Inflation, Workforce Issues Cloud the Forecast
A Look Ahead to the New Year
Chris Geehern says there’s been a slight but significant uptick in the Business Confidence Index issued each month by Associated Industries of Massachusetts (AIM).
That increase is one of the many reasons why he and others are … wait for it … cautiously optimistic as the calendar turns to 2023. That phrase has been put to heavy use in recent years and recent months, especially with so much uncertainty regarding the economy due to forces ranging from COVID to inflation to an ongoing workforce crisis.
“If the workforce grows 1.5% and the number of jobs grows by 21% or 22%, as they’re projecting, we have a problem — a big problem.”
But as the state and region put 2022 in the rear view and focus on a year with even more uncertainty, there are some reasons for optimism, said Geehern, executive vice president of AIM, and that is reflected in the numbers he’s seeing.
“Our members seem pretty confident about the prospects for their own companies,” he said. “And they are reasonably confident about the state and national economies. There are certainly lingering concerns about interest rates and about whether there will be a soft landing or not. But, by and large, we’re finding that Massachusetts companies are resilient, and they seem to be navigating this kind of economic cycle pretty well right now.”
Elaborating, he said unemployment remains comparatively low, and the state’s economy grew in the third quarter, albeit slowly, after two quarters of negative growth — another positive sign. “So, by and large, employers don’t seem to be deeply concerned by the short-term economic cycle.”
Bob Nakosteen, a semi-retired Economics professor at UMass Amherst, agreed. He told BusinessWest that, in addition to growing optimism, inflation is starting to cool, a sign that the Fed’s decision to aggressively raise interest rates may — that’s may — be working. It could also be a harbinger of lower rate hikes in the future, which would certainly help business owners and consumers alike.
“And I think inflation is already a lot lower than is being reported,” said Nakosteen. “The month-to-month figures are pretty low … I think inflation is going to drop, maybe not dramatically, but considerably in the next few reporting periods.”
Elaborating, he said ‘dramatically’ would be a drop to the 2% target set by the Fed (at its height, inflation was closer to 8%), while ‘considerably’ would be to the 3% to 4% range, which is what he expects.
“And if that’s the case, then the Fed is going to ease off on interest rates,” he said, adding that such actions should bolster the stock market and the economy as a whole as the dramatic increases in the cost of borrowing start to ease.
Meanwhile, there are other signs that the picture is improving and the odds for recession in 2023 are moving lower, said Nakosteen, adding that the labor market remains quite strong, and the Atlanta Federal Reserve’s projections for GDP in the fourth quarter are for 3.2% growth — this on top of what has been a strong Christmas season for retailers.
“The signals just aren’t there for a serious recession — or even for a recession at all.”
“I think that economic growth is going to slow down, and if we do get into a recession, it will be a mild one,” he said, adding quickly that his track record with projections is decent but not spectacular. “What continues to amaze me is the strength of the labor market; unemployment is still at or just over 3% both nationally and in this state, and in Western Mass. as well. “The signals just aren’t there for a serious recession — or even for a recession at all.”
But while there is cause for some optimism, there are many concerns as well, especially when it comes to the workforce.
Indeed, in 2022, it became obvious to most in business that the problems seen in 2021 when it came to companies being able to fill positions with qualified help were certainly not temporary in nature. They persisted into 2022, and in some cases were exacerbated.
Now, there is what Geehern, summing up the thoughts of AIM’s members, called “deep concern” about what has become a workforce crisis in this state.
“‘I can’t find the people I need to make my business grow’ has become part of the vernacular in this state,” he said, noting that, as part of the Business Confidence Index survey, AIM asks an open-ended question, along the lines of ‘what are you worried about?’
And, increasingly, owners of businesses large and small are worried about workforce.
“I would say that 75% to 80% of the responses to that question every month have to do with talent acquisition, talent retention, and the availability of workers,” he said. “And the concern is that this isn’t the function of an economic cycle; it’s really a deep, structural inflection point for the Massachusetts economy.”
As he explained why, Geehern cited some rather alarming statistics from the Massachusetts Department of Economic Research, which projects that the number of jobs in Massachusetts will grow by 22% between now and 2030. Meanwhile, projections from various economists indicate that the state’s workforce will grow 1.5% by 2030.
“If the workforce grows 1.5% and the number of jobs grows by 21% or 22%, as they’re projecting, we have a problem — a big problem,” Geehern said. “This was going on anyway — it’s partially a function of demographics — but it’s been exacerbated by the newfound independence that remote work has given to employees.”
Given this unsettling math, Geerhern said there are things the state and individual employers must do to make themselves more attractive — not just to businesses, but to workers on all levels.
“Traditionally, we’ve focused on what creates the environment where businesses can start and grow in Massachusetts, and we’re still committed to that,” he said. “But at the same time, we also recognize that you have to create a quality of life that makes people — workers — want to live here in Massachusetts. And that means looking at the cost of living.
“Massachusetts ranks number one in terms of childcare costs, we have the second-highest housing costs, and the fourth-worst traffic congestion — I don’t know how they measure that, but they do,” he went on. “What we’re looking at is a significant outmigration of people from Massachusetts to other areas of the country; a Massachusetts Taxpayers Association report showed that, over the past three decades, there’s been an outmigration of 750,000 people from Massachusetts, and that trend has actually accelerated post-pandemic.”
In some cases, people are leaving the state for lower-cost areas, but keeping their jobs here, a byproduct of the remote-work phenomenon. Moving forward, Geehern said in conclusion, the state has to make itself an attractive place to do business and to live and work — because failure to do so will worsen an already-difficult situation and made it even harder for business owners to sleep at night.
As he surveys the scene in Western Mass., especially the ongoing focus on encouraging entrepreneurship and helping startups get to the next level, Charlie D’Amour says he can see some parallels to when his father, Gerry, and uncle, Paul, were getting started in Chicopee nearly 80 years ago with a venture that would eventually become known as Big Y.
But this current surge in entrepreneurship is different in some respects from than the one in the mid-’30s, he told BusinessWest, adding that it is deeper and more diverse. And it holds enormous promise for the future of the region in terms of job creation and the vibrancy of individual communities.
“I continue to be impressed by the fact that we have a diverse and growing class of new entrepreneurs,” D’Amour noted. “Through the commitment of the EDC, the commitment of other organizations, and the commitment of anchor institutions in the area, if we can continue to grow, develop, nurture, and encourage these entrepreneurs, it’s only going to put us in a great position.
“That’s part of what gives me some optimism for the economy of our region — to see this growth in entrepreneurship,” he went on. “This is an interesting group of young entrepreneurs, and it’s a diverse group, and that speaks to where our future is going to be.”
Entrepreneurship and the prospects for more of it comprise one of many subjects touched on by D’Amour and other representatives of the Western Massachusetts Economic Development Council (EDC) during a wide-ranging discussion of the issues facing the region as the calendar turns to 2023.
“I continue to be impressed by the fact that we have a diverse and growing class of new entrepreneurs. Through the commitment of the EDC, the commitment of other organizations, and the commitment of anchor institutions in the area, if we can continue to grow, develop, nurture, and encourage these entrepreneurs, it’s only going to put us in a great position.”
D’Amour is a long-time member of the EDC and member of its executive committee. Others joining the discussion were Rick Sullivan, president and CEO of the EDC; Tricia Canavan, CEO of Tech Foundry and current EDC board chair, and relatively new board member Cesar Ruiz, president and CEO of Golden Years Home Care Services.
Together, they addressed subjects ranging from workforce issues to marketing of the region to the prospects for bringing more jobs to the area.
Overall, as the new year begins, those we spoke with are optimistic about the region and its fortunes, but there are reasons for concern, especially when it comes to workforce (more on that later), an issue touched on by many in this special Economic Outlook section.
“I’ve seen some real opportunities with some investments that I do believe will be coming with the new governor’s administration in terms of broadband and internet access,” Sullivan said. “There is a digital divide, in our urban communities but also in our rural communities, and I think there’s a real opportunity there with a significant investment by the state and federal government to make those final connections and finally bring high-speed broadband to people’s homes and businesses; that’s a real opportunity for us.
“And I also some see some significant investment in the field of cybersecurity, which is an industry that, unfortunately, is probably here for the long run, and we need to be doing a lot of work every single day to stay ahead of the bad guys,” he went on. “With Springfield already being designated as one of the centers of the statewide system … that’s a real opportunity for us in terms of both workforce and working with our municipalities and particularly with our higher-ed institutions, so I’m very optimistic about the opportunities that are going to present themselves for this region in 2023.”
“The good news is that the economy of Western Massachusetts, with its diversity and whatnot, has proven to be somewhat resilient, from what I’ve seen,” he noted. “Though I anticipate a downturn in the economy, a slowing of the economy, I do expect that we’ll be able to weather it fairly well.”
“We’re all experiencing challenges in hiring — we can’t hire fast enough; we can’t hire quality enough within our workforce. Hiring is certainly going to be a barometer for how successful we’re going to be with expanding our business.”
Canavan concurred, noting that the many lessons learned during the pandemic will serve to make the region’s economy and individual businesses stronger and more resilient.
“The silver lining of the pandemic has been some lessons learned,” she said. “I’ve seen people start to integrate these lessons into their businesses and organizations and into their collaboration in the community. I’m really excited about progress on diversity, equity, and inclusion efforts; digital equity and access; and additional community alignment. I think we’ve learned the importance of working together. I’m optimistic about Western Mass. — we are going to be resilient, and we’re going to recover from the pandemic, even if there are some additional bumps coming our way.”
One of those bumps is likely to be a continuation of very challenging times when it comes to workforce and companies attracting — and then retaining — the talent they need to grow and prosper. Those we spoke with said this is easily the biggest challenge moving forward and perhaps the most difficult problem to solve.
Ruiz, whose industry, home care, has been particularly hard hit by the workforce crisis, said workforce issues are more than an annoyance — they are hindering the growth and progress of companies, including his own.
“In Massachusetts, we have roughly two open jobs for every candidate that’s in the market. This is a great time for people who may not have been able to access those jobs previously to get training, to get education, and to seize those opportunities.”
“We’re all experiencing challenges in hiring — we can’t hire fast enough; we can’t hire quality enough within our workforce,” he noted. “Hiring is certainly going to be a barometer for how successful we’re going to be with expanding our business.”
He said individual sectors and specific businesses are, out of necessity, forced to be creative when it comes to putting more talent into the pipeline. Golden Years, for example, is collaborating with area colleges to help ready them for careers in healthcare.
Still, the problem is acute, and he’s talking with U.S. Rep. Richard Neal and others about ways to bring more people from other parts of the world into this country to work.
“Using foreign workers is nothing new — our resort areas bring them in by the hundreds,” Ruiz noted. “They come here for a six-month period, and there are certain obligations as an employer that we have to meet to tap that source. But we have to come with creative ways to tap these resources.”
Canavan concurred, and noted that the current workforce challenge presents a huge opportunity to engage those who are currently not engaged in education or work.
“That’s one of the big opportunities for us at this moment in time,” she said. “In Massachusetts, we have roughly two open jobs for every candidate that’s in the market. This is a great time for people who may not have been able to access those jobs previously to get training, to get education, and to seize those opportunities.”
“Our population has basically been flat, and in some areas, it’s declining. If we’re going to be vibrant, there has to be some growth; you need to grow to survive.”
D’Amour agreed, and said his company has been creative and also diligent in addressing the problem.
