By most measures, New Hampshire has recovered from the Great Recession. The size of New Hampshire’s economy continues to expand, the state has regained all the jobs lost during the great recession and wages have begun to increase. These are all good signs if you’re interested in a healthy economy.
What is driving the expansion in New Hampshire’s economy? Gross domestic product (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 gross state product per capita (GDP divided by population) has grown more quickly than the nation, increasing .6% per year since 2006. And a recent federal Bureau of Economic Analysis report estimated that in the first quarter of 2016, gross state product in New Hampshire grew at an annualized rate of 2.9%, among the top 20% of states in the country.
Did Obamacare drive NH economic growth?
Which industries have fueled these changes? The Bureau of Economic Analysis, estimated the value of goods and services produced by different industries in our state.
The single largest contributor to changes in the value of the goods produced in New Hampshire 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 for this growth was the increase in health insurance coverage in New Hampshire. 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 New Hampshire 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 fact that the real estate markets in New Hampshire have begun to heat up again. Residential sales have increased by almost 50% since 2010, with almost 16,000 units being sold in 2015 and a median price of sale that was 14% higher than in 2010. This activity not only creates economic value for individuals, but also for the state. Receipts from New Hampshire’s real estate transfer tax has increased well beyond expectations.
What were some of the other big changes? Wholesale trade – businesses engaged in wholesaling merchandise without any transformation of goods, think shipping and selling – 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 in terms of aggregate addition to the state’s gross state product was health care and social assistance – up an additional $530 million.
All in all, those five industries accounted for almost half of the $9.6 billion in growth in the state’s gross domestic product between 2009 and 2014.
Why does this matter?
First why it might not matter. The most common concern expressed regarding looking at GDP and changes in GDP is that it tells us relatively little about individual economic welfare. Job growth (preferably the rate of high wage 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 New Hampshire was in the food service and accommodations industry, which tend to be lower wage jobs.
But change in GDP is a good measure of the economy’s trajectory. And understanding changes in GDP matters because it offers insight into where workforce development specialists planning for the future workforce, economic development practitioners attempting to build on (and or accelerate activities), and investors (looking for a return on both human and physical capital) might want to invest their time and energy and resources.