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Michael Benton, owner of a Londonderry-based network of health, wellness and fitness facilities, sees many people who had been exercising outside or working out remotely starting to trickle back in despite the second wave of Covid. After all, he reasoned, a vaccine is on its way.
“Our revenues are still way off, but I see light at the end of the tunnel,” said Benton, CEO of Genavix Corp., a national network that includes the three fitness centers he owns in New Hampshire.
But for Evan Mallett, chef and owner of Black Trumpet Bistro and Wine Bar in Portsmouth, many of the diners who ate outside at his and other restaurants during the summer are now staying home.
“I see the light at the end of the tunnel but also the train wreck before we get there,” he said. “It’s more like we are on the cusp of an abyss.”
In hindsight, 2020 may be remembered as a train wreck — the biggest and strangest recession in the nation’s history, the most sudden, the shortest, the most savage. But, thanks to an acceleration of technological trends, one that might open the economy up in profound ways that we are just beginning to understand.
If the Great Recession that started in the last decade was a slow-churning hurricane — vast, broad and affecting nearly everyone — the pandemic-induced downturn that kicked off this decade was more like a tornado, deadly to some sectors yet offering surprising opportunity to others.
The statistics reflect this nearly patchwork recovery and economy, which has been devastating to the hospitality, entertainment and transportation industries as well as some retailers. But it has boomed for financial services, real estate, logistics, the medical supply and technology sectors, not to mention online retailers, most conspicuously Amazon.
Real estate
The Covid recession began in the spring with an unprecedented jump in the state’s unemployment rate from 2.4% to 17.1% in April. Then it swiftly declined, eventually falling to 4.2% in October, though new jobless claims began shooting up in December. Food insecurity has grown by about 50% in the state, according to New Hampshire Food Bank statistics, and the number of people requesting economic assistance for housing and other services went up from about 119,000 to 134,000.
Yet, the state’s real estate market has been on fire, fueled in part by demand from people fleeing urban centers for the relative safety of rural new England and a limited supply of homes.
Homes are selling, on average, above the asking price. In late summer and fall, sales and prices have risen by double digits. The median sales price of a single-family home climbed to $350,000 in October, a $50,000 increase in equity from a year earlier.
But it also means homes are less affordable, and so are apartments.
The rental unit vacancy rate, though not as low as last year’s ridiculous 0.8%, is still only 1.8%, driving the median rent for a two-bedroom apartment in New Hampshire up by $50 a month, to $1,413, according to the NH Housing Finance Authority.
Yet, the eviction tsunami predicted by housing advocates after the state’s eviction moratorium ended in July hasn’t occurred. In fact, there have been fewer evictions than in 2019, even before the federal government imposed its own, less-stringent moratorium in September.
Nor has the state been overwhelmed with housing assistance requests. In July, the governor, using federal CARES Act funds, offered as much as $35 million in assistance to cover back rent and homelessness needs. As of Nov. 20, only $8.3 million had been expended, according to the state’s latest CARES Act funding transparency report.
Some numbers
All of this could be partly explained by the record level of aid to businesses and individuals right after the pandemic began, ranging from an extra $600 a week from the federal government in unemployment benefits and the Paycheck Protection Program, which granted funds to businesses so they wouldn’t lay people off. The total spend exceeded $5 billion in New Hampshire — equivalent to a quarter of the Gross State Product.
But most of that aid ended in the summer. At deadline, nothing has been passed by Congress to succeed the wide-ranging CARES Act, as some companies hang on by their fingernails with fear as a more deadly new surge hits the state, with a sense of hope as the first vaccines are approved — although they won’t be widely available to a significant portion of the population for months.
Yet, as of November, New Hampshire’s business tax revenues were up by more than 25%, mainly on the strength of the business profits tax.
And look at bankruptcy filings in the state. They actually dropped to their lowest level in a generation following the pandemic, and have been sinking even further in the fall.
In addition, new businesses have started up — some 17,150 in fiscal year 2020, which ended June 30. That’s only about 500 fewer than the previous fiscal year.
Why is this happening? For one, there is more money available, not just CARES Act money, but the stock market has been going gangbusters.
Consider that revenues from the interest and dividends tax are up 84% year-to-date.
That kind of bull market doesn’t just increase the income and consumer confidence of retirees living off their 401(k), but it enhances the portfolios of angels and private equity firms looking for something to invest in.
“There is a lot of activity in mergers and acquisitions, because the public markets are providing some liquidity for companies further down on the food chain, as it were,” said Jim Cook, a Manchester attorney who specializes in working with relatively new technology firms.
Manufacturing and tech
And then there are companies that are expanding because of the opportunities offered by the pandemic.
Take PIF Technologies, a 25-year-old privately held firm in Hooksett that employs 35 people, now mostly remotely, of course. Its core business — automating the processing of paperwork — seems designed for the new work-from-home office.
“You used to walk down the hall and hand someone an invoice,” said Gary Saklad, PIF’s owner and president. “Now all that has to be automated.”
But the company also has made the Covid pivot, developing QuickTemp, a division which makes thermometer kiosks and an app that asks the required Covid questions of employees.
