Business & Economy

Economists predict slow growth for Vermont

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
Richard Heaps, Gus Faucher, NPR’s Adam Davidson and Art Woolf stand together after their presentations at last year’s annual Vermont Economic Outlook Conference, held in Burlington. Photo by Hilary Niles/VTDigger

Vermont’s economic recovery will progress along with the rest of the country in 2015, but the state will continue to lag in job and population growth, according to forecasts presented Friday morning in Burlington.

Economists painted a generally rosy picture for the coming year during the 24th Annual Vermont Economic Outlook Conference, held at the Sheraton Burlington Hotel & Conference Center. About 150 attendees – primarily from banking, real estate, energy and other financial industries – also heard that the state isn’t adding as many jobs as the rest of the nation. And while Vermont’s number of residents of prime working age declines, so does its prospects for attracting new and expanding businesses.

“My forecast is they’re not going to come in here,” said Richard Heaps, a former University of Vermont economics professor and co-founder of Northern Economic Consulting Inc., the Westford-based company that publishes the monthly Vermont Economy Newsletter and sponsors the economic conference. “We’re going to grow slowly.”

Heaps calculated that Vermont added about 1,900 jobs in 2014 and projected another 1,500 new positions this year. A reflection of the state’s size – it represents just 0.2 percent of the total U.S. economy – those numbers barely overcome the margin of error for such estimates, he said.

Over the past three years, Vermont has trailed the U.S. job growth rate, adding 2.5 percent compared with 5.6 percent nationwide. “We’re growing at about half the rate of what the country is doing,” Heaps said. “It’s not the robust growth we see elsewhere.”

Heaps also noted the shutdown last month of the Vermont Yankee nuclear power plant in Vernon, which will take years to complete decommissioning, but will ultimately hurt the Windham County economy and surrounding area. The plant employed 600; just over half of them will remain during the next five years.

Vermont gets a boost from its tourism and restaurant industries, which accounted for about 800 of those new jobs last year. A good ski season in the past few winters has helped and could do the same this year, Heaps said. The most well-off U.S. consumers – who have financially recovered faster than those with lower incomes – are key visitors to the state’s mountain resorts.

As Vermont loses young adults who seek their fortunes in bigger cities, baby boomers are aging, creating an increasingly older population that’s less and less in the workforce. With fewer laborers available, companies are less likely to locate or expand in the state, said Art Woolf, co-founder and editor of The Vermont Economy Newsletter.

Today, about 15 percent of Vermonters are older than 65. Woolf projected that demographic would account for almost 27 percent of the population by 2030.

The state has about 300,000 jobs now, Woolf said. But because of its stagnant and aging population, it stands to lose 35,000 of those in the next 25 years, he said.

On the brighter side, those aging baby boomers will need more health care, which points to growth potential in that sector of the economy.

Vermonters also have more money since the recession. Median family income inched up to about $73,000 in 2013 – close to where it was in 2007 – and is expected to continue to rise, according to the economists. Median family income will reach $100,000 by 2040, Woolf projected. The median is the point at which the same number of families have income below that amount as they do above it.

Most U.S. consumers, including those in Vermont, have more money in their pockets today because of the dramatic drop in gasoline prices, now ranging between $2.22 and $2.99 per gallon across the state, down almost $1 from a year ago. That amounts to an average household savings of about $900, Heaps said. And in Vermont, lower heating oil costs – particularly compared to the price spike last winter – further bolsters household finances.

All of this has helped encourage consumers and businesses to resume spending since the recession, when they focused instead on paying down their debts, said Gus Faucher, a senior economist for PNC Financial Services Group, during his presentation at the economic conference.

The nation overall has surged ahead, with year-over-year growth in gross domestic product reaching 3.5 percent for the past four quarters, said Faucher, who is based in Pittsburgh. Last year, the country saw the most job growth since 1999, adding 2.95 million positions.

