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The Forces Behind NH's Expanding Economy
Published Friday, February 3, 2017
by Steve Norton

By most measures, NH has recovered from the Great Recession. The size of NH’s economy continues to expand, the state has regained all the jobs lost during the recession, and wages have begun to increase. These are all good signs.  

So what is driving the expansion? To answer that, we need to look at NH’s gross domestic product (GDP). GDP by state is the measure of the market value of all final goods and services produced within a state in a particular period of time. New Hampshire’s per capita GDP (which is GDP divided by population) has grown more quickly than the nation, increasing 0.6 percent annually since 2006. A recent U.S. Bureau of Economic Analysis report estimates that in the first quarter of 2016, gross state product in NH grew at an annualized rate of 2.9 percent, placing NH among the top 20 percent of states in the country.  

Driving Industries
According to the Bureau of Economic Analysis, the single largest contributor to changes in the value of the goods produced in NH was the insurance industry and related activities.  Between 2010 and 2014 (the last year for which complete data is available), gross state product associated with this industry grew by $1.5 billion.  

Why? One possible explanation was the increase in health insurance coverage in NH. The passage of the Affordable Care Act (ACA) has resulted in significant increases in health insurance coverage and aggregate premiums. Slightly more than 55,000 NH residents have received health insurance coverage through the federal health insurance exchanges established by the ACA. An additional 45,000 individuals have enrolled in Medicaid as a result of the state’s decision to expand its Medicaid program to otherwise able bodied, but low income, adults. All of this translates into additional revenues in the health insurance sector of the economy.  

The second largest contributor to changes in the state’s GDP was real estate and rental leasing.  Real estate activities added an additional $1 billion to the state’s economy between 2010 and 2014. This is likely driven by the real estate markets in NH beginning to heat up again. Residential sales have increased almost 50 percent since 2010, with nearly 16,000 units being sold in 2015 and a median sale price that was 14 percent higher than in 2010.

This activity not only creates economic value for individuals, but also for the state. Receipts from NH’s real estate transfer tax have increased well beyond expectations. In fiscal year 2016, tax receipts increased by 15 percent (14 percent more than state budget makers originally thought.)  

What were some of the other big changes? Wholesale trade brought in an additional $900 million. Information services, primarily driven by software publishers and data processing, internet publishing and other information services, added another $630 million. And rounding out the top five industries for aggregate addition to the state’s gross state product was health care and social assistance, which was up an additional $530 million.  

Those five industries accounted for almost half of the $9.6 billion in growth in the state’s $70 billion GDP between 2009 and 2014. However, GDP tells us relatively little about individual economic welfare. Job growth and personal income are generally considered better measures of a community’s economic well-being. The single largest source of job growth in NH was in the food service and accommodations industry, which tend to be lower wage jobs. In 2015, the average wage for the industry that grew the fastest—insurance—is roughly three times as high as food and accommodations.  
Change in GDP, though, is a good measure of the economy’s trajectory. And understanding changes in GDP matters because it offers insight into where workforce development specialists, economic development professionals and investors might want to invest their time, energy and resources.

Steve Norton is executive director of the NH Center for Public Policy Studies, a nonprofit, non-partisan organization in Concord. Norton can be reached at snorton@nhpolicy.org.

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