“Our staffing has improved — it’s much better than it was a year ago or a year and a half ago,” he noted. “But part of it is because we worked at it — we’ve addressed it proactively. We didn’t just put a sign in the window saying ‘now hiring.’ We’ve been a little bit more deliberate, a little bit more strategic, and a little bit more focused about it, and those are the kinds of things that we’re going to need moving forward.”
Elaborating, he said workforce issues require both creativity and a lengthy time horizon, meaning measures that will fill the pipeline with workers for the long term. And the focus needs to be on education.
“From early education to higher education, we need to make sure that we’re bringing our kids and our young people along so that they can be the workforce of the future,” he told BusinessWest. “If we don’t have that, we can’t do a lot of the things that we aspire to. We need to reach into these various communities and make sure that young people have the skills they’re going to need to be successful; that’s where our workforce is going to come from, and those are the kinds of things we have to do.
“I know that’s an area of focus for the EDC, and I know it’s an area of focus for the anchor institutions and many individual companies,” he went on. “We’re not going to get there in a year, but we need to start now; it’s probably a little bit overdue.”
As noted earlier, those we spoke with could find plenty of reasons for optimism concerning 2023 and beyond in this region. Collectively, they mentioned everything from the Victory Theatre project in Holyoke (Ruiz is among the many involved in that effort) to the growing number, and diversity, of new businesses being started in this region, especially within the Hispanic and African-American communities; from the strong education and healthcare sectors to the quality of life here and the opportunities presented by remote work for people to live in this region and work wherever they desire.
Meanwhile, those we spoke with said there are real opportunities to grow certain business sectors in this region — from cybersecurity to clean energy to water technology — with the area’s higher-education institutions taking lead roles in each one.
Sullivan said another often-overlooked or forgotten sector showing promise is manufacturing, what he called the “invisible backbone” of the region’s economy.
“Most of our manufacturers were classified as essential employers during the pandemic, so they were able to continue operating,” he noted. “They proved to be really flexible and able to pivot, in some cases even manufacturing PPE and other products that were not part of their portfolio before COVID. That flexibility, if you will, served them well, and now they’re well-poised for growth, and you’re starting to see them make significant investments.
“Whether it’s Advance Manufacturing, Boulevard Machine, or Advance Welding in Springfield, they’re making investment in their own facilities and their own people, and they’re creating jobs — and jobs that will exist well into the future because of the work they’re doing and the contractors that they have, whether it’s the Department of Defense or the Department of Transportation or healthcare,” he went on. “And these manufacturers have recognized that, while this region may not be the cheapest in terms of power or the cheapest in terms of taxation, we are the best when it comes to workforce.”
D’Amour agreed, and said another aspect of the local economy that is often overlooked is agriculture.
“We’re the garden of New England here in Connecticut River Valley, and there are a lot of young farmers in this region that are doing great stuff,” he said. “Agriculture and food products are an important part of our economy, and it adds to the diversity of the economy in our region. Having fields and orchards is also why many people like to live here; it leads to the whole genus of our community and what makes Western Mass. so special.”
Another priority for the region, Sullivan said, is to better leverage its many assets in higher education.
“Many of the other parts of the country, and even the eastern end of this state, really market the presence of higher ed,” he said. “And we have world-class institutions here; whether it’s the flagship campus for UMass or Smith or Mount Holyoke or Bay Path, the cohort of higher education we have here is really significant. And when we talk about workforce, the students that are sitting in the classrooms at the Elms and AIC and the other institutions are the workforce that everyone is looking for, and I really believe that economic vitality and higher ed are entwined tighter than they ever have been before.”
While there are reasons for optimism, there are also some concerns and priorities for the months and years to come, said those we spoke with.
Sullivan noted, for example, that the region — known in the banking sector and many others as a ‘no-growth’ area — certainly needs a growth strategy.
“Our population has basically been flat, and in some areas, it’s declining,” he told BusinessWest. “If we’re going to be vibrant, there has to be some growth; you need to grow to survive. We can absolutely sell our cost of living and quality of life here, but we need to have the housing for people to move into, and they need to be able to work from home or do their coursework from home, which means, again, that we have to make that investment in broadband and the internet across our region so we can take advantage of that opportunity.
“When people discuss work/life balance and what they want for their families, this lands in a sweet spot for us,” he went on. “That’s who we are; we can sell work/life balance and quality of life, as long as we have all the components. They’re not all going to happen in a month or a year, but there needs to a positive trajectory on all of those things.”
D’Amour agreed, noting that the region has a number of sellable assets, from location to transportation infrastructure to relatively inexpensive (and often green) power, as well as higher education. One priority moving forward is to more aggressively sell these assets and market the region.
“Our challenge has always been telling our story,” he said. “We have not participated as fully as we could have or should have in the economic boom that Eastern Mass. has had. How do we get some of the business community in Eastern Mass. to focus on us instead of going to Southern New Hampshire, or Rhode Island, or wherever?”
Canavan agreed. “We are, in some ways, our own worst enemy when it comes to not telling our story — or appreciating where we live,” she said. “And we do have a lot of assets here, starting with diversity; we’re very lucky to have people from all over the world here, people with different perspectives — that is a real asset. I also think we’re small enough to be agile and to pilot things … we’re like the scrappy player who can try new things, and that’s very exciting.”
Lastly, Sullivan said he is hopeful, and confident, that the state’s new governor, Maura Healey, will not just “talk about how we care about Western Mass.,” but make some significant investments in the region.
“And I think you’ll see them, whether it’s vocational education or community colleges, or broadband or cyber or clean energy,” he said. “I think that there’s an opportunity to make very strategic, intentional investments in Western Massachusetts that will allow it to grow.”
As part of its annual Economic Outlook, BusinessWest put together a roundtable of area business leaders to discuss the issues facing the region and its business community and the outlook for the year ahead. The panel represents several sectors of the economy, and both small and large businesses. It includes: Harry Dumay, president of Elms College in Chicopee; John Falcone, director of Merchandising for Rocky’s Ace Hardware; Spiros Hatiras, president and CEO of Holyoke Medical Center; Susan Kasa, president of Boulevard Machine in Westfield; Tanzania Cannon-Eckerle, an attorney with the Royal Law Firm and co-owner of Brew Practitioners; and Tom Senecal, president and CEO of PeoplesBank. They were candid and, overall, cautiously optimistic in their answers to a series of questions about the economy and what comes next.
BusinessWest: What is your outlook for 2023?
Kasa: “We’re excited for 2023; we’ve really seen an uptick in military and defense work, so we’re really excited about where our year is going to go.”
Senecal: “Increased business confidence is the biggest thing, I think, with all the negative press we hear on the economy. Increased confidence is big, and in my industry, and with the people we do business with, lower interest rates will have a significant, positive impact on our environment.”
Cannon-Eckerle: “We’re excited about some of the fallout that we got legally from COVID; it has started to settle down a little bit — we’re starting to see those issues become isolated, and opportunities for us to create some guidance and counsel about preventive measures. On the employment side, instead of seeing people float from job to job, I think we’re going to see a little more staying power.”
Falcone: “We really track consumer sentiment, and what we’re expecting is a really soft Q1, but then when Q2, Q3, and Q4 hit, we’re expecting that consumer sentiment will increase slightly, and that we’re going to have some sort of recovery come the back half of the year.”
Hatiras: “With ARPA funds drying up, we’re going to have pull ourselves up by our bootstraps. So our emphasis is on closing the staffing gap. If we can do that, and not bleed money on the expense side, I think we’ll be OK; I think we’re poised to have a good year, as long as we’re able to attract nurses here.”
BusinessWest: What are the major challenges facing businesses in the year ahead?
Kasa: “For us, it’s the same old, same old — trying to get people into manufacturing. We’ve dealt with the generation gap for years, and are getting more involved with the vocational schools and getting parents to understand that manufacturing is a viable option for young people. It’s not just manufacturing; they can be their own entrepreneur in plumbing or electrical, whatever it might be. Also, holding onto folks; ever since COVID came through, it just seems harder and harder to find people who want to work, and want to work the extra hours that we’re giving them. Workforce is key for us — building on the workforce.”
Hatiras: “In healthcare, there is a great deal of concern, and the most concerning part is the continuing shortage of personnel, which has created this market for temporary staffing at rates that are truly outrageous. To put things in perspective, we have about 20 nurses on temporary staff that we get through agencies. Those 20 nurses, on an annual basis, cost us $5 million; each nurse costs us $250,000, because the rates are exorbitant — the nurses get a lot of money, but there’s also a middleman that makes untold amounts of money from this crisis.
“As a nation, the federal government is doing a lot of things — they did some things with railroad workers, they’re helping Ukraine, they’re talking about a lot of things. They should have stepped in and regulated this and said, ‘the pandemic created a tremendous amount of shortage; we cannot allow private companies to go out and profit from that shortage of staffing and bring hospitals to their knees.’ With all this, it’s going to be very difficult for hospitals to cope, and that’s why all our strategy centers around finding a way to attract nurses here.”
Falcone: “Number one would be interest rates; we keep seeing interest rates increase, and not increasing at a rate that we would expect compared to supply chain. The supply chain is still not fully intact, so we’re still struggling to find those products that we want to make strategic investments in. Also, the job market is going to be difficult for us, primarily on the service, retail, restaurant industry. We very much struggle with our workforce.”
Senecal: “I would agree with Susan on the labor force. We’re all in different industries, but we’re seeing the same challenges, whether it’s manufacturing, skilled labor, retail labor, banking and financial services … COVID killed the participation rate of how people want to work or, quite frankly, don’t want to work. It seems like it’s across all industries — the participation is so low, and people just don’t want to work. That’s a huge challenge for next year.
“Another one is inflationary pressures; the Fed has raised rates at unheard-of levels, and it’s having very little impact, which is kind of scary. The last increase wasn’t as high as the others, but it’s still unprecedented. They used to be a quarter-point; three or four 75-basis-point raises is a shock to the system, and it’s not having the immediate impact you might think it would have. That’s going to be a challenge for a lot of business, as well as for us in the banking industry.”
Dumay: “In higher education, there are many challenges related to enrollment and finances; we’ve been talking for a while about what is known as the ‘demographic cliff,’ which is the fact that there are fewer high-school graduates, fewer 18-year-olds that are ready to enroll in college, and this has been exacerbated during the COVID years. This is creating enrollment challenges for all higher-ed institutions. On the finance side, everyone here has mentioned the challenge of inflation, as well as the tight workforce. Higher education is also challenged by the fact that some of the stimulus funding that has helped during COVID is no longer available. All of these are going to create challenges for the higher-ed sector in general, and Elms College in particular. But they also present opportunities.
BusinessWest: What are the forces that will determine what will happen with the local and national economies in 2023 and what we’re all talking about a year from now?
Kasa: “For us, what’s happening in the world politically and the war in Ukraine; we’re really seeing an increase in military spending and orders for the military and defense. That’s going to be very helpful for us, and I do see that continuing. There’s a tremendous amount of talk about upgrades to engines, the F-35 … and being in the aerospace alley and having so many of these large OEMs right in the corridor, in the Hartford area, is beneficial for us. I do foresee things continuing to move up and onward for us.”
Cannon-Eckerle: “One of the things bubbling up in the legal sphere is something they call ‘litigation investment,’ which is essentially large companies investing in litigation against larger corporations that normally they wouldn’t be able to afford. It’s like a venture-capital-like investment, and we’re starting to see large companies spread their wings. I think that might have an effect on litigation down the line.”