Wages have lagged, but Faucher said he expected this to change as greater demand for workers started to tap out supply, forcing employers to pay more.

“Businesses are in good shape to go out and hire,” he said.

For 2015, he forecasts an increase in auto sales, improvements in the housing market and an ongoing boom in domestic energy production.

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  • Pete Novick

    Quoted from the article:

    “Median family income inched up to about $73,000 in 2013 – close to where it was in 2007 – and is expected to continue to rise, according to the economists.”

    Here’s a link to the Vermont Department of Taxes statistics webpage, where you can browse individual income tax data for the years 2000 to 2013.

    Please open the 2013 ‘Vermont Personal Income Tax Returns – Counts’ page where tax returns are aggregated by adjusted gross income (AGI).

    Note that of 314,010 tax returns filed by state residents, approximately 225,000 returns (72%) reported income under $70,000.(I had to interpolate from the $60,000 – $74,999 data set, but I am confident it’s pretty accurate.)

    So, if approximately 72% of households report income under $70,000, please show me the math supporting the $73,000 median income reported in the article.

    “Put more water in the soup, there’s better times a coming.”

    – Traditional


    • Doug Hoffer

      Mr. Woolf and Mr. Heaps are fond of using median “family” income rather than median “household” income.

      The former is a term of art that means only households whose members are related by blood, marriage or adoption. This a legitimate and important group but is just a subset of all households.

      For example, some portion of the returns you see in the tax tables are single and some of them share a household with other unrelated people. That’s why the number of returns far exceeds the number of households (314,000 vs. 257,000).

      The median household income is about $54,000 and has been stagnant for years (here and elsewhere).

      Here is the link to the Census page with income data.

    • Joyce Wilson

      Pete, Vermont’s median income is $54,267 not the near $73,000. Thanks for doing that research and bringing that to light as when I read the article last night, I did not question Vermont’s median income of near $73,000.

      Here is a link from the US Census Bureau and Vermont’s median income is $54,267.

  • Wendy Wilton

    Most Vermonters live in family households according to the economists. While Mr. Hoffer calls it a term of art it is the reality of our population. I would also state that a family earning $73,000 annually is barely making it unless their mortgage is paid off. The cost of taxes, transportation, food, energy, college tuition and healthcare is higher in VT than other places.

    The demographics of our state are a important issue which the legislature would be wise to address. Future revenues for state services will dwindle and expenses will rise if we cannot reverse the trend. One out of four Vermonters will be over 65 by 2030 if the trend is not reversed.

    I did attend the event which was very informative. Woolf and Heaps announced that this conference would be their last, unfortunately. Thank you VT Economy Newsletter for all your efforts to educate Vermonters about the economics of our state and nation over the years. There is hope that the VT Chamber may pick up the task of hosting the conference in the future. That would be a good thing!

    • Doug Hoffer

      Actually, it’s not me who calls it a term of art, it’s the Census Bureau. Here is the official definition.

      “Family households” consist of a householder and one or more other people related to the householder by birth, marriage, or adoption. They do not include same-sex married couples even if the marriage was performed in a state issuing marriage certificates for same-sex couples. “Nonfamily households” consist of people living alone and households which do not have any members related to the householder.

      As for the reality of our population, here are the figures from the 2010 Census.

      256,442 Total households
      160,360 Family households (62.5%)
      96,082 Non-family households (37.5%)

      So while the majority of Vermonters live in family households, I hardly think we should rely solely on income measures that ignore almost 40% of our households.

      • Joyce Wilson

        Doug, Wouldn’t an “young” adult daughter/son that is living at home because of difficulty finding a decent paying job after college etc be including in this “family household” income? If so then this would inflate the median “household income” of say two young daughters/sons each only making $10,000 per year and living at home after college. Or did I interpret it incorrectly?

        Thanks for your clarification on the “household” median income as I did not previously know about the distinction.

  • John Cisar

    Vermont’s job, economy, and population growth being half the national average is evidence contrary to your “rosy picture” claim.

