state is expected to grow above the forecasted U.S. average of 9%. Rhode Island is expected to grow at the regional average and at a similar rate as Massachusetts, due not as much to a strong recovery in the Ocean State, but mainly because of the state’s more pronounced decline during the recession. The remaining states in the region, Connecticut and Maine, are expected to experience growth in employment from their troughs to the end of the forecast period of 5.7% and 6.2% respectively.

Figure 3: Percent Change in Total Employment, Trough to 2014, Q4: U.S. and Six New England States

New England in Slow Recovery

Significant uncertainty and downside risk potential in the global and national economies could have significant negative impact on the New England economy. This includes the expanding European debt crisis, continued unresolved housing issues and government at all levels under significant financial stress.

The recovery from the recession of 2008-09 in the New England states is expected to continue to be slow and precarious. The region’s economy will not improve significantly until the national economy improves.

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Ross Gittell is the James R. Carter Professor at the University of New Hampshire’s Whittemore School of Business and Economics.