Dumay: “I think some of those challenges that I spoke about that are related to enrollment will lead to some of the forces and trends that will shape things in 2023. I expect institutions to tailor their pricing and courses accordingly; there is a trend in higher education to look for shorter types of certificates to help max the credentialing needs of the workforce. I expect we’ll see that. But also, the workforce issues are providing a lot of opportunities for institutions to partner with businesses to address some of these workforce issues, and I expect that we’ll see more collaborations and partnerships between higher-ed institutions and businesses to address some of these workforce challenges.”
Senecal: “I see two things. One is supply chain; I think the pressure seems to be coming off, and if that trend continues, that will have a really positive effect on the economy. Two, I think higher energy prices are not going to go away. With the war in Ukraine and Russian energy and what is being supplied to Europe and all … many people don’t think it impacts us. I think it will have a huge impact going into 2023. When you look at the supply of energy in Europe, they have enough to get through the winter to sustain themselves. What they don’t have is the ability to replenish those supplies by next winter, and I think Russia knows this, and I think their strategy is to put a huge amount of pressure on to get to next year, because when you get to next winter, there’s not going to be any energy-supply reserves, and that’s going to have a huge impact worldwide on energy supplies, and that trickles throughout the economy.”
Falcone: I very much agree with Tom. The overall political and economic environment created by that war has affected our business dramatically, whether it’s fuel costs, energy costs that directly impact the supply chain and lead to inflation, or interest rates, because the overall cost of carrying our inventory is higher, and the cost of the product we’re procuring is higher. So with that, our overall cost of business has increased.”
Kasa: “I agree with John. In manufacturing, our supply chain has really been impacted by this war; we’re not able to get material as we did some time ago, and those costs continue to rise. Being in manufacturing, we’re held to long-term agreements, master agreements, and it just continually squeezes the small guy.”
BusinessWest: How has your business or institution coped with the recent workforce challenges? Do you have a success formula?
Senecal: “Before COVID hit, we would never let an employee work from home; from a security perspective, from a collaborative perspective, it just wouldn’t work. Two weeks into the pandemic, we had 80% of workforce working from home without a hitch. I still think the collaboration, or culture, side of it has to occur within the office, but we’ve pivoted from that perspective, and we’re pushing the ability to work from home a whole lot more.
“To tackle the workforce issue and spread our wings and look beyond Western Mass., we are advertising positions as ‘80% work from home,’ something you would have never thought of or heard of in years past. We have an employee now who works 100% out of Chicago. As a local community bank, we would have never considered that. It’s increased our ability to attract talent, and we’ve found some success, but I know it’s still going to be a challenge moving forward.”
Kasa: “We’re looking for exposure, and being in our bright new building certainly helps. So does using social media to attract young machinists; we’re using Instagram and Facebook … it really does work with the young people that follow you. And being a family-owned business also resonates with many people; there have been so many capital acquisitions in recent times in this area.
“We spend a lot of time talking to parents about manufacturing and the opportunities that are available to young people. Manufacturing is coming back, and now parents are realizing that not everyone is meant for a college degree, and they don’t have to spend $100,000 or $200,000 on education; they are coming into machining and electrical and plumbing. The parents are really starting to see us as a viable option.”
Dumay: “We’re paying a lot of attention to employee morale and employee satisfaction, and being flexible where we can. Part of the promise of Elms College as a small, liberal-arts institution is that students will be in contact with people and one another, so having a presence on campus is important. But we’re trying to work creatively to include flexibility for employees in terms of where they can work and the time they can work, to the extent that this can be done.”
Hatiras: “We’re doing OK because we had to respond to what was going on in the market by creating even more attractive reasons for coming here — we raised our rates, we’re enhancing benefits, and at the same time, we’re looking at economic assistance for the lower-earning employees. Where it’s more difficult is with the professionals, because the dollars are significantly more, so competing just on price is difficult. The key for success — what keeps people here and makes them come here — is the culture of the place, so we put a tremendous amount of effort in the 10 years I’ve been here on creating a good culture. Now, it’s become a differentiator, and we’re pushing it even more. We’re an employer that listens to employees, responds to their needs, and cares. That’s what people want.”
Falcone: “We put a big focus on our company culture. Right in our strategic plan, it says ‘invest in people, personally grow, and have fun.’ There’s no doubt about it … the people we have are our biggest asset, so what we want to do is make sure that we’re taking care of them. In this ever-competitive job market, it’s really easy to jump jobs for an extra dollar or two an hour, but for us, we really want to focus on employee engagement and employee satisfaction.”
BusinessWest: Provide us with at least one, and maybe a few, reasons for optimism regarding the year ahead.
Falcone: “The supply chain is becoming more intact. Two years ago, our fill rates as a company were about 60%; December marked the first time our fill rates recently broke the 80% mark. They’re still not back to 2019 levels of roughly 90%, but it’s slowly getting better, and I think the numbers will continue to increase. For the consumer, it’s the availability of product at a reasonable price. Also, we’re starting to see a little bit of deflation … I think we’re still going to have inflation, but it is going to level off.”
Kasa: “The war, which is terrible for the world, and the politics going on are only going to make more work for us because we’re military and defense-heavy. Meanwhile, space is another huge one for us, because it’s been years since the U.S. has gone to space. And with all the competition going on for space travel now between Blue Origin, SpaceX, and others … it’s a a market the U.S. hasn’t been involved in for years, and it bodes well for us.”
Cannon-Eckerle: “Now that COVID is a little bit behind us … we have some clarity. I think there was a period of time when employers, employees, people who don’t work, everyone in this world went through a period of time when they just didn’t know what the future would hold. Now, people can start making decisions and moving forward, in whatever direction that might be. Also, green technology. I think that technology is getting a huge boost, even moreso than it had before, and I think we’re going to start making some big strides in green technology, and I’m really excited about that.”
Hatiras: One of the good things for Holyoke, and this is one of the reasons I’m optimistic about our path here, is that we have this new waiver in Massachusetts, a five-year waiver with Medicare, which puts a lot of emphasis on safety-net hospitals. So, despite the many challenges I mentioned — and we’re going to have to meet those challenges — I think we’re going to be in a very good position to continue to provide the services we do now, and even better; it’s a good deal for Massachusetts and safety-net hospitals.”
Dumay: “We had a Christmas party at the college recently, and everyone was shaking hands — no one was fist-pumping, no one was six feet apart. It’s easy to forget where we were a year ago. I’m encouraged when I look at what happened during the past semester, when students were happy to be with one another; this is the generation where students finished their high school on Zoom and already had some difficulty with social skills. This ability to come back together … people are appreciating that.
“Another reason for optimism is that we learned a lot of lessons during COVID. We endured considerable hardships, but we also learned some valuable lessons as well. In higher education, for example, we learned about online learning and providing students with maximum flexibility. This is something we were forced into by COVID, but now, those lessons are settling down and providing both flexibility and efficiency in terms of teaching and learning. From a human-relations perspective, we’ve learned some lessons that are becoming part of our operations, and for the better.”
The Berkshire Economic Recovery Project, a program of 1Berkshire and Berkshire Regional Planning Commission, with funding from the United States Economic Development Administration, announced the launch of its women- and minority-owned business enterprise (W/MBE) module.
The training module, available in both English and Spanish, provides a high-level overview of what it means to be a certified women- and/or minority-owned business enterprise, and how such a certification can help support the small businesses in the Berkshires. In addition to the short overview training modules, interested businesses will also find a direct link to schedule a free intake consultation with the Economic Development team at 1Berkshire.
These consultations will allow 1Berkshire to make direct referrals to technical assistance support to help guide interested women- and minority-owned businesses through the certification process.
“We know we have many incredible small businesses in the Berkshires owned and operated by women, immigrants, minorities, and LGBTQ community members, however we find very few businesses are certified as such,” said Benjamin Lamb, 1Berkshire’s director of Economic Development. “This effort aims to move the needle on helping our underserved business owners access the opportunities that W/MBE certification unlocks, including government contracting opportunities, specific loan and grant programs, tax incentives, and more.”
Businesses and business owners are invited to visit the W/MBE module page at https://bit.ly/3yff8zP for more information and to view the recordings.
CHICOPEE — The Donahue Institute at UMass Amherst issued a study Tuesday showing that the Westover Metropolitan Development Corporation (WMDC) industrial parks in Chicopee and Ludlow and the civilian airport generate an estimated $2.2 billion a year in direct and indirect revenues.
The report was released at a press conference at a hangar at the base attended by dozens of area economic development leaders. It states that the industrial parks and airport have increased the number of jobs in the region, employing 3,600 people across the Hampden County area. Also, 69% of workers in the airparks earn more than $3,333 per month, compared to 55% of workers across the state. Business activity at WMDC-developed areas generates almost 8,500 jobs around Massachusetts annually.
The WMDC is a quasi-public development corporation formed in 1974 to convert military property in the vicinity of Westover Air Force base to productive civilian uses. WMDC has developed more than 1,300 acres of land in the area and currently operates the Westover Civilian Airport and three industrial parks.
The report notes that businesses within the airparks and the airport also contribute more than $6 million in local taxes. Businesses in Chicopee paid a total of $4.32 million in local taxes, while businesses in Ludlow paid $1.87 million in local taxes.
BOSTON – The echoes of the COVID-19 global health crisis were apparent in the latest edition of The Index of the Massachusetts Innovation Economy, a report that tracks the strength of the Commonwealth’s tech and innovation sectors.
Even with net job losses in nine of 11 key tech sectors in 2020, the Massachusetts tech and innovation economy continued to be a top state in terms of total R&D investment ($36 billion in 2018, second only to California), record venture capital investment ($15.8 billion in 2020), and increased investment in higher education per student (up 29.4% since 2015).
Despite the data capturing the worst of the COVID-19 recession, all three of the sectors below were well above their 2015 employment levels, with the first two having actually added jobs during 2020:
• Biopharmaceuticals and Medical Devices (+37.8% since 2015);
• Scientific, Technical, & Management Services (+25.4% since 2015); and
• Software & Communications Services (+16.8% since 2015).
The 2021 Index found the following areas were bright spots for the innovation economy:
• A marked increase in higher education investment, with appropriations per student up 29.4% since 2015, greater than any of the LTS save for California;
• Highest number of degrees conferred per capita among the LTS (18.1 per 1,000 residents);
• 47.6% of the workforce has at least a bachelor’s degree, higher than any other state and well above the U.S. average of 34.4%.
R&D and VC Investment Rising:
• Massachusetts is one of the leading producers of patents per capita, with 1,275 utility patents per million residents in 2020, second in the LTS;
• Of the 5 LTS with more than $1 billion in annual investment in 2015, Massachusetts saw the fastest growth in VC funding, up 88.3 percent from 2015 to 2020.
• $3.3 billion in National Institutes of Health (NIH) funding in Massachusetts in 2020;
• $5,659 of NIH funding per $1 million GDP;
• 11 Massachusetts research institutions received more than $100 million in NIH funding in 2020.
“While the pandemic’s impacts were stark, the investments made by the private and public sectors continue to fuel growth in the areas that are driving our innovation economy,” said Pat Larkin, director of the Innovation Institute at MassTech. “On education, we’ve seen the clear rise in higher-ed investment by the state, which is a key driver for our talent development pipeline. The Index also points to the potential for further strengthening, as the state expands Innovation Pathways programs at the K-12 level, efforts which will further train students for careers in advanced manufacturing and robotics, which desperately need talent.”
All 10 leading tech states saw net job losses in key sectors during 2020, including in Massachusetts. Since 2015, the Commonwealth’s innovation job losses were concentrated in a few key manufacturing sectors, including: Diversified Industrial Manufacturing (- 6.9%); Advanced Materials (-7.4%); and Computer & Communications Hardware (-16.9%).