  • Peter Everett

    Experts predict slow economic growth, for who? Households, businesses. I’m sure they expect to see massive growth for our wonderful government. All at the expense of tax payers and businesses pockets.
    Check, gas prices are down. More money in people’s pocket. Heaven forbid Montpelier would let the owners of this $$$ enjoy the extra cash. Bet you, those in power will find a way to get at this $$$ through increased fees, taxes,etc. Is there no shame in these “trusted” individuals serving the “people”? NOPE.

  • J. Scott Cameron

    “On the brighter side, those aging baby boomers will need more health care, which points to growth potential in that sector of the economy.”

    If that’s the brighter side I would suggest that we are in serious trouble.

    • Walter Cooper

      To Scott’s comment–the Boomer’s have had such an outsized effect on Vermont that it warrants more study.

      What does a post-Boomer Vermont real estate market look like? What happens to financial and other Boomer assets as they age? Who is in-line to buy the Boomer’s out, and at what prices? What are the public-finance ramifications of Boomer’s retiring for Vermont? Living in old age?

      Vermont was suffering from its second great exodus in the 50s and 60s before the Boomer’s arrived. They reversed that trend and also irrevocably changed the state.

      I wonder if the difficulties Vermont had before the 70s are reappearing–largely that it’s a cold, remote, expensive place to do business. I know my generation (I’m 40) has a lot less time and money for leisure than our parents did (in general terms). I see that too in the demographic of visitors to my Vermont town (e.g., they are mostly old).

    • David Dempsey

      I couldn’t agree more. But that “brighter side” of the economy from the growth in the health care sector might not materialize. Many of us baby boomers who are on fixed incomes are finding it hard to pay property taxes and also pay bills. That could mean that a lot the increased health care revenues will end up in the states that people can afford to live in.

  • Glenn Thompson

    From the article,

    “As Vermont loses young adults who seek their fortunes in bigger cities, baby boomers are aging, creating an increasingly older population that’s less and less in the workforce. With fewer laborers available, companies are less likely to locate or expand in the state, said Art Woolf, co-founder and editor of The Vermont Economy Newsletter.”

    That statement nails it perfectly!

  • Vermont’s “Nothing Burger” Economy
    You don’t even need to “read between the lines” to see that these folks are trying to put lipstick on a brood sow. A declining and aging population, job growth currently ½ of the national average that will decline by 10% by 2040, median family income only equaling to 2007 rate, taxes and cost of living well above national average, an economy reliant on season tourism from “well-off” citizens visiting mountain resorts and suffering from a declining manufacturing sector – how do these brilliant businessmen find any silver lining is this dark cloud?
    Yes, Vermont has the resources to return to economic and social vitality however it will take new and inventive ideas. Ideas and strategies that foster individual enthusiasm, ingenuity and innovation will return Vermont to a self sufficient and sustainable economy. The socialist thinking has gotten Vermont behind the “eight ball” offers nothing to resolve the problems it has “gifted” us!

    H. Brooke Paige
    Washington, Vermont

  • Jason Farrell
    • Wendy Wilton

      Jason, thanks for posting that link. Carr and Kavet, the state’s economists were wrong, and Woolf was right.

  • Joyce Wilson

    Jason, They missed with that forecast in your link as personal income tax revenue in Vermont has missed the target each and every month since April 2014. The general fund in Vermont is very dependent on personal income tax. The legislature must figure this session how to fill the gaping hole in the budget.

  • nicole boar

    Gas a block from where I live in Yuma, AZ is $1.86 a gallon if you don’t use credit card. Plus sun shines all day and it is 75 degrees.
    How come economics folks talking about what to expect in 2040?? the world could be gone by then. get real. Folks want to know what is predicted to happen in a year or two.
    Get REAL Vermont. I left for a reason. Stop raising taxes every year and maybe some folks and businesses will stay.