Eric Davis: Vermont economy is ‘mixed at best’

Tom Kavet, the economist who forecasts state tax revenues for the Legislature, presented his semi-annual report on the Vermont economy last week.
Kavet noted that the unemployment rate in Vermont — 3.6 percent in June — continues to be one of the lowest in the country. Job growth in the state has picked up a bit: 1.7 percent over the past 12 months compared with 0.7 percent the previous year.
However, there are two trends of concern in the employment picture. The first is that there is a considerable disparity in unemployment rates around the state. Chittenden County has the lowest unemployment, at only 2.9 percent, and the job picture looks solid as well in the Upper Valley — Orange and Windsor counties — and in Addison, Franklin and Washington counties.
Unemployment in southwestern Vermont — the Rutland and Bennington areas — and in the Northeast Kingdom continues to be persistently high, running two to three times higher than in Chittenden County. The southwestern and northeastern parts of the state are not benefiting from the economic growth that has been taking place in and around Burlington.
Second, most of the job growth in recent years has been concentrated in a few sectors of the economy: private-sector professional and business service positions, most of them in Chittenden County, as well as the public and non-profit sectors all over the state — health care; education at all levels; and municipal, state and federal government. Private sector job growth outside of Chittenden County has lagged. Of particular concern, especially for those Vermonters without college degrees, are the substantial declines in manufacturing and construction employment over the past five years. Increases in mostly low-paid positions in the leisure and hospitality sector do not make up for losses in well-paid construction and manufacturing jobs.
Kavet presented data on middle-class income stagnation and income inequality in his report. Real median income in Vermont, that is income after adjustments for inflation and taxes, has declined by about 8 percent since the start of the Great Recession in 2007, from nearly $60,000 annually to about $55,000. The median Vermont income is now about the same as it was in the 1988-1990 period, more than 25 years ago.
As in the nation as a whole, income gains in recent years in Vermont have been concentrated at the upper end of the distribution. Inequality is somewhat less in Vermont than nationally, in part because there are relatively few Vermont households with seven-figure and higher incomes.
Most of the income gains in Vermont since 2009 have gone to about 5 percent of the households — those with annual incomes between $150,000 and $500,000. Earners in these households include private-sector professionals in Chittenden County, professionals in the non-profit and health care sectors around the state, and affluent retirees who moved to Vermont before the recession. Interestingly, polls, election results and campaign finance reports show that these groups include some of the Vermont Democratic Party’s strongest supporters.
For the bulk of Vermont households — those with annual incomes between $40,000 and $100,000 — the last five years have been characterized by relatively secure employment, but little income growth. Increased property taxes and health care costs have more than consumed what little wage and salary increases have been available. It is not surprising that, outside of Chittenden County, Vermont’s population has been stagnant, or even slowly declining, during this period.
Democrats have held a legislative majority and the governor’s office throughout the last six years. Will they be able to hold on to both branches in the 2016 election, in the face of what is, for many middle-income Vermonters, a mixed economic record at best?
Eric L. Davis is professor emeritus of political science at Middlebury College.

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