To download a copy of the Index of the Massachusetts Innovation Economy, or to access interactive copies of the graphs and charts from the report, visit masstech.org/index.
John Doleva said 2020 was supposed to be the “year of all years” at the Basketball Hall of Fame, when it would unveil a $25 million renovation of the museum and welcome record crowds to a series of events and new attractions.
It was the year of all years, all right. Just for … another reason, namely a pandemic that shuttered most tourist attractions for months.
But the Hall did get to that ribbon cutting this past May, said Doleva, the institution’s president and CEO. And that wasn’t all.
“We had a terrific summer,” he told BusinessWest. “We were up 36% over 2019 — and that’s comparing it to a quote-unquote ‘normal’ year; we were up 300% over 2020.”
The Hall was very aggressive in promotion and advertising across a variety of platforms in 2021, he added, highlighting additions like a 14-by-40-foot LED screen on center court that could host remote visits with Hall of Famers, and recently wrapping up a series of eight college basketball tournaments in major cities across the country.
“I’d say we came out of 2021 as positive as we possibly could,” Doleva said, adding that the plan is to continue to aggressively market and elevate the brand in 2022, as well as looking to open new galleries every year, taking a lesson from Six Flags, which tends to unveil a major new ride each spring. “We’ve adopted that thinking. We want to give customers reasons to come back and see something new and exciting.”
Mary Kay Wydra has also been impressed with the tourism sector’s resilience in 2021.
“When the restrictions were lifted in late spring, we saw a boost in the attractions, and hotel occupancy grew,” said Wydra, president of the Greater Springfield Convention and Visitors Bureau. “Looking ahead, I do feel like we’re positioned to continue building on this momentum.”
“When the restrictions were lifted in late spring, we saw a boost in the attractions, and hotel occupancy grew. Looking ahead, I do feel like we’re positioned to continue building on this momentum.”
Last year’s boost in tourism was largely generated by leisure travel — and a need among people to go to something, she noted.
“When we were hunkered down at home, not doing anything, we all had a desire to reconnect with family and friends. The industry term is ‘human-oriented travel’ — the collective urge of people to reconnect. And we saw that.”
What she also saw was a region uniquely situated to meet that need in enriching ways. “We have a lot of things to do in our area. And when people come to visit, not everyone stays with family; they’re staying in hotels and visiting our attractions. So we had a very robust summer.”
So robust, in fact, that hotel occupancy rates in the region this summer exceeded pre-pandemic 2019 levels in three different months.
“It would be great to continue the momentum in 2022,” Wydra went on. “We always know the first three or four months is soft — it’s our shoulder season — but we should see good travel again this summer, again dominated by leisure travel. Conventions and meetings have been far more impacted by the pandemic, and 2022 will still be a little light. But the forecast for 2023 is far better.”
That’s because many organizations schedule their annual events a few years out, and events that were canceled in 2020 already had other sites scheduled for 2021 and 2022, but not 2023, she explained — and Western Mass. is aiming to get some of that business back — that is, “if they’re still doing in-person meetings,” Wydra said, and that is, indeed, a lingering question on the convention circuit.
It didn’t seem like many people had a problem crowding into the Big E a few months ago. A total of 1,498,774 people visited the 2021 event, after it was canceled outright in 2020. According to Carnival Warehouse’s annual Top 50 Fairs list, the 2021 Big E was the third-largest fair in North America, even surpassing the Minnesota State Fair — a huge achievement, Eastern States Exposition President and CEO Gene Cassidy said — for the first time.
On its way to that achievement, the Big E set four daily attendance records over the course of the 17-day event, including an all-time single-day attendance of 177,238 on the final Saturday.
“I think there was pent-up demand,” Wydra said of those numbers. “You miss something for a year, you definitely want to get back there the next.”
Jonathan Butler, president and CEO of 1Berkshire, said hard numbers won’t be known for a while regarding visitorship in Berkshire County in 2021.
“But our feeling, especially post-Memorial Day weekend, was that the Berkshires was really bustling during the summer,” he told BusinessWest. “And we saw different types of visitors to the Berkshires — a lot more younger couples, younger travelers trying to get out of the urban setting and finding the Berkshires to be a great option for them, with open space, a lot of recreational opportunties, and room to breathe. We saw bits and pieces of that in the summer of 2020, but saw it exponentially increase in 2021.”
Two factors slowed the momentum somewhat, and they’re both national in scope, not unique to Western Mass., Butler said. One was the Delta variant of COVID-19 (and, on its heels, Omicron), and the other is a lingering workforce shortage, which has kept some attractions, restaurants, and retail destinations from being open every day, and forced some hotels to operate at less-than-peak room capacity.
“We’ve seen a little bit of growth in terms of job applicants and some employers being able to get some workforce back,” Butler said, “but it’s still a bigger gap than we want for the economy to get fully back on its feet.”
“We saw different types of visitors to the Berkshires — a lot more younger couples, younger travelers trying to get out of the urban setting and finding the Berkshires to be a great option for them, with open space, a lot of recreational opportunties, and room to breathe.”
One factor that especially impacts hotels has been a decline in international workers coming to the region on work visas, due to both pandemic fears and shifting federal rules, he explained. “These are highly trained, motivated members of our local properties’ teams, and the loss of that demographic in the workforce has been another obstacle that has disproportionately affected hospitality.”
On the plus side, “even starting in 2020, we’ve seen a boom in outdoor recreation; it’s been a leading reason to visit the region,” Butler noted. “We saw continued increased activity at museums this year, again, building off 2020. Many museums and historical sites feature outdoor space, which is a nice option for people. And we saw some return to live performing arts this year. We’re very sensitive to the impact the pandemic has had on performing arts in the Berkshires, so it was good to see a return to live performances again at places like Tanglewood and Jacob’s Pillow.
“The big takeaway from 2021 was that people want to be here, and it’s a broader group that wants to be here, not just couples over 50,” he went on. “We’re seeing an influx of young adults, young families, who want to take part in a large variety of things — outdoor recreation, the food economy, health and wellness opportunities. We’re exposing whole new audiences to the Berkshires, and that will benefit us in the long term.”
Wydra feels the same about Western Mass. as a whole, and said the industry has learned to roll with the shifting demands of the pandemic because society demands it.
“Just like people in general, we have to adapt to the challenges COVID puts in front of us, things like masking, sanitary conditions, safety protocols. It’s super important to visitors, and something that will not go away for a while, if at all,” she said. “It’s becoming our new normal, and we’re all trying to figure it out.”
While noting, once again, how important it is that conventions and group business return at some point, Wydra also admitted the region has plenty going for it.
“The beauty of Western Mass. is that we have this amazing collection of great attractions and incredible natural resources. If people don’t want to go to Six Flags, they can go ziplining or rafting. There are so many things to do here, and that’s why we’re positioned well as a destination.”
Doleva has been busy promoting the re-envisioned Hall as an ideal site for meetings, fundraising dinners, product launches, and more, and he takes a similar interconnected view of the tourism industry in general. In fact, he says it’s necessary if the sector truly wants to shake off the pandemic and move ahead.
“We certainly take our obligation as part of the major attractions in the Valley very seriously,” he said. “We can and will work together as we go forward, and I think we’ll be in a very good position. None of us thinks of this region as a single-day trip. There’s multiple things to do, and we’ve recommitted to that idea throughout this whole COVID experience.”
— Joseph Bednar
Dr. Robert Roose says he’s deeply optimistic that 2022 will be the year when, as he put it, “COVID no longer rules most aspects of our lives.”
Elaborating, Roose chief medical officer for Mercy Medical Center, said that soon — how soon, he doesn’t know — COVID will reach a point where it is a more endemic infection that has much lower risk for larger numbers of people in the community. He bases that belief on a number of factors, including vaccines, rapid testing, and, soon, an oral, pill-based therapy that can reduce the risk of hospitalization amongst those that are most vulnerable to severe illness.
“The combination of these things has me optimistic that, for the summer, six months from now, and perhaps sooner, we will have lower rates of infection, higher proportions of our population immune to COVID — or at least the most severe effects of COVID — through vaccination or natural infection, and we will have more therapies that are available for those that would be vulnerable,” he said. “And I’m optimistic that will happen this year.”
“I’m very much an optimist; I’m a glass-half-full kind of person. I’m optimistic about the year ahead, despite the many challenges we face now and into the future. But 2022 is going to be challenging, especially the first few quarters, because of COVID and the ramifications of both the current surge and previous surges.”
Roose is not alone in that assessment — others we spoke with expressed similar optimism — but for now, all those in healthcare must cope with the present, when COVID still does rule most aspects of our lives, and when there are myriad other challenges stemming from the pandemic.
These include everything from intense workforce shortages that are being felt in this sector perhaps more than any other; high levels of fatigue and burnout among those working in most all healthcare settings, especially hospitals; growing mental-health issues that are impacting people in all age groups; and mounting non-COVID-related health issues stemming from individuals putting off needed care during the pandemic, or simply not being able to get it (see related story on page 41).
The sum of all these challenges and others prompted Dr. Mark Keroack, president and CEO of Baystate Health, to use the word ‘crisis’ early and quite often as he addressed the state of his healthcare system at an hour-long Zoom press conference a few weeks ago. Actually, he used the plural of that word, noting that his system was and is facing four crises: staffing, capacity management, a surging need for behavioral-health services, and, of course, COVID and the skyrocketing increases in cases due to Omicron.
While addressing these issues, Keroack echoed Roose when he said he is optimistic that COVID will become more endemic and, therefore, less controlling in the months and years ahead. But those other issues, and especially the workforce crisis, are expected to linger well into 2022 and probably well beyond.
Lynnette Watkins, who recently took the helm at Cooley Dickinson Hospital in Northampton, agreed, although she, too, was optimistic about 2022 and beyond.
“I’m very much an optimist; I’m a glass-half-full kind of person,” she said. “I’m optimistic about the year ahead, despite the many challenges we face now and into the future. But 2022 is going to be challenging, especially the first few quarters, because of COVID and the ramifications of both the current surge and previous surges.”
“About one in five healthcare workers has left the field since the start of the pandemic, and clearly that has shown up in our institution as well.”
The new year will certainly get off to an ultra-challenging start, she went on, noting that Omicron will test the healthcare system in every way imaginable, from capacity to workforce.
“We’ll get through this, but it’s going to be a challenging, challenging time for the next three to four months,” she told BusinessWest. “We tend to be about three weeks behind our neighboring states, meaning Connecticut, New Hampshire, and New York, in particular, when it comes to this surge in the disease. So January is going to a particularly tough time for this region, but what we’re seeing in the research is that, as quickly as this virus surges, it declines.
“With that, we need to make sure we have the capacity and capability of taking care of those patients who are COVID long-haulers, as well as those who have deferred and delayed care,” she went on. “And that is going to continue to be a challenge.”
Looking forward, those we spoke with said that perhaps the biggest challenge looming over the industry is a workforce crisis that was in evidence before the pandemic, especially among nurses, but has been exacerbated by COVID.
“We’re seeing those gaps just widen,” Roose noted. “The chasm between what we need to close is just wider.”
For the immediate future, hospitals and other providers will be impacted not only by people leaving their jobs, or the industry as a whole, due to retirement, burnout, and other factors, but also workers being infected by the virus and being forced to the sidelines, as well as the huge toll the shortages take on those in the trenches.
“We’ve really put a lot on our people — we’ve asked them to do a lot, like coming in for extra shifts, filling in, and stretching themselves,” Keroack said. “If we were fully staffed with people who were feeling refreshed, we’d feel a lot more confident about what we’re facing in the next few weeks.”
