NE Won’t Return to Pre-Recession Employment Until 2015, but Region’s Education Advantage Could Offer Economic Advantage

The New England states continue to experience slow growth and slow recovery of the jobs lost in the 2008 to 2009 recession. The main reason for this is the continued weakness in global and U.S. economic conditions. The U.S. and New England economies continue to be affected by the weak European economy and sovereign debt crisis and by weakness in domestic and regional housing markets.

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.




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