Shrinking labor force casts shadow on economic forecast

Dick Heaps, Gus Faucher, NPR's Adam Davidson and Art Woolf stand together after their presentations at the Vermont Economy Newsletter's 23rd annual conference, held in Burlington. Photo by Hilary Niles/VTDigger

Dick Heaps, Gus Faucher, NPR’s Adam Davidson and Art Woolf stand together after their presentations at the Vermont Economy Newsletter’s 23rd annual conference, held in Burlington. Photo by Hilary Niles/VTDigger

A shrinking labor force — meaning fewer people working or looking for work — is the greatest concern for Vermont’s economy, according to Art Woolf, editor of the Vermont Economy Newsletter. And the decline appears to be worse news for women than for men.

At the newsletter’s 23rd annual presentation and state economic forecast on Friday in Burlington, Woolf said the state’s already tepid recovery from the recession is being cooled by downward population trends.

“The $64,000 question, looking forward, is how to get more jobs out of a shrinking labor force,” Woolf said. “Even more problematic is the state’s shrinking pool of people in working age years.”

Woolf said the number of Vermonters between the ages of 25 and 64 is expected to decline, with attrition coming mostly from the younger half of that age bracket. A shortage of people to pick up jobs doesn’t bode well for job growth, he said.

But there have been steady increases in health care — likely a natural outgrowth of Vermont’s aging population. And women have picked up most of those jobs, said newsletter publisher Dick Heaps. Women also are dominating job growth in the professional services sector.

However, Vermont women are losing ground at a faster rate than men in the state’s other dominant industries: manufacturing, retail, leisure and hospitality and wholesale.

“This is an aberration,” Heaps said. “Vermont is a flea on the tail of the dog. Usually.” But the data revealing women’s diminishing role in the workforce are a mystery, he said, especially because it’s not consistent with national trends.

In addition to the anomalous gender imbalance they pointed out, Woolf and Heaps tempered a cautiously optimistic update on the national economy from Gus Faucher, vice president and senior macro-economist at PNC Financial Services Group.

Faucher pointed to a slowly recovering housing market, shrinking trade deficit and slight upswing in business investment as his sources of hope.

Woolf and Heaps gave a less rosy forecast for Vermont. Their predictions for the state’s economy are, in part, a function of Vermont’s historical relationship to the national stage: Vermont tends to follow national trends, but to a lesser degree.

This helped during the recent economic collapse, when the state’s economy didn’t fall so hard. But it also means recoveries tend to be less dramatic. Given that the U.S. recovery is unfolding slowly, Woolf and Heaps characterized Vermont’s climb as incremental.

Average median income in the state has ticked up slightly since 2008, but solid growth in the previous decades had leveled off since 2000. Coming out of the dip doesn’t mean much in the bigger picture, Woolf said.

Likewise, it’s good that the housing market is stable, but he finds little lift to help raise real estate values in most of the state.

And the state’s relatively low unemployment rate is not likely to get any better, he said, especially with that job growth problem.

Faucher suggested that immigration may help other states struggling with the workforce decline issue. Woolf places less hope in that basket.

“I really don’t have a good answer for how we’re going to have … job growth, given the underlying population (trends) in the state,” Woolf said.

Complex conditions that drive competition for businesses in other regions make it hard for Vermont to offer much of a bargain, he said.

Judging by history, Vermont could be simply returning to its long-term trends, he said. After all, the 1960s through 1990s were the only decades since the 1800s when state population growth rate matched that of the rest of the country. Before the 20th century influx, Vermonters left the state in droves to seek their fortunes elsewhere.

Hilary Niles

Comments

  1. Tony Redington :

    What these economists miss includes the fact that the two fastest growing New England States–Connecticut and Massachusetts–not only have better public transportation systems than Vermont but also higher average wages and benefits. Plus Mass health care remains far advanced than Vermont’s with Mass’s landmark Obamacare now several years old. Taxless, government less, and clueless New Hampshire (my home state) suddenly trails neighboring Massachusetts in population growth. Labor force participation and a successful economy increasingly depends on quality public services—especially heath care, child care and transportation–and here Vermont lags at its economic peril. The quality of life and sustainability are what is important, not population growth. Seems to me lack of participation in the workforce with low population growth sends a message–and it is not the need for more population as the Vermont economists imply.

    • Dan Carver :

      Tony,
      Interesting perspective you presented. When I read it, I think of population density. According to data from the US Census Bureau for the 4 states mentioned:
      Mass – 840 people per square mile.
      Conn – 739 people per square mile.
      NH – 147 people per square mile.
      VT – 68 people per square mile.

      Based on this data, I infer it is easier to support public services when you have population densities 11 or 12 time greater than VT, or 6 times greater than NH.
      To have density, you need private sector jobs.
      Vermont’s focus is to grow government jobs. As we lose private sector jobs, this equates to an unbalanced equation: How to tax government employees enough to pay for their own wages and benefits.
      It’s not a very good model/formula, but if you package it well, it buys enough votes to keep the status quo…for now.