Meanwhile, staffing up during this crisis is a difficult and very expensive proposition, with all hospitals forced to hire what are known as ‘contract nurses,’ often at rates of $5,000 per week or more, Roose noted.
As for workers leaving their jobs, the numbers tell the story; Keroack told the assembled press that Baystate had 1,800 vacancies at that point in time in a total workforce of 13,000, roughly 14% of its workforce. In normal times, the number of vacancies would be closer to 500.
“Long-term, we could build some strength out of this. But short-term, it’s going to be very challenging.”
“About one in five healthcare workers has left the field since the start of the pandemic, and clearly that has shown up in our institution as well,” he remarked. “It’s been especially hard for bedside caregivers; many nurses have taken early retirement, and it has also affected respiratory therapy and pharmacy, and it’s been hardest for our entry-level employees — medical assistants, various technical positions, nurses’ aides, environmental workers, food-service workers.”
Roose said the numbers are similar at Mercy, with vacancy rates of 10% to 15%, with ‘functional’ vacancy rates, those that take into account open positions but also those employees on leave, being much higher, in some departments as much as 30% or more.
At Cooley Dickinson, Watkins noted, the number fluctuates anywhere between 9% and 12%, with the majority in nursing and nursing support.
In response to these developments, hospitals have made adjustments, said those we spoke with, including higher wages for many positions, expanded benefits eligibility, bonuses, ramped-up recruiting efforts, job fairs, and other steps, all aimed at bringing improvement when it comes to both hiring and retention.
And in some respects, they’re working, said Keroack, noting that these efforts are bringing in between 100 and 150 new workers each week, with the ratio of people coming in to those leaving being roughly 2 to 1.
“So we’re gaining on the problem, but it still quite significant,” he said, adding that, to that point in time, the system had spent roughly $40 million on bonuses and shift differentials, and another $40 million on contract-labor expenses, for calendar year 2021.
Looking ahead, those we spoke with said that, eventually, the laws of supply and demand will being improvement to the staffing crisis, but relief is not likely to come any time soon.
Keroack said part of the problem, especially when it comes to nurses, is simply getting enough people into and then through the pipeline.
“There’s a tremendous shortage of nursing faculty members — we had a number of senior seniors take early retirement — and so the pipeline simply wasn’t fat enough to completely replenish the pool in a quick amount of time,” he said. “We have waiting lists of people wanting to go to nursing school, but they’re limited by the number of clinical placements and the number of faculty.”
Roose agreed. “I think that at some point, a few years from now, things will start to settle out, perhaps sooner if there can be some major interventions at the federal level from a legislative perspective, as well as reconnecting with some of the meaning behind why people get into healthcare in the first place,” he noted. “This can spur people to enter the field as a result of wanting to be part of something so transformative.
“Long-term, we could build some strength out of this,” he went on. “But short-term, it’s going to be very challenging.”
The same can be said the mounting mental-health crisis impacting the region and the entire country, said Watkins, expressing optimism that American Rescue Plan Act funds can and will be put to use to address this emerging issue.
“A lot of what’s coming through this act will definitely help on all fronts and all healthcare providers,” she explained, “but especially our mental-health professionals and building that pipeline to increase access to care — because we’ve all suffered, and if we’re not looking into mental-health support services, we should.”
And while COVID has certainly given all those in healthcare a number of headaches and challenges, it has also given this sector the opportunity, born of necessity, to innovate and find and new and often better ways of doing things and caring for patients, said Watkins, adding that perhaps the best example of this is the rise of telehealth, a trend that will certainly continue in 2022 and beyond.
“While a lot of people might have thought about telehealth before the first wave of the pandemic, now it’s here, and it’s here to stay,” she said, with conviction in her voice. “Whether it’s teleradiology, teleneurology, or other ways of engaging telehealth … this has emerged as one of the key delivery options of the future; there’s more access, without the inconvenience of travel and waiting. The emergence of telehealth has been a real game changer.”
Summing things up, Watkins maintained her glass-half-full outlook, but stressed repeatedly that 2022 will pose the same challenges as the past two years, and they will likely increase in intensity before there is solid improvement.
“We have a very, very depleted workforce,” she said while speaking for all her colleagues in the industry, “and a very, very sick population.”
— George O’Brien
Looking ahead to 2022, Sandra Doran projects that this will be what she called “the year of the woman.”
Elaborating, she said many women have put their lives, careers, and educational goals on hold the past few years. And she projects that many will be making up for lost time in the months to come as the region and its large and important higher-education sector look to return to something that has been quite elusive since March 2020: normalcy.
“COVID has had a disproportionate impact on women, both in the workforce and in higher education,” said Doran, president of Bay Path University in Longmeadow, a women’s college, at least at the undergraduate level. “Many people lost their jobs, and many students weren’t able to continue, especially our adult students, those who work and live and go to school, and our graduate students — many of them had to delay their own aspirations. And I see many people saying, ‘I’m not going to put that aside any longer.’”
“Many people lost their jobs, and many students weren’t able to continue, especially our adult students, those who work and live and go to school, and our graduate students — many of them had to delay their own aspirations. And I see many people saying, ‘I’m not going to put that aside any longer.’”
The area’s colleges certainly need this to be the year of the woman — and a better year all around. Many had been struggling with enrollment before the pandemic, due to smaller high-school graduating classes, but other factors as well. And the pandemic only exacerbated the problem, with enrollment down more than 3% nationally in the fall of 2021.
The region’s community colleges have been the hardest-hit, with double-digit drops in enrollment at all of them over the past two years, but all schools have been impacted by COVID.
“Like every state university in Massachusetts, we’re having enrollment challenges,” said Linda Thompson, who took the helm at Westfield State University last summer, noting that many are still wary about attending college in the midst of a pandemic.
Those we spoke with said ‘normal’ was something they were anticipating would return last fall. Indeed, as COVID cases plummeted over the summer and the economy reopened across the board, there were high expectations for that fall semester, said Harry Dumay, president of Elms College in Chicopee. But the Delta variant showed how quickly the picture, and expectations, can change.
And as the new year dawns, COVID and its Omicron variant loom large over this sector, with some uncertainty about whether schools can open their campuses for the spring semester (several closed their doors as Omicron cases spiked in the middle of December) and under what circumstances they can reopen.
“Fall of 2021 was actually a very good enrollment period for us.”
“We’ll be watching over the break to see how things develop, and we will have contingency plans in place if we need to do anything different,” said Dumay, adding that returning students must be vaccinated and receive their boosters as soon as they are eligible. “We’ll be as cautious and prudent as we were in the fall of 2021, and even more so, given what we’ve seen from Omicron.”
There are other challenges as well, especially a workforce crisis that hasn’t spared any sector, especially higher education.
“We have jobs that are going unfilled; we have jobs where, in the past, we’d have 100 applicants — we’re just not seeing that anymore,” said Thompson, noting this trend involves positions at every level and shows few if any signs of abating any time soon.
But amid the questions, concern, and uncertainty, there is also optimism, expressed by Dumay and others, that 2022, and especially the fall semester, will bring improvement on enrollment numbers and a return to something approaching normal.
Or continued improvement, as the case may be.
“Fall of 2021 was actually a very good enrollment period for us,” said Dumay, adding that, after a slight decline in the fall of 2020, the first semester after COVID made its arrival, the school — bucking those national trends — saw record applications among traditional, first-time freshmen, close to record acceptances, and one of the highest enrollment numbers for first-time freshmen in more than a decade.
Meanwhile, the numbers for transfer students and graduate students were also solid, with the latter helped by the opening of a graduate admissions office, he went on, adding that the only segment that was down was continuing education, the students who transfer from community colleges, a statistic in keeping with the struggles at those schools.
“As we look to the fall of 2022, everything is trending as it was in the fall of 2021,” he went on. “In fact, we’re ahead, year over year, in terms of applications, and all three segments that were good last year continue to look very solid for 2022.”
Doran shared that optimism. “I feel very confident about next fall,” she said. “Many students had an online experience over the past few years in high school, and now, they’re looking for a more personalized, in-person fall experience, and that’s what we’re really good at.
“I really see this as a very strong year for women in education and women in the workforce,” she went on. “And I feel that way for several reasons, starting with the fact that I hear women say, ‘we can no longer put on our lives on hold — we have to move forward aggressively, and part of our life plan is to make sure we have the right education.’
“But we also hear from employers that they’re very eager to fill their talent pipeline,” she went on. “They know our students, that they’re well-qualified and exceptional employees, and we’re working very closely with employers to make sure our curriculum provides our students with the strengths, capabilities, skillsets, and thinking ability to succeed; I see it on both sides of the equation.”
“We’re looking at more things we can do with community colleges. We need to streamline pathways from high school to community college to four-year institutions. These are the things that are going to much more prevalent moving forward.”
When asked if the phrase ‘pent-up demand,’ which is being heard in many contexts as the economy continues to grow, also pertains to higher education, those we spoke with offered a qualified ‘yes,’ noting that there is demand for education that is career-focused.
“I think we’re going to see increased enrollment in the online space, and I think it’s because women know that, to advance their careers and to realize their career aspirations, many of them need a credential, a bachelor’s degree, a master’s degree — if you’re going to teach in Massachusetts, eventually you’ll need a master’s degree,” Doran said. “There’s a lot of momentum around educational attainment, particularly for our students. That’s because we’re really focused on student services, internship, career development, and making sure our curriculum aligns with workforce needs.”
Thompson agreed, noting that, as the number of high-school graduates continues to decline, colleges and universities need to increase their focus on those who may have tried college and stopped because life got in the way.
“Now, they’re probably looking for opportunities for growth and moving up in their jobs,” she noted. “So we need to do more to reach adult populations; faculty are starting to look at the way they offer courses, and probably will be offering more things in a blended format.
“Also, we’re looking at more things we can do with community colleges,” she went on. “We need to streamline pathways from high school to community college to four-year institutions. These are the things that are going to much more prevalent moving forward.”
Beyond enrollment and a long list or protocols to be followed and updated as necessary, COVID has brought other challenges as well, and these will certainly continue in 2022, said those we spoke with. Dumay told BusinessWest that managing through the pandemic has been difficult and exhausting on many levels.
“Across higher education, and across all industries, for that matter, people are tired,” he said. “If you ask any college president, they would say they and their teams are … fill in your favorite word — they’re on edge, they’re tired, they’re demoralized. And we’re paying attention to all that.”
Elaborating, he said ‘all that’ means paying more attention to the needs of students, obviously, but also faculty and staff, many of whom are coping with pandemic-related issues off the job as well as on it, and also focusing on the mental health of students.
“Students have different ways of coping with the uncertainty of the time,” he said. “And we’re seeing, across all campuses, a lot more students with mental-health issues, and COVID is exacerbating that.
“All of these things have created a whole lot of challenges, and there’s been very little let-up,” Dumay said in conclusion, adding that this trend, in addition to all the others, will almost certainly continue into the new year.”
Thompson agreed. “I think we’re going to be living with this virus for a long time,” she said. “I see it continuing to mutate; I see us having to be vigilant with hand washing, wearing masks, paying attention to our health and well-being, and doing whatever we need to do.”
— George O’Brien
Bart Raser started by stating the obvious: 2021, like 2020, was “a great year to be in the hardware business.”
Indeed, many of those who found themselves working at home, or just spending more time at home because of COVID, found themselves wanting to work on their homes as well, and that certainly brought more customers — contractors and do-it-your-selfers alike — to the doors of the eight Carr Hardware locations, six in Western Mass. and two in Northern Conn., with the flagship store in Pittsfield.
