Boston Fed expert: New England economy strong, but tight labor markets also pose challenge
Forum for NE state legislators features NEPPC economists’ research, analysis of economic issues
The New England economy is doing “amazingly well” by several measures, including sustained low unemployment, rising compensation, and steady prices, according to a regional economic update this week by Boston Fed economist Jeffrey P. Thompson.
But Thompson also highlighted some worrisome economic and demographic trends, including tight labor markets making hiring increasingly difficult and the aging region’s dependence on immigration for population growth.
“A shrinking population is a fairly troubling thing to be staring in the face,” said Thompson, director of the Boston Fed’s New England Public Policy Center. “And without immigration, that’s exactly the picture we’re looking at.”
Thompson spoke Monday at a forum co-hosted annually by the NEPPC and the Lincoln Institute of Land Policy. The forum in Cambridge, Mass., drew legislators from the six New England states to learn about economic and demographic trends and explore pressing policy topics, including state and local tax issues, economic development, and education finance. NEPPC senior economist Bo Zhao joined Thompson at the event to share results from his recent research report, “Consequences of State Disinvestment in Higher Education: Lessons for the New England States.”
Thompson opened the forum with a look at the regional economy, which he said was “at a Goldilocks moment, not too hot, and not too cold.”
The good news includes rising compensation among private industry workers in New England that has outpaced national gains, even as growth in prices has remained flat, he said. Meanwhile, the regional job market recovered more quickly than the rest of the nation, as unemployment dropped below pre-recession levels back in 2015.
But Thompson added that the tight labor market is making it tougher for employers to find workers.
New England’s population has also grown older than the rest of the country. In 1950, the median age in the six states was in line with the median age nationwide, but since 2010, the median age in every New England state has exceeded the U.S. median age. Also, New England’s population growth rate has been flat or negative since about 2012, if international immigration is excluded.
Thompson said the issue is of particular relevance in New England’s northern tier of Maine, New Hampshire and Vermont, which is considerably older and aging faster than the rest of the region. In a presentation after Thompson’s, Middlebury College professor Peter Nelson presented data indicating deaths are outnumbering births through much of the northern tier. His data also indicated the region’s smallest towns – communities of 1,000 people or less that are prevalent throughout northern New England – are struggling to keep people. While larger communities have seen modest but slowing gains since the 1990s, those towns have seen their populations fall.
Thompson said a declining population raises numerous concerns. For instance, it can exacerbate worker shortages caused by the tight labor market. It also compromises the region’s ability to sustain housing prices and its publicly funded institutions, he said.
During his talk, Zhao focused on the impacts of state funding cuts to higher education, including the fact that fewer people earn degrees. He also noted that state spending reductions have the most impact on degree completion at community colleges.
Zhao’s research estimated that for every $10 million cut in state funding for community colleges, 57 fewer associate’s degrees were awarded. Zhao estimated that community colleges in New England collectively granted 21,388 fewer associate’s degrees during the 2002–2012 period than they would have granted if they had received per-student state appropriations at the 2001 level in each year after the 2001 recession.
Given the disparity, Zhao suggested that lawmakers consider increasing protections for community college funding.
“It’s important if you want to address social and economic inequity, because students attending community colleges tend to be low income and have a minority background,” he said. “So when you cut funding for community colleges, that tends to hurt those vulnerable populations even more.”