“It essentially is what we do: automating a manual process,” he said. And that has enabled the company to expand its workforce, absorbing people laid off by other businesses.
New Hampshire manufacturers, all of which were considered essential from the get-go, have for the most part weathered the storm, though there have been supply chain issues, trade disruptions and the disease itself attacking the workforce.
For instance, Worthen Industries, a Nashua-based manufacturer of adhesives and coatings, lost an employee to Covid in Mexico, and a few weeks ago had to curtail operations after one employee tested positive at its Nashua plant after Thanksgiving.
The company also had to shell out $100,000 to a private testing service, because the free testing provided by the state was so backed up during the holidays. “It is unfortunate that the testing is so pathetic,” griped owner David Worthen.
Wire Belt Company of America, a Londonderry firm that makes equipment for such food suppliers as Tyson, was diversified enough to ride the storm.
The sharp downturn in its customers’ school lunch and restaurant business in the spring was offset by the run on frozen comfort food at the grocery stores. Then, both restaurants opened up in the summer and schools, at least partially, in the fall.
“But it is challenging keeping people here and six feet apart.
No matter how good your planning is, there is always something,” said David Greer, Wire Belt’s CEO.
A few weeks ago, Greer said, someone tested positive in the shipping department. While there was no evidence of transmission in that department, there is a good chance it spread to some co-workers he was friendly with in production.
So far, the company has dodged supply chain issues, but the pandemic has also disrupted trade, including exports, sporadically.
New Hampshire exports were down in the first three quarters by nearly 6.5% (mostly with demand falling from Europe), but that’s better than in all but eight other states. As a whole, the nation experienced a 15.4% drop.
Exports make up about 40% of the business at Textiles Coated International, a Manchester company that makes materials designed to handle extreme temperatures. The company suffered a decline in business from the aerospace, oil and gas industries, “and I don’t think I have to explain while those are off,” said CEO John Tippett.
But TCI also pivoted. Its resilient materials are being used to store vaccines “We are putting all our resources into that,” said Tippett. But, on the whole, we are “not quite back to where it was before Covid.”
Unfortunately, TCI was also affected by community spread of the virus. “At any one point, some 15 positions are in jeopardy, it seems,” he said.
Hospitality and retail
So, overall, many sectors of the state’s economy have muddled through and even thrived. But the same can’t be said for the hospitality industry.
In fact, the state’s only declining revenue stream this year is from the rooms and meals tax. By Nov. 28, according to the latest analysis by the Department of Employment Security, revenue from accommodations were at 87.4% of last year’s levels, and restaurant tax revenue was down to 90.9% of last year.
Hotels in New Hampshire shut down during the spring, but opened up during the summer when rural New Hampshire was seen as a relatively safe haven.
“We weren’t doing as well as last year, but we were only down 10% or 15% during the summer, which we thought was pretty good, considering,” said Ed Butler, an owner of the Notchland Inn in Hart’s Location. “But the winter is pretty scary.”
Now the cancelations are coming in, both out of second-wave fear and other states’ travel restrictions.
Other hotels were hurt more by the drop-off in business travel and events. Year-to-date occupancy rates were 43% this year, as opposed to 63% last year. In October, the height of foliage season, they were at 53%, down from 73%.
Business was slow at most restaurants, even when they were able to combine outdoor and limited indoor dining with takeout.
Mallett couldn’t fit too many tables outside the Black Trumpet, and when he tried to put heaters in, they were too close to the cars, the fire department said. The Trumpet did participate in Portsmouth pop-up space at a city-owned downtown parking lot but, when the temperature declined, so did the restaurant’s revenue, from 85% in August to 20% at the start of December.
“If there is a better definition of ‘not sustainable,’ I don’t know what it is,” Mallett said.
He, like many other restaurant owners, is thinking of taking a hiatus on indoor dining in January, though he quickly added that takeout, curbside pickup and delivery would continue.
Retail is a mixed bag. Grocery stores, of course, are doing well, as are stores that cater to the home office and the home.
When Nashua’s Persian Rug Gallery opened up in May, “we were pleasantly surprised,” said co-owner Sy Mahfuz. The main challenge was replacing the two people he lost during the shutdown — a sentiment echoed by employers everywhere in spite of high unemployment.
But other retailers are beset with other issues, said Nancy Kyle, president of the New Hampshire Retail Association. Massachusetts travel restrictions now require that anyone who crosses the state border for pleasure to quarantine upon returning.
“That means no one is crossing the border to shop. That’s a huge problem,” Kyle said.
Then there is the candy store in downtown Portsmouth, where business is down by a fifth, but it will hang in there until Christmas, said Kyle. It plans to shut down in January. And there’s the furniture store up in Plymouth. Just like the Persian Rug Gallery, demand is up, but supply is hard to come by. “They can’t get product. Some people are going to wait, but they stopped asking for deposits, and that affects their cash flow.”
On top of these troubles are the costs of signage, masks, the constant sanitation and curbside pickup. All of it involves money or time, Kyle said.
“There is just a lot of fear and uncertainty out there,” she said.
Bob Sanders can be reached at bsanders@nhbr.com.
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