But while business has certainly been good, there have been myriad challenges as well, from workforce shortages — which Raser, the company’s president, has largely been able to avoid, and he’s one of the few who can really say that — to inflation, production, and supply-chain issues, caused in large part by that soaring demand and a workforce crisis that no one in his sector has been able to avoid.
And that’s why large orders of grass seed, bird food, and other spring items will be arriving at those stores in a few days or a few weeks, rather than in mid-March, as is customary, because Raser’s team ordered well in advance to make sure the shelves would be stocked. And that’s also why he’s predicting it will be very difficult to buy a new lawnmower come April, and those forced to do so will pay a steep price for that item.
“Lawnmowers for spring look tricky — really, really tricky,” he told BusinessWest. “Some of the big manufacturers got out, and … there will be fewer choices and significantly higher prices.”
Raser’s story has its own specific nuances, but there are common threads for most all small-business owners in the region. For many, business has been good, although in most cases still not as good as before the pandemic. But there have been — and will continue to be — headwinds, like inflation, shortages of products that consumers want, lingering workforce issues, and the impact of all of the above on the bottom line.
Kris Houghton, a partner with the Holyoke-based accounting firm Meyers Brothers Kalicka, said 2021 was a time when her small-business clients were looking to put COVID behind them. That didn’t happen, obviously, and as they continued to battle the pandemic and many new challenges emerged or escalated, especially the workforce crisis and the rising cost of everything from labor to health insurance.
“There’s definitely an employee shortage, which is causing employers to have to pay more than they would otherwise have paid in the past,” she explained. “And, of course, paying more leads to two things: they either increase prices to their customers, or there is less profit for them in the end. It’s a compounding problem, and the biggest issue is employees.”
But there are others, including supply chain, she said, adding that businesses in many sectors could have done better in 2021, if they only had product to sell or produce. That’s true of auto dealers, obviously, but also hardware chains, restaurants, and manufacturers.
“Supply chain is also a big problem because, if businesses can’t get the product, they can’t sell it,” Houghton noted. “And if they want the product bad enough, they pay increased shipping costs to try to make product available; all this is leading to diminished bottom lines.”
And these dynamics become even more critical in the months ahead, she went on, because most federal support programs, from PPP to the employee-retention credit, have expired or soon will.
“Those were lifelines to try to restore a little bit to their bottom lines,” she said. “So there is concern about the future. In New England, we’re resilient, and some businesses were fortunate enough to have some reserves that can help them carry on. I don’t know about the other businesses. Are they going to be able to borrow? Are they going to run up costly debt? Are business owners going to be relying on credit cards, which come with 18% interest? These are some of the questions that will be answered in 2022.”
“Supply chain is also a big problem because, if businesses can’t get the product, they can’t sell it. And if they want the product bad enough, they pay increased shipping costs to try to make product available; all this is leading to diminished bottom lines.”
As noted, 2021 was a solid year for many small businesses, especially those in manufacturing and related services. Jeanne Bell, controller and co-owner of Westside Finishing Co. in Holyoke, spoke for many when she said her company struggled to keep up with demand from customers who saw a surge in orders themselves.
“We ended up having a really good year,” she said. “It started off rocky, of course — the first two quarters, we were eligible for the employee-retention credit, but the second half of the year has been really, really busy, and it looks like it’s going to continue into next year.”
She said Westside is a job shop that power-coats parts and ships them back out again. Clients, and there are many, include OEMs like East Longmeadow-based Excel Dryer.
“We work for a variety of industries, and all of them are busy right now,” she told BusinessWest. “We’re actually turning down work right now because we can’t do it all; we would have to start a second shift to have more capacity, and we probably wouldn’t mind doing that if we thought we could get the people, but that’s our biggest challenge — workforce.”
Elaborating, she said the company’s labor costs rose in 2021, and one of the big reasons why was the need to hire additional staff to fill in for those out with COVID. And those additional costs kept this past year from being as profitable as others in the past.
Looking back, and ahead, she said overall sales in 2021 were not quite at pre-COVID levels. But she believes the company can get there in 2022, if current trends involving customers continue, if the economy continues to grow, and if some of those issues impacting clients themselves, including production and supply chain, work themselves out.
That’s a good number of ‘ifs,’ but overall, she said there is ample reason to be optimistic about the year ahead.
“We’re actually turning down work right now because we can’t do it all; we would have to start a second shift to have more capacity, and we probably wouldn’t mind doing that if we thought we could get the people, but that’s our biggest challenge — workforce.”
Raser concurred, but noted that most of the issues that came to the surface in 2021, especially when it comes to production and supply-chain woes — due to everything from soaring demand to workforce shortages to that large number of container ships waiting in a queue to be unloaded — are expected to linger well into 2022. He said roughly 3,000 of the 38,000 products his company sells have been impacted by both production and supply-chain issues, with that list including everything from paint and batteries to plumbing supplies and those aforementioned lawnmowers and other types of power equipment.
Paint manufacturers have been especially hard hit, he noted, adding that resin plants in Texas were set back by a succession of natural disasters, including the snow and freezing temperatures last winter and, later, hurricanes, as well as workforce challenges.
“All the big manufacturers of paint — Sherwin Williams, PPG, and Benjamin Moore — are all really struggling,” he noted. “And our painting contractors are very frustrated, as are their customers and homeowners as well. We’re been around a long time and have a lot of brands, so we’re able to pull a lot of levers to keep items in stock, but people have to flexible — they may have to consider moving to a different brand or a different product to get their project done.”
That part about being flexible goes for small businesses as well. This past year was solid for many of them, but business wasn’t the ‘normal’ that people had been hoping for, and expecting, around this time last year.
As we turn the calendars again, there are similar hopes and large doses of optimism, but the reality is that normal, as we knew it 22 months ago, is still an elusive target.
— George O’Brien
When asked to project what lies ahead, Rick Sullivan said he believes the region got a taste of what he expects 2022 will be like last summer and early fall — before Delta and Omicron entered the lexicon.
Flashing back, he said the tourism sector was rebounding on many levels, with the Big E on its way to a very solid year, many other attractions across the region open again, and most all restaurants and other types of venues taking full advantage of large amounts of pent-up demand.
Meanwhile, the housing market was (and still is) booming, in part because there was considerable interest in moving to this region among those in Boston, New York, and other markets due to the growing popularity, and availability, of remote work. And the Western Massachusetts Economic Development Council, which Sullivan serves as president and CEO, was seeing an uptick in inquiries and site searches involving the region, with much of the interest coming from transportation and distribution companies, but also some manufacturers as well.
“From a retail and from a travel and tourism point of view, the future looks bright, and we had that taste of it.”
“We didn’t quite get to where we thought we’d be when we looked into our crystal balls at the start of 2021, but I thought we caught a glimpse of where we will be in the summer and early fall,” he said. “From a retail and from a travel and tourism point of view, the future looks bright, and we had that taste of it.”
That ‘taste,’ as Sullivan called it, could be a preview of 2022, and there is considerable optimism that it will be. But there are many question marks regarding what’s on the horizon, and most all of them are COVID-related in some way, shape, or form.
That includes a workforce crisis that has impacted every sector of the economy and spawned the term ‘Great Resignation,’ as well as supply-chain issues, enormous stress and strain on healthcare providers, and a host of challenges for small businesses, including, by and large, the end to COVID-generated federal relief measures such as PPP and the employee-retention credit.
As for COVID, itself, its unpredictability — and deep impact on the economy and specific business sectors — were on full display in December, said Tom Senecal, president of Holyoke-based PeoplesBank, citing postponed business conferences, canceled holiday parties (including one scheduled by his company), and the ripple effect all this had on businesses that were projecting a far better end to 2021, as just one example.
“COVID is going to be the impactful event of the beginning of 2022 — it might alter the way we continue to do business,” he said. “It comes down to mandates and whether businesses can stay open. Some colleges are closing; think about how it might affect the Amherst and Northampton market if colleges are closing and maybe not reopening depending upon how COVID goes.”
But despite great uncertainty about COVID and other issues, such as inflation and the fact that is no longer transitory in the eyes of the Fed, there is optimism that soon — how soon no one knows — the region may be see more of what it caught a glimpse of in 2021.
Vince Jackson, executive director of the Greater Northampton Chamber of Commerce, said many businesses returned to 2019 levels of revenue last year, and many others that didn’t at least came close, with expections that they will in the year ahead. But in many ways, the situation is similar to what the region was experiencing a year ago. As 2021 dawned, there was a general feeling that the worst was over and that ‘normal’ was maybe a quarter or two away. The reality was much different, of course.
“One of the things we learned from 2021 is that things are ever-changing,” he explained. “The outlook could be one way today, but end up being very different. We didn’t know what to expect at the end of 2020 as we headed into 2021, and we were just hoping for the best. And … here we are again, ending the year with a lot of uncertainty, just as much uncertainty going into 2022.”
As the new year starts, Jackson noted, many business owners, especially those in the retail and hospitality sectors that dominate Northampton’s economy, are looking for more consistent statewide direction regarding masking, vaccinations, and other COVID-related matters.
“One of the things we learned from 2021 is that things are ever-changing. The outlook could be one way today, but end up being very different. We didn’t know what to expect at the end of 2020 as we headed into 2021, and we were just hoping for the best. And … here we are again, ending the year with a lot of uncertainty, just as much uncertainty going into 2022.”
“Most business owners are looking for guidance on masking so that they don’t have to end up being the mask police,” he said, adding that many have questions about whether masks should be mandated or simply advised, because business can be lost depending on the answer.
Like Sullivan and others we spoke with, Jackson said 2021, or at least a short slice of it during the summer, provided a glimpse of what everyone is hoping for in 2022.
“As the year went on, things got better,” he recalled. “Summer came, the economy reopened, and people were ready to get outside and return to a sense of normalcy. We saw that in almost every sector of business, and the response was beyond expectations because of the community’s response, the public’s response, to returning to what was normal for them.
“From a restaurant standpoint, there was outdoor dining for those not quite ready to get out as much, and there was still takeout. But then, there was a whole statewide initiative to push indoor dining because we had the vaccines and things were safe,” he went on. “As I look back, I think we need to learn from history because we’re kind of in the same cycle in most people’s minds.”
Looking back at 2021, Jackson said the dominant limiting factor for most businesses was workforce. It kept many restaurants closed an additional day, or even two, each week, and it kept many types of businesses from realizing their full potential as the economy roared back to life in last spring and summer as COVID restrictions were lifted.
Thus, perhaps the biggest question hanging over 2022, beyond COVID, of course, is whether there will be any improvement on the labor front.
It’s too early to tell, but at present, there are few signs of real progress, said Senecal, who related a recent experience at the bank that speaks volumes about how deep and widespread the problem is.
“We had an open, entry-level position a few months ago that 16 people applied for; 16 people set up an interview, and 16 people didn’t show up the interview,” he recalled. “No phone call, no nothing.”
As alarming as that is, what’s perhaps more disconcerting is a lack of solid answers for what is behind this and similar episodes being recorded at businesses across the region.
“I don’t know what that says,” Senecal said, with a note of exasperation in his voice. “This was a few months ago, after the unemployment benefits ran out. I don’t understand that phenomenon and why it’s happening now.”
Sullivan concurred, and said that what the past few months have clearly shown is that the problem is much deeper than unemployment benefits and also rests with issues such as childcare, elder care, and the retirement of many in the Baby Boom generation.
