Northern New England's Good Jobless Numbers? They're Bad -- Update

By Jon Kamp and Jennifer Levitz Features Dow Jones Newswires

Extremely low unemployment rates in Northern New England would seem like grounds for bragging. Instead, the tight labor market has become a headache for employers and policy makers.

Continue Reading Below

To cultivate new New Hampshire workers, gun-maker SIG Sauer Inc., of Newington, is paying students to attend on-site classes to learn machining skills, and the company still can't fill all the positions it has. In Vermont, a virtual-reality startup founded by a Middlebury College graduate had to leave the state because it couldn't find workers. In Maine, it has become a challenge to fill anything from skilled technical positions to summer jobs.

The worker shortage "makes me a little nervous," said Amanda Rector, Maine's state economist. "It means that businesses aren't able to find the workers they need to expand, and if businesses can't find workers, they go elsewhere."

The national unemployment rate is at 4.5%, but New England's three northern states are all well below that. The 2.8% jobless rate in New Hampshire is among the lowest in the U.S. The unemployment rates there and in Vermont and Maine are all well below 20-year averages.

The tight labor market is partially tied to the region's demographics: The three states have the three highest median ages in the U.S., all above 42 years, according to U.S. Census data. People are aging out of the workforce.

"Those who have the significant skills, we're losing them," said Jeff Chartier, SIG Sauer's chief human-resources officer. "And it's a challenge to try to replace them at the same speed."

Continue Reading Below

The three states have a combined population of nearly 3.3 million, which has barely grown (less than 1%) since 2010, in comparison with the national population growth rate of 4.7%, according to census data.

Federal data show Vermont's civilian labor force has been eroding for several years. The numbers in Maine have remained about flat. New Hampshire, with some towns in the southern part of the state located in Boston's exurbs, has a growing workforce.

Standard & Poor's said in a recent research note that aging populations and muted economic growth in Maine, Vermont, and northern New Hampshire could weigh on government credit ratings over time.

Low unemployment rates can pose a particular challenge for largely rural states that don't have dynamic, big-city markets to draw young talent, according to economists. Massachusetts also has a below-average unemployment rate, but Boston's colleges and universities churn out a steady flow of new workers, making the city attractive to companies, economists said.

A dearth of qualified job candidates caused Nate Beatty to move his growing tech company three years ago from Burlington, Vt., to New York City. The 25-year-old co-founder of IrisVR Inc., which builds virtual-reality tools for architecture and design firms, said he now might interview 10 applicants for every vacancy. In Vermont, he would struggle to find candidates to interview and also had difficulty luring people from big cities. "There just aren't enough people," he said "It's just a simple numbers problem."

MyWebGrocer, a Winooski, Vt., company that serves retail grocers and consumer-packing firms, relies in part on about 150 technology workers in Romania, Chief Operating Officer Jerry Tarrant said. He co-founded the company with his brothers about two decades ago. They are loyal to their home state, he said, but Vermont is a particularly hard place in an already competitive market for tech workers.

"It's been a struggle for us almost since the beginning because of our small population," Mr. Tarrant said.

Northern New England's challenges highlight why economists don't want unemployment rates to drop too low. When that happens, companies can struggle to find qualified workers, potentially boosting wages and inflation.

Average hourly wages for private-sector workers have risen in all three states over the last two years, reaching $23 to $26 an hour in February, according to the BLS.

Whelen Engineering Co., which employs 1,000 at an emergency-warning-equipment plant in Charleston, N.H., has been raising wages over the past few years ago to keep jobs filled. It now pays incoming assembly workers about $15 an hour, a $3.50 increase from the typical wage a few years ago.

Eric Rosengren, president of the Federal Reserve Bank of Boston, said in a recent speech that business groups in Northern New England are concerned about the tight labor market. "I would say that's a big enough issue, they're thinking of moving," Mr. Rosengren said of the businesses.

To address the issue, the states have taken a number of actions -- or are considering them. Maine started a tax-incentive program several years ago to keep newly minted college graduates in the state. Last year, more than 5,000 graduates claimed the credit, according to Maine Revenue Services.

New Hampshire Republican Gov. Chris Sununu has proposed a scholarship program to help students attend college and training programs in the state. He is also pushing for full-day kindergarten to help attract workers with young families.

Vermont put in place a marketing plan last year to try to retain residents and attract new ones.

Shawn Moody, who founded an auto-body chain in Maine that now has 170 workers around the state, said making his company employee-owned more than a decade ago has helped him keep workers. But he is worried about the state's prospects.

"Our hardest challenge is finding good people," said Mr. Moody, who made an unsuccessful run for governor as an independent in 2010. "Our next recession could be driven by a lack of people to do the work."

--Paul Overberg contributed to this article.

Write to Jon Kamp at jon.kamp@wsj.com and Jennifer Levitz at jennifer.levitz@wsj.com

(END) Dow Jones Newswires

April 21, 2017 17:16 ET (21:16 GMT)