State Economics — Spotlight on New England: The Kiplinger Letter

To help you understand what is going on in the economy at a state level, our highly experienced Kiplinger Letter team will keep you abreast of the latest developments and forecasts (Get a free issue of The Kiplinger Letter or subscribe). You'll get all the latest news first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…

The New England states will see only modest employment growth this year after a better-than-expected 2023. Labor markets are close to returning to normal, with unemployment ticking up and people leaving their jobs approaching pre-pandemic levels. Job openings are down significantly from their 2022 peak, though still elevated.

Massachusetts

Massachusetts job growth will slow to 0.7% this year, versus 2.5% in 2023. The strongest sectors for employment at the moment, healthcare and hospitality, are both still playing catch-up from the pandemic. By contrast, jobs in professional, scientific and technical services appear to have peaked over the summer. Biotech also remains a bright spot: 

In December, the Food and Drug Administration gave its first approval to a gene-edited drug, Casgevy, produced by Boston-based Vertex Pharmaceuticals and CRISPR Therapeutics. Expect other groundbreaking medicines to follow. The defense sector is surprisingly important to the state, which ranks eighth in Pentagon spending. Raytheon, General Electric and MIT are all major recipients.

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Maine

Since the pandemic, Maine has experienced the best job growth in the region, in part because it has attracted the most new people. Many are retirees, but enough are workers to help the labor force grow, particularly in healthcare and hospitality. Look for employment to increase by 0.7% this year, compared with 1.3% in 2023. 

A key issue to watch is the state’s love-hate relationship with clean energy. Maine incentivizes residential heat pump installations and solar energy development, but there has been pushback, both from small towns worried about the disposal of old solar panels and environmentalists concerned about clearing Maine’s forests.

Connecticut

Home prices will continue rising at a strong clip, possibly as much as 4%, after a 9.5% increase last year even though inventory levels remain extremely low — 70% of homes sold in Hartford in October were above asking price, the second highest rate in the nation. Signs of progress are few, with November building permits half what they were a year ago.

Connecticut employment growth will also ease to 0.6%, from 1.5% last year. Strength in the healthcare, defense and trade/transportation sectors has helped to offset the ongoing decline of its finance and insurance industries. At 3.6%, the unemployment rate is still below the pre-pandemic norm and reflects a labor force that has not fully recovered. The good news? The state’s out-migration rate is shrinking. 

New Hampshire

New Hampshire will follow New England’s employment slowdown, with job growth of 0.6% this year, down from 2.0% in 2023.  Although the healthcare sector has already returned to its prepandemic level, the hospitality sector struggled in 2023, but the number of tourists is expected to finally surpass pre-pandemic levels in 2024.

The state is still drawing transplants, but the inflow from neighboring states is falling. It’s also worth noting the boom in degrees being earned by remote learners, which can be attributed to Southern New Hampshire University’s online programs pulling in such students.

Vermont

Vermont’s job growth, by contrast, has lagged other New England states since the pandemic, growing only 1.2%, compared with a regional average of 1.9%. This year, it will lag all but Rhode Island, with 0.4%, versus 0.6% for the region as a whole.

Hospitality remains a standout, adding 2,600 jobs in 2023 (an 8.1% increase). But the manufacturing sector lost 1,600 jobs (-5.5%). The Green Mountain State has also become a popular entry point for migrants avoiding the U.S. southern border. More than 10,000 migrants tried illegal entry in the Swanton sector, half initially from Mexico.

Rhode Island

Rhode Island will have it the worst of all the states in the region. Job growth has been stagnant since the beginning of 2023, a trend that will continue into 2024. On the plus side, the state’s population has increased slightly thanks to immigration from other countries and a decrease in out-migration to other states. 

Meanwhile, the housing market is very tight, with over half of recent home sales in Providence above the asking price. Along with Connecticut and Massachusetts, the Ocean State is making a big play for offshore wind development but has, thus far, seen as many setbacks as victories.

This forecast first appeared in The Kiplinger Letter, which has been running since 1923 and is a collection of concise weekly forecasts on business and economic trends, as well as what to expect from Washington, to help you understand what’s coming up to make the most of your investments and your money. Subscribe to The Kiplinger Letter.

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