“Every business has the help-wanted sign out, and you’ve seen things like sign-on bonuses and higher wages, which I think is a healthy thing for the economy,” he told BusinessWest. “Our employers have had to get a little more creative with incentives to keep the employees they have, and they’ve had to do things to bring new workers in. It’s not a regional problem, but a national one, and it’s one we’re going to have to come to grips with in 2022.”
“Our employers have had to get a little more creative with incentives to keep the employees they have, and they’ve had to do things to bring new workers in. It’s not a regional problem, but a national one, and it’s one we’re going to have to come to grips with in 2022.”
Meanwhile, there are other challenges the region must contend with in the weeks, months, and quarters to come.
“Supply chain and inflation are the two biggest economic dampers, both nationally and regionally,” Senecal said. “Core inflation is up 6%, gas is up 33%, cars are up 12% … when you talk inflation, it’s not the 6%, it’s the things outside the core inflation index that are really driving up prices. And the Fed has taken the words ‘temporary’ or ‘transitory’ out of their projections, meaning the Fed believes it’s real inflation.”
But while there are challenges, there are opportunities as well, said those we spoke with, noting that 2021 brought some positive signs when it comes to interest among both individuals and businesses alike to come to Western Mass. to take advantage of its quality of life and lower overall cost of living.
As for individuals, many have decided they can live in the 413 and work essentially wherever they want, said Sullivan, adding that this dynamic certainly impacted the local housing market, driving prices higher as inventory levels fell, following the laws of supply and demand.
And on the business side, there has been an uptick in activity when it comes to site selectors inquiring about the 413.
“We currently have more than 40 site searches going on, and that number has been pretty consistent for us over the past year or two,” he said. “And that’s a healthy number; it’s at the high end of what we’ve traditionally seen. It doesn’t mean that everyone is going to come here, obviously, but it does mean that people are out there looking.
“And the big difference this year, as opposed to perhaps few years ago, is that this interest comes in different sectors,” Sullivan went on. “We’ve always been historically attractive to the transportation and logistics companies because we’re at the crossroads of New England, and businesses can easily serve the Northeast given the Turnpike, I-91, and the other highways here, and rail and the airports. But we’re seeing the sectors increase, everything from manufacturing, which we had not seen a lot of, to cybersecurity and Big Data, such as the proposal for Westfield.”
Overall, Sullivan and others said the trends, both positive and negative, will continue into 2022, which should — and COVID will obviously have a lot to say about this — provide more than just a glimpse, or taste, of better times.
— George O’Brien
Bob Nakosteen started his discussion concerning the regional and national economy with a quick rejoinder that doubled as something to top everyone’s wish list.
“Well, if we put aside COVID…” he started while talking about the year ahead and, more specifically, about inflation and optimism that the Fed’s anticipated actions to raise interest rates will stem the rising tide of the past few quarters and bring it more under control in the months to come.
Overall (COVID notwithstanding), Nakosteen, a semi-retired professor of Economics at the Isenberg School of Management at UMass Amherst, said most factors involving the economy are positive — everything from consumer confidence to jobless rates; from a still-white-hot housing market to persistent pent-up demand for goods and services, especially the former.
Of course, you can’t take COVID out of the equation, as much as we all might like to, and that’s why predicting just what will happen in 2022 with regard to the economy and the many forces that drive it is still somewhat of a crapshoot.
Still, there is general optimism when it comes to the big picture and matters such as inflation — even though the Fed and others have dropped the word ‘transitory’ when talking about the issue — confidence, supply chain, the stock market, and perhaps even the workforce crisis, said Nakosteen and others we spoke with.
“The Fed wants to make sure it doesn’t jam on the brakes and raise interest rates so fast that they cause the recession they’re trying to avoid. It’s not good to get a recession named after you.”
Indeed, earlier this month, in a note to clients, Marko Kalanovic, JPMorgan’s chief global strategist, wrote, “our view is that 2022 will be a year of a full global recovery, and end of the global pandemic, and return to normal conditions we had prior to the COVID-19 outbreak.”
All that might still happen in the next 12 months, but the events of the past few weeks show that recovery may be slower, and perhaps not as complete as JPMorgan projects.
Karl Petrick, a professor of Economics at Western New England University, told BusinessWest that inflation should ease up in 2022 and retreat from highs of nearly 7% (year over year) in November to below 5% and perhaps to 4% or even 3% in the months ahead.
He said soaring gas prices, triggered by the laws of supply and demand as the economy started to roar back to life roughly a year ago, have been a big factor in soaring inflation, and they have already started to fall.
“It takes time for supply to meet that surge in demand, and as oil suppliers rebound, we expect to see that price come down, and we’re already seeing some moderation,” he said, adding that, if the impact of Omicron on the global economy is substantial — and already there are signs of slowdown and even shutdown in some countries — then demand for energy (and, therefore, the prices for same) will come down.
“Regardless, we expect to see inflation moderate,” he said. “It will still be a little uncomfortable compared to what we’re used to — we had gotten used to prices going up 2% or 1% a year, and that was part of the shock we felt as prices really started to jump the second half of this year — but things will improve.”
One key to what happens with inflation is action on interest rates, said Nakosteen and Petrick, noting that the Fed is certainly paving the way for higher rates. In mid-December, the central bank announced plans to phase out its large-scale bond-buying program faster than initially planned. That will give the Fed more flexibility to raise rates, and 12 of the 18 members of the Fed’s rate-setting committee expect rates to rise by three-quarters of a percentage point or more in 2022.
While such action is expected to keep higher inflation from becoming more entrenched, there are risks and costs to raising rates, said Petrick, adding that the Fed wants to keep inflation in check without slowing the pace of growth or, far worse, putting the country on a course to a recession.
That’s what happened in the early ’80s, he said, when then Fed Chairman Paul Volker elevated interest rates to historic levels, which triggered a recession that, in many historical references, bears his name.
“I don’t think the Fed is going to have to raise interest rates to the point where it’s going to dip us into a recession.”
“The Fed wants to make sure it doesn’t jam on the brakes and raise interest rates so fast that they cause the recession they’re trying to avoid,” Petrick said. “It’s not good to get a recession named after you.”
Nakosteen agreed, and said that, overall, he’s in the camp that believes that higher inflation as was seen over the last three quarters of 2021 will be transitory — and not built into the economy, as others predict — but perhaps for a longer period than everyone would like. He also agrees that, while the Fed is talking tough about inflation and the need to keep it in check, its overall response will not be as tough as the talk.
“I don’t think the Fed is going to have to raise interest rates to the point where it’s going to dip us into a recession,” he told BusinessWest. “The economy is going to continue to grow, maybe not as quickly, inflation is going to come down over the next year, and interest rates are going to go up, but not by very much; it will affect the housing market and automobiles.”
Petrick agreed, projecting “pretty reasonable” growth for the year ahead, but adding quickly that events of even the past few weeks — the rise of Omicron and setbacks for President Biden’s Build Back Better program among them — have tempered some of those expectations.
“At the beginning of December, before we knew the Omicron variant was as prevalent as it was internationally, growth projections were pretty high, about 4% to 5% globally, and about 4% in the United States,” he said. “And then … those projections came down to about 3.7% to 3.8%, and now, with the doubts about the Build Back Better agenda getting through Congress, they’ve been downgraded again, to 3% to 3.5% on an annual basis next year — that’s the consensus that I’ve seen.
“But the first quarter will be pretty quiet, with about 2% growth, which was our average, pre-COVID,” he went on. “And that’s a big slowdown from this year, when we saw 5.5% growth overall, which was expected.”
As for the longer-term picture … Petrick said the consensus, if there is one, is that there will be continued growth in 2023, perhaps 2.5% to 2.9%. But as the events of the past few weeks have shown, things can change — and very quickly.
So projecting too far out is obviously difficult. For now, there is widespread if cautious optimism about which way the arrow will point in 2022.
But as Nakosteen noted, the past two long and mostly painful years have shown that there is simply no putting COVID aside. u
— George O’Brien
Bob Nakosteen has an old saying hanging in a frame in his office at the Isenberg School of Management at UMass Amherst — the one he hasn’t been in but once since last March.
It reads: “You Can See the Future by Looking at the Past.”
Nakosteen, a professor of Economics at Isenberg, said he’s lived by those words, especially at this time of year, when he’s asked to try to forecast what might come over the next 12 months.
Only this time, that saying doesn’t hold. Indeed, while people tend to throw that word ‘unprecedented’ into the mix early, often, and sometimes when it doesn’t actually apply, one could certainly use it with regard to COVID-19, the economy, and any efforts to look into the crystal ball and make some projections.
“In virtually every situation I’ve been in before, you can pick out an historical situation that came close and give some perspective on what might happen next,” he said. “Now, you can’t at all. Even 1919 and the last global pandemic was different; there was lingering demand from World War I, and a lot of global agriculture had been shut down. That really bolstered United States agriculture; we were still predominantly an agricultural country. There were some circumstances that we can’t duplicate now.”
So if people can’t look to the past to project what will happen in 2021, how can they handle that assignment?
“Not very easily,” said Nakosteen, who noted there are always question marks going into a new year. This year, they come by the bushel bag, and cover everything from vaccines — how effective they’ll be and when they’ll be widely available — to overall consumer confidence, always a huge issue in determining which way the arrow will point; from the election of a new president to what’s happening in other countries, especially with regard to the pandemic; from the employment scene (specifically, how many of those millions of lost jobs will actually come back) to whether, and to what degree, Congress keeps printing money and dispensing it to those in distress.
With these vaccines coming online, once people get them, and they have confidence that other people have done the same thing, then you’ll likely see a pretty robust recovery, starting slowly and then accelerating. But, then again, we’re in completely uncharted territory.”
Add it all up, and there is simply too much uncertainty to make any real projections, said Nakosteen, adding that, while the country may well avoid another recession, or the dreaded ‘double-dip recession,’ as it’s called, the eventual shape of the recovery — which has been the subject of endless conjecture, with possibilities ranging from a V to a U to something like a Nike swoosh — is still be to determined. Obviously.
“What we could have is a W-shaped recovery,” said Nakosteen, offering another possibility, noting that, in this scenario, the economy would move back down again, hopefully not as bad as it did when it cratered last March, but eventually climb back up.
“With these vaccines coming online, once people get them, and they have confidence that other people have done the same thing, then you’ll likely see a pretty robust recovery, starting slowly and then accelerating,” he told BusinessWest, adding that the bounce-back might also take the more dramatic Nike swoosh shape. “But, then again, we’re in completely uncharted territory.”
When asked about the factors that will dictate the eventual shape of the recovery, Nakosteen said there are almost too many to count. They include:
• How much more stimulus money will be injected into the economy. Like most, Nakosteen said the recent $900 billion package approved by Congress will help, but it won’t be enough. When asked if the federal government could keep on printing money, in essence, he said he didn’t see why it couldn’t. “One of the things that happens during an economic crisis is that the government will provide temporary support until the economy heals itself. This is not permanent; this is temporary, and it’s a bridge to the future. And right now, we need a bridge.”
• The election of a new president. “That generally seems to perk things up — there’s generally a first-administration bounce — but in these unprecedented times, who knows?”
• To what extent new habits might become permanent. These include everything from not dining out or traveling to doing most shopping online, to working remotely. “I would like to get back to going out more, but my guess is that my life has changed, and we’ll never really go back to the way it was before the pandemic.”
• How many of the jobs that have been lost are regained. Employment is always a key to any recovery, and there is conjecture that many jobs will be lost permanently due in part to those changes in behavior; and
• Whether this region can somehow benefit from these changes in behavior and attitude. Some have suggested that, now that people can successfully work remotely, they may choose to do so in a setting like Western Mass., which provides space and a lower cost of living than Boston or other major cities.
