Talking About Jobs, Trade and Neighbors to the North, Eh?

By John O. Harney

New England’s unemployment rate stood at 4.4% in April, compared with 5% nationwide, according to the spring 2016 outlook delivered last week by the New England Economic Partnership (NEEP) to 50 or so economists and others gathered at the Federal Reserve Bank of Boston.

New Hampshire posted the second lowest unemployment rate in the U.S. at 2.6%. But all New England states are projected to have lower annual employment growth than the U.S. average through 2018, partly due to the region’s aging population.

Economist Barry Bluestone of Northeastern University’s School of Public Policy and Urban Affairs projected that New England’s population will grow by only 5.5% from 14.7 million in 2015 to 15.5 million in 2025.

Turning to the spring 2016 NEEP theme of New England’s special relationship with Canada, Bluestone noted that 6% of jobs in New England depend on trade with Canada. New England’s No. 1 export to Canada is aircraft and aircraft parts, partly from GE and Pratt & Whitney. In some instances, the interdependence is striking: One growing export from New England to Canada is live Maine lobsters. One major import from Canada back to New England is processed and frozen lobster, much of it for casinos and cruise ships.

The conference was sponsored by Brandeis International Business School’s Perlmutter Institute, the Canadian Consulate General and TD Bank—the Toronto bank that now markets itself as America’s Most Convenient Bank and has naming rights to the arena that is home of the Boston Bruins, NHL archrival of the Montreal Canadians.

Bluestone added that New England output is forecast to grow nearly 13% by 2025. At the same time, ISO New England reports that the region’s power generating capacity will decline by at least 13%, due to nuclear, coal and oil plants going offline. That means more natural gas, including via controversial means such as pipelines carrying fracked gas from Pennsylvania and ships carrying LNG from Yemen. Wind and solar power can supplement that, but cannot provide reliable, 24/7 energy for New England. And there is the question of how to get energy from the hydropower resources of Canada to the markets of New England. People in Maine, New Hampshire and Vermont don’t want to see big power lines. One solution is the power lines currently approved to run under Lake Champlain in Vermont.

Bluestone added that as international flights to Boston’s Logan Airport have grown considerably, it may be time for New Englanders to think of Halifax, Nova Scotia, as another viable international airport. It’s closer to Europe than Boston is.

In one of the surprisingly rare references to education and talent at the NEEP conference, Bluestone warned that New England needs more engineers to innovate in areas such as harnessing the region’s high tides for energy and desalinizing seawater for drinking.

State of the states

The Canadian theme is engaging, for sure. But for me, NEEP’s gold comes in its colorful state-specific forecasts, this time down to four state forecasters from the usual six or more. (NEEP mourned the death of stalwart New Hampshire forecaster Dennis Delay, who died in December; Fairfield University professor emeritus Edward Deak, who historically watched ups and downs in Connecticut, retired from NEEP. Ross Gittell, the NEEP vice president who usually delivers the New England regional forecast, could not attend the spring conference because of his duties as chancellor of the Community College System of New Hampshire.)

Independent economist Jeff Carr of Vermont reminded the audience that his last forecast was clouded by Keurig’s launch of its cold-beverage line (which the coffee-brewing company ultimately discontinued) and Global Foundries buying IBM microelectronics facilities in the Northeast (which changed the company’s semiconductor export picture).

In January 2015, Vermont reached full recovery from the Great Recession—a benchmark whose significance is still lost on some who didn’t understand the full trauma of that downturn. Carr noted that, for the first time in years, the decrease in Vermont unemployment is actually due to increasing employment, not declining labor force. He added that the craft food industry (as he said, everything you need for vacation: Ben & Jerry’s ice cream, Cabot cheese and craft beers) has been a key part of Vermont economic resilience, despite hits in overall manufacturing..

Most Vermont exports are integrated circuits from the former IBM plant in Essex Junction and engine blades from Rutland. On the Canada theme, Vermont approved the transmission under Lake Champlain to bring in electricity from Quebec. Carr pointed out that Canadian hydro initially was not considered “renewable” because of an existing large carbon footprint and environmental implications for the Cree Indian Nation.

In a tribute to Delay, who gave a regular “Segway report” based on the motorized scooter invented by New Hampshire’s Dean Kamen, Carr noted the irony that Segway tours have become a top tourist activity in Burlington, Vt.

Charles Colgan, professor emeritus at the University of Southern Maine, who also spends much of the year at the Center for the Blue Economy in Monterey, California, returned to NEEP for the Maine forecast. Portland unemployment is extremely low, he said, yet it does not increase in-migration.

Also five paper mills in Maine have closed since 2008, claiming 7,500 total jobs.

On the conference theme, Colgan noted that Canada is Maine’s #1 trading partner, followed by China and Malaysia. Also, Maine still attracts many Canadian tourists to Old Orchard Beach and other coastal spots on the “Quebec Riviera.”

Maine also has led New England in renewable electricity. Colgan told of how a shortage of oil power threatened the Great Northern Paper mill in Millinocket, Maine. Then-Maine Gov. Ken Curtis contacted New Brunswick Premier Richard Hatfleld to nudge Irving Oil of St. John to help keep the mill running. New England governors began meeting with Eastern Canadian premiers to discuss energy issues at that time, and Irving remains a major presence in Northern New England.

Now, many Mainers and others worry about tar sands being transported through a Maine pipeline for later redistribution.

Maine has installed significant wind power and has more planned for Aroostook County, which historically has been connected only to the Canadian grid. Meanwhile, offshore wind may help solidify Maine’s potential in the middle of a rapidly developing energy market from Maine to the ”Boston States.”

Bryant University economist Edinaldo Tebaldi displayed a slide, showing the Rhode Island economy is improving but not as fast as New England or U.S. The Ocean State suffers from very little population growth, and its labor force is actually shrinking. Rhode Island’s unemployment rate is almost back to pre-recession levels, but not quite, partly because of sluggish job growth in manufacturing and construction.

Economist Adam Clayton-Matthews of Northeastern University spoke about high confidence in Massachusetts. Unemployment is now below pre-recession levels, but demography is making it impossible for many employers to replace workers.

Asked about the crisis in creating homes for middle-income households, Carr of Vermont noted that it’s not as cool for millennials to live in Burlington, Vt., as it is to live in booming Boston. People go to Vermont to get educated, then move away, then comes back with three kids, Carr quipped. He add that the milestones people used to reach in their twenties—marrying, having kids and buying a home—they now do in their thirties, partly because of the pressure of student loan debt. In Maine, the state with the highest median age in the U.S., the housing problem is a lack of affordable senior housing.

A TD Bank official pointed out that not wanting to lose that enormous body of aging talent, the bank has no mandatory retirement. Many older workers can work one or two days a week. If other companies would do it, she noted, that would help an aging New England.

If the trade data weren’t enough to convince the audience of the “special relationship,”  panelists on Canadian innovation may have drove the point home.  TD senior economist Michael Dolega pointed out that no banking crises has occurred in Canada since 1840, compared with 12 in the U.S. (though housing markets are overheating in cities like Toronto and Vancouver and oil-producing regions of Alberta, Saskatchewan and Newfoundland & Labrador are in recession). François-Philippe Champagne, a member of parliament from Québec, and parliamentary secretary to the minister of finance, told the audience that looming Canadian infrastructure investment will emphasize public transportation, water and wastewater treatment, and affordable housing—priorities that perhaps should, but may not, straddle the border.

John O. Harney is executive editor of The New England Journal of Higher Education.


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