The Backyard Economy: Vermont

— -- Like the state's New England neighbors, Vermont's economy faces the challenge of an aging population and high heating costs during the winter.

The state's job growth has been hampered by the lowest birth rate in the nation and America's second-oldest population. It is a rural state with no major metropolitan areas that has struggled to attract new, young residents.

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"We haven't created any jobs in Vermont for about a year and a half, but the economy isn't doing that badly," said Art Woolf, an economics professor at the University of Vermont and publisher of the Vermont Economy Newsletter.

Woolf said that while there aren't more jobs, those who are working have seen a steady increase in wages, and as a result, the state's income tax collections were up.

In addition, this year, Vermont had a good winter snowfall that helped the state's ski areas. A weak U.S. dollar also brought in more Canadians to shop, vacation and buy real estate. Woolf said that meals and lodging taxes have increased as a result.

"Essentially, Vermont is on sale for Canadians," he said.

But Vermont still has its fair share of challenges.

High oil prices are likely to hurt residents this coming winter because a majority of them rely on heating oil to heat their homes.

The state also has seen home prices and sales decline, though the decline is not as sharp as has occurred elsewhere, because there was never massive growth.

IBM, the state's largest employer, has also been shedding its Vermont payroll in the last few years.

Ultimately, Woolf said, Vermont's future will depend on its ability to attract new workers to the state with the lowest birth rate.