  2. Peter Everett :

    As I see it, people are getting tired of an overbearing Gov’t. The economic environment is far from appealing to workers. Each year, more of their earnings are consumed by Gov’t, especially the State Gov’t.
    As of now, people are beginning to realize that leaving the state is a viable option for them…better wages, lower taxes and living conditions that may be far less harse than in Vermont.
    As for me, my granddaughter is so embedded in our community that it would be unfair for us to leave now. Upon her entering her Sr year of high school we will be placing our home up for sale and relocating to a much friendlier state to live. We will always have the option to return and vacation here, because Vermont is a naturally beautiful state ( the beauty is why we relocated here, unfortunately for us, we did not perform research enough about the negative aspects of living here). One learns through their mistakes.

  3. Pete Novick :

    There are two ways to grow an economy: increase the number of employed people; and/or increase worker productivity (output per worker per unit of time).

    Vermont’s population continues to decline in the cohort most important to long term economic health: working aged couples with education, skills and experience and school aged children. These people are not relocating to Vermont, where our wages are below the national average, our labor market does not offer a robust mix of jobs in the highest paying sectors of the economy, and our cost of living is about 20% higher than the national average.

    Additionally, Vermont’s population of children attending public school continues to decline: from over 100,000 students ten years ago to 89,000 today. Every year, we have schools closing and consolidating all over the state because of low enrollments.

    Businesses all across America are aware of these trends.

    The result of this state of affairs is visible – or more accurately, not visible – on your morning commute.

    Sustained, year-on-year economic growth of at least 3% GDP is the one sure-fire way to realize substantive gains in the standard of living. It is the tide that lifts all boats.

    Regrettably, Vermont is not even close to that 3% growth benchmark, and here’s a snapshot for 2012 GDP growth by state published by the US Department of Commerce:

    http://www.bea.gov/newsreleases/regional/gdp_state/gsp_newsrelease.htm

    As you can see, Vermont’s economy grew at an annual rate of only 1.2% in 2012 and about the same in 2013.

    Surely Governor Shumlin could re-order his priorities and focus on the single most critical challenge facing Vermont today:

    Vermont’s dying economy.

    Consider housing starts. In 2012, housing starts in Vermont were down 6% year-on-year – one of the lowest rates in the nation. 2013 is shaping up the same. You can check it out for yourself here:

    http://www.washingtonpost.com/blogs/govbeat/wp/2013/12/27/the-nine-states-and-one-district-that-won-2013/?hpid=z3

    What surprises me is that the 4 people in the picture accompanying this article are still smiling.

  4. Paul Lorenzini :

    They are smiling because all they do for work is talk all day and spend other peoples money.
    THEY are living the American dream, and we have to pay the bill.
    The bills they send keep getting bigger and small employers cannot give raises because the government eats all the profits.
    Try working next to a person on the same salary as you, but for whatever reason, they receive massive welfare and you only pay.
    The reason they receive and you pay is that THEY made kids before THEY could pay for them.
    The government in VT looks at people without children as nothing but an opportunity to tax. If you don’t have kids, you don’t need your money, the welfare bum with 4 kids deserves it more according to state policy. Young people without kids, but with a home, get boned by this state.
    I had to work next to a person that made the same money I did
    They receive free home weatherization, free washers, dryers, and refrigerators, free food, heating assistance, health care, education, income sensitivity on property taxes, massive income tax returns, and general sympathy because they banged out a bunch of kids before they could support them. I forgot to mention they also receive VHFA mortgage assistance which is essentially the state buying part of their house for them.
    I had to work and pay for all of that if I wanted it. WE BOTH GOT PAID THE SAME MONEY!
    I really think that working next to people that live this way is a massive disincentive to work. Seeing how the state redistributes income from those who have, to those that have kids irresponsibly, is not good for worker morale.
    Looking back at my life I would say that I would have been better off, and far richer, if I had just started making kids here, instead of trying to make a living.
    I am just sick of being a cash cow for the state and continually being asked to pay more for less so someone else can be equal to me, even though they were the irresponsible ones.

  5. Duncan Kilmartin :

    Probably the most important article and commentary of 2014 to appear in VTDIGGER.

    Would that Shumlin’s legislative tailors of his Imperial Emperor’s new clothes, instead of spinning their yarns of absurd delusional gossamer, could read and heed the article and its comments!

    If we don’t reverse directions, Vermont will lead the nation “over the cliff of self-destruction”.

  6. Steven Farnham :

    I fail to see the bad side of this news. A shrinking labour force means a labour market that favours labour instead of business. I suspect that to be the main reason these people are in such a panic about it. It’s about time something happens that might help the little people who are actually working, and, might help the chronically unemployed finally find a decent income. If this trend keeps up, employers might actually have to pay their workers and…

    wait for it…

    provide benefits.

    They might have to provide paid sick leave.

    And firing workers on a whim might be less attractive when it’s so hard to find a replacement.

    Whoa. Troubling times indeed.

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