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Surging N.H. economy alters political equation

PORTSMOUTH, N.H. -- A dozen years ago, New Hampshire was probably the last place the first President Bush wanted to run a campaign. If failing banks, collapsing real estate values, and layoffs by the thousands were not a dismal enough backdrop to the first-in-the-nation primary -- and his reelection bid -- there was always Pease Air Force Base.

 

Pease, a victim of federal base closings, had been transformed in a matter of months from a busy post of more than 4,000 military and civilian employees into a desolate ghost town of vacant buildings, empty hangars, and abandoned homes. In many ways, it symbolized New Hampshire's economic free fall of the early 1990s, which provided the launching pad for the Democrats' eventual victory in 1992.

Today, as a new President Bush seeks reelection in the wake of another national recession, Pease still provides a symbol of the New Hampshire economy, but tells a different story. The redeveloped base, known as Pease International Tradeport, is now home to a diverse mix of some 175 firms that employ an estimated 5,575 people -- significantly more than the Air Force did -- and produces a combined payroll estimated at more than twice the military's.

As the rejuvenated Pease shows, New Hampshire is emerging from the recent recession in far better shape than it did a decade ago. That projects a far more difficult road for Democrats who, earlier this year, had hoped a return to "It's the economy, stupid" would again deliver them the White House. In 1992, political consultants couldn't have dreamed of a better setting to attack the administration's economic policies: Democratic candidates could literally walk from their campaign offices to find boarded-up buildings, soup lines, and other scenes of despair for nightly newcasts.

This time, New Hampshire is not being so accommodating. While the state hardly escaped the recent recession unscathed -- losing nearly 20,000 jobs -- it nonetheless can boast an unemployment rate that, at 4.3 percent, is among the nation's lowest and about half that of the early 1990s. Its labor market is beginning to improve, and regional economists forecast the state will continue to add jobs over the next year at a faster rate than both New England and the United States as a whole.

The result, say political observers, is that the economy is no longer a hot campaign issue in New Hampshire, where the national debate is often shaped. And ultimately, Democrats may lose what many once viewed as their most potent argument for ousting the administration. The national economy is also improving: The Labor Department recently reported that the unemployment rate fell in November for the second consecutive month and US employers added jobs for the fourth consecutive month. "Most people are tuning in to the positive news about the economy, and it might recede as a winning issue," said Mark Wrighton, a political science professor at the University of New Hampshire. "Despite Democratic hopes for a repeat of 1992, it might not be '92."

Certainly, analysts add, the economy isn't going to vanish from the campaign debate. There's still a long way to go to regain the jobs lost in the recent recession, particularly higher paying manufacturing jobs, which sustained the biggest losses. Moreover, economists add, many of these jobs are gone forever, lost to automation or to nations with lower costs.

At Pease, for example, the 206,000-square-foot plant of Celestica Inc., a Toronto-based electronics manufacturer, has stood vacant for about a year. After the technology bust, Celestica decided last year to shift much of its New Hampshire production overseas and consolidate what remained in Salem, N.H. At its peak, Celestica employed about 960 at Pease, according to the Pease Development Authority. Another electronics contract manufacturer, Singapore-based Flextronics International Ltd., consolidated its operations at Pease to one building, from two, and cut more than 200 jobs, the authority said.

New Hampshire, meanwhile, has shed more than 20 percent of its manufacturing jobs in the recent recession, and questions remain as to what type of jobs will replace them. Dennis Delay, the New Hampshire forecaster of the New England Economic Project, recently estimated that sectors losing jobs between 2001 and 2002 had annual average wages of about $44,000; those adding jobs, primarily health care and government services, have an average annual wage of about $38,000.

In 1992, added Ross Gittell, a UNH business professor, Digital Equipment Corp., the vanished computer maker, was the state's biggest employer; today, it is Wal-Mart. "Back when Clinton was running, the only economic issue was what you would do to get the economy going in the short term," Gittell said. "Now, there are concerns about longer-term economic priorities and values, such as health care, affordable housing, who should get tax cuts, and what happens to the working class."

That New Hampshire voters have the luxury to look to the long term is perhaps a testament to how much the state's economy has strengthened since the brutal recession that began in the late 1980s. Then, the state lost 60 percent of its construction jobs, 18 percent of its manufacturing jobs, and 17 percent of its financial services jobs, according to Economy.com of West Chester, Pa.

Retail, technology, and tourism also suffered double-digit job losses. Commercial vacancy rates ran as high as 30 percent. Home prices fell nearly 20 percent. The state's biggest banks failed.

In Portsmouth, not only was Pease shut down, but Portsmouth Naval Shipyard was beginning to slash thousands more jobs as part of the post-Cold War defense cuts. The city's population plunged by about 5,000 residents, a 20 percent drop.

At Pease, the Air Force had left more problems: obsolete commercial-style buildings, overgrown lots, and environmental contamination. The rebuilding was slow, with the state spending more than $20 million -- which the development authority is repaying -- to get the site into shape. The first private employer, Celltech Biologics, a British biotech firm, decided to locate at Pease in 1992, enticed by a guaranteed, $30 million state loan, and completed its new facility at the former base in 1995. Celltech's contract manufacturing operation was soon after bought by Swiss-based Lonza Group and the name was changed to Lonza Biologics Inc.

Lonza, which began operations here with about 40 employees, has since grown to more than 440, and is now completing a $200 million expansion.

In 1997, Two International Group LLC approached the Pease Development Authority with a project that many thought was crazy: constructing an 86,000-square-foot office building on spec -- that is, without any tenants already lined up to lease the finished space. Daniel Plummer, Two International's president, said bank after bank turned him down as he sought financing, requiring the group's seven partners to put up most of the cash.

Today, Two International Group has eight buildings at Pease, all filled or nearly filled, and no trouble attracting financing. The group's tenants include technology companies, financial services firms, a deli, a dentist, and a health care center, located in the base's former chapel, which offers traditional Western medicine as well as acupuncture and massage therapy.

Development authority officials attribute the success of Pease to the same factor that has helped New Hampshire prosper over the past decade: location. The tradeport is close to Massachusetts' technology companies and universities, but offers New Hampshire's lower costs and taxes, and so-called quality of life, including low crime and easy access to recreational amenities such as the mountains and seashore.

These attributes helped the state to diversify its economy, attracting an array of technology companies like Lonza, which sees Portsmouth as a place where it can land the talent needed to succeed. As Lonza demonstrates, the state even diversified its technology industry, and now evenly spreads its jobs among five tech sectors, including software and communications, according to Gittell. In the early 1990s, nearly all technology employment was concentrated in hardware manufacturing.

New Hampshire did not escape the technology shakeout unscathed, but other sectors, including tourism and a strong residential real estate market, have helped it ride out the recession. At Pease, for example, Two International Group had a major technology client negotiate a two-thirds reduction of its space; two financial services firms and a software company took it over.

Pease also boasts five higher-education institutions, three restaurants, a hotel, and a brewery. Two International now has three more buildings, including a retail center under development. The onetime symbol of New Hampshire's hard times is nearly built out, with just 60 developable acres available in the commercial park.

"It's almost a city unto itself," said David Mullen, the Pease Development Authority's interim executive director. "It's the closest thing to alchemy that you'll find."

Robert Gavin can be reached at rgavin@globe.com.

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