While making hard projections is difficult, Nakosteen said he could offer what he considers to be a best-case scenario:
“By early summer, enough of the country is vaccinated and enough of the state is vaccinated, and, almost as importantly, people have confidence in the vaccine and the percentage of the population that’s been vaccinated, and then you see people start to re-engage. The industries that have been hurt have all been face-to-face industries — accommodations, retail, other services, the arts, and recreation. These face-to-face services start to bounce back quickly because people have a great hunger to get back out. If things go well, you’re going to see them get back out in the summer, and that’s when you’ll start to see the beginning of a serious rebound.”
Again, that’s the best-case scenario.
The worst case? An insufficient percentage of the population receives the vaccine, supply-chain issues “gum things out,” news of new strains of the virus spreads fear, people lose confidence in a recovery, and things drag on into the fall and perhaps longer, he said, adding, again, that myriad factors will determine which scenario — possibly one in between those two — becomes reality.
Summing things up, Nakosteen noted that, in some respects, we know what’s coming next — the administering of vaccines to millions of people over the next several months. What we don’t know is how all that is going to play out.
As he said, normally you can look to the past to see the future. But not in this case.
Jamie Birge was searching for a piece of wood to knock on.
Massachusetts College of Liberal Arts (MCLA), which he serves as president, had essentially made it through a very different fall semester with only a handful of positive cases of COVID-19. He considers this a victory for his institution, and a clear indication that the many protocols put in place were effective.
“For the full semester, our positive rate was 10 times lower than the Commonwealth’s positive rate, and each week we outperformed our host city [North Adams], the county, and the Commonwealth,” he explained. “We were actively hunting the virus through our testing protocol, and through our tracing protocol, we made sure there was no spread. I think we had six cases, and in each of those cases, none of them spread on campus, because we were able to identify the virus through testing, we were able to either quarantine or isolate individuals, and we went to remote learning after Thanksgiving, which turned out to the best time to do that because there was an uptick in positive cases in Berkshire County, and our students were already off campus learning remotely. From a numbers perspective, we did extraordinarily well.”
The semester was a success on many levels, he went on, but for the students living on campus in singles or in off-campus housing, it certainly wasn’t the “typical residential college experience,” he noted, adding that those on campus were all in single rooms, and access was limited between residence halls. “You couldn’t go visit other people.”
“Even in the era of online and remote learning, students still want to be on campus; they want that traditional experience.”
Focusing on the future, Birge is obviously looking forward to the day when the school can again offer that full experience. He’s not sure when that will happen — certainly not before next fall and perhaps not even then — but there are signs of encouragement, he said, referring to everything from the introduction of vaccines to the projections for enrollment for next September.
“The latest I’ve seen for the 2021 cycle is that we’re within 3% of the pre-pandemic numbers, so we’re feeling good about that,” he said, noting that, by this time of the year, many students have already committed to where they will be attending school in the fall, although the next four or five weeks are critical. “I think that’s a soft figure, and, overall, we think this is going to be a multi-year emergence to return to where we had been. But I’m encouraged by the fact that we’re only off 3%.”
He said that number seems to be consistent with what the other eight state schools are reporting, although there is some variation. And time will tell if those numbers hold up as the vaccines are rolled out and their effectiveness is gauged.
Meanwhile, beyond the all-important process of rebuilding enrollment, colleges and universities will face other challenges, said Yves Salomon-Fernández, president of Greenfield Community College (GCC), especially the need to “adjust, adapt, and evolve,” as she put it, to effectively prepare students for what will be a changed landscape when it comes to the workforce and how work is done.
“For next year, we have to very intentional about our learning because the world we’ll be returning to, post-COVID — and with the vaccines, which will be a game-changer — is going to different from the one we had become accustomed to before COVID,” she explained. “We know that there are a number of jobs that won’t be returning.”
Elaborating, she said GCC will lean heavily on a panel it created called the Future of Work Advisory Committee, comprised of area business leaders across several sectors, including healthcare, hospitality, financial services, manufacturing, and others.
“They help us keep a pulse on what’s changing, what they anticipate, and what the outlook is, so we can align our new academic programs, and also adjust our existing programs to meet their demands,” she noted. “Also, it will be critically important for us to get a sense of what the workplace will look like and the skills that employers will be looking for.”
In this respect, she said colleges and universities, at least those with an eye on the long term, will be taking lessons from evolved companies that looked at the marketplace and how it was changing and began to adjust accordingly.
“These companies started asking themselves, ‘what are the market needs today that we can adapt to and meet — and what will be the unmet needs in the future, and how can we best position ourselves to meet them?’” she explained, adding that colleges have to do the same.
As for enrollment, the lifeblood of any college or university, area schools have been battling not only the pandemic, but demographics in the form of smaller high-school graduating classes. The two forces collided with considerable force this past September, with enrollment down as much as 20% at some area schools (that was the number at MCLA) and 15% at most of the institutions, with many high-school graduates taking a gap year and many already in college simply taking a break.
The question hanging over the industry involves that matter of pent-up demand and whether there will be good amount of it when the product is a college education.
“For next year, we have to very intentional about our learning because the world we’ll be returning to, post-COVID — and with the vaccines, which will be a game-changer — is going to different from the one we had become accustomed to before COVID.”
Birge believes there will be such demand, although, as he said, it might be the fall of 2022 or 2023 before pre-pandemic levels return.
“From the information we collect from students, the students want to return to campus,” he told BusinessWest. “Even in the era of online and remote learning, students still want to be on campus; they want that traditional experience.”
Noting that enrollment at community colleges usually rises during times of recession and high unemployment, Salomon-Fernández noted that this past fall semester was an exception to that rule, both because of large amounts of assistance to those who became jobless and the inability to attend in-person classes. She believes the vaccines, and the eventual end to those stimulus benefits, will change that equation.
“I think enrollment will start picking up in the fall of 2021,” she said. “In the long term, we can’t keep borrowing against ourselves — the national debt is the highest it’s been since the Great Depression. This is not sustainable, and we expect that, as the vaccine becomes available, the government subsidies will decline, and people will have ample incentive to get back to work — and they’ll need the skills to enter, continue in, and thrive in the job market.”
Looking ahead to the spring, Birge said MCLA will operate very much as it did in the fall, but with even more testing due to the colder weather at the start. Spring break will be eliminated, and an extra day will be tacked on to President’s Day weekend.
Like he said, the spring will be a lot like last fall. It will be different, though, if the vaccines work as the experts project they will, because the finish line, when it comes to the pandemic, will be much closer.
“Everyone is down right now when it comes to enrollment,” Birge said. “But we’re feeling a little bit of encouragement that it’s better than we thought it was going to be, although it’s certainly not what we want it to be.”
Donna Boulanger says she doesn’t how the landscape might change in 2021. What she does know is that it changed quite a bit in 2020.
That goes for everything from attitudes regarding online and mobile banking to sentiments on remote working, to thoughts on where people might prefer to live. Overall, she noted, these past 10 months have been a time to rethink how we do things and where we do them. And many of these changes may well be permanent, which will go a long way toward determining what 2021 — and the years that follow — will be like.
“A lot depends on the rollout of the vaccine and the effectiveness of the vaccine,” she said. “There is some pent-up demand, and it’s just a question of how quickly we return to a new normal, because are we ever going to go back to what was normal? Probably not,” said Boulanger, president and CEO of North Brookfield Savings Bank, which has eight branches and serves customers in both Western and Central Mass.
“There is some pent-up demand, and it’s just a question of how quickly we return to a new normal, because are we ever going to go back to what was normal? Probably not.”
“And how much have consumers’ habits changed?” she went on. “Are they going to go back to retail stores? Are they going to go back to restaurants? Will they go back to traveling? They are so many factors in play, and that makes predicting what will happen in 2021 very difficult. There are a lot of moving parts.”
Looking back on 2020, she said it was a period of adjustment — for the bank and many of its customers. Like all financial institutions, North Brookfield Savings Bank had to pivot, as she termed it, when it came to everything from staffing branches — teams would rotate in for two-week periods — to providing much-needed lessons in online and mobile banking to the bank’s generally older customer base.
Overall, Boulanger said, many businesses and consumers adjusted well to the pandemic, and state and federal support played a large role in this.
“In the Western Mass. and Central Mass. area, the loan portfolios held up very well; delinquencies, and I know this is hard to believe, are at record lows,” she explained. “Whether it is the increased unemployment or stimulus checks, our customers have weathered this storm fairly well. But there are certainly pockets, in Massachusetts and across the country, where people are not faring so well.
“We have a lot of customers who have fully recovered,” she went on, meaning they’ve returned to pre-pandemic revenue patterns. “These are generally manufacturers or specialty businesses; they’re not in hospitality, they’re not in retail. The people still being impacted are those in personal service, whether you’re a nail salon, a barbershop, a gym, or daycare facility.”
The bank took what she called a “proactive approach,” calling each and every business customer to see if help was needed, and in what form. Meanwhile, it was active with the Paycheck Protection Program, handling applications not only for customers, but businesses well outside its general service area.
Looking ahead, like others we spoke with, she noted that winter is a slow time for many business sectors, and the next few months could well be tough sledding for many ventures. And beyond those few months, question marks loom about consumer behavior and just how much pent-up demand there will be for some products and services.
But some shifts are already taking place, she said, adding that there are visible signs that attitudes are changing, about everything from where people want to live to how and where they will work.
“There is an outward movement from cities — we see it in our market,” she told BusinessWest. “When I talk to our local Realtors, we see people moving into Central and Western Mass. They’re coming from New York, they’re coming from New Jersey. Is that going to continue? No one knows, but it’s happening now.
“Palmer, Belchertown, Ware … we’re seeing people move there from outside Massachusetts, and I don’t think you would have seen that before,” she went on. “There’s demand for open space because people are going to continue to be able to work remotely. And because people aren’t going to restaurants as much, they don’t need to be in the big city; you’re not going to walk to the local restaurant or the local business.”
The question moving forward is how much permanence can be attached to these changes in attitude and behavior.
“Are these going to be long-term changes, or will people, when they feel safer, return to the cities because of the amenities?” she said in conclusion. “That’s the struggle for all the big cities.”
And that’s just one of the questions, one of those moving parts, that make predicting the future, even the next few years, so difficult.
That was the word Julie Quink summoned, after considerable thought, to describe the sentiment of most small-business owners as the calendar turns to 2021.
And it seems like an appropriate choice.
Indeed, regardless of how a business fared in 2020 — and some of her clients actually held up pretty well — Quink, managing partner at the West Springfield-based accounting firm Burkhart Pizzanelli, said most simply don’t know what to expect for the year again. Thus, they are uneasy and likely to be cautious and conservative in the months to come, which will likely play a role in how quickly and profoundly this region bounces back from all the body blows it took over the past 10 months or so.
“I have clients that are doing swimmingly well — they’re in the right industries that are flourishing in this environment — and I have others, third-generation businesses, that are closing; we’re helping them wind down.”
Many of these businesses are also uneasy because they were able to “limp along,” as she put it, thanks to support from the CARES Act, especially in the form of forgivable Paycheck Protection Program (PPP) loans that provided a much-needed cushion from sometimes dramatic drops in revenue.
Starting this past fall, when many businesses effectively spent down their PPP, they’ve been getting a look at operating without a net underneath them, if it can be called that, and for many, it’s a scary proposition.
“That’s why I think we’re going to see the true impact of this crisis over the next 12 months or so, especially as the pandemic continues,” said Quink, adding quickly that, another round of PPP was included in the recently passed stimulus package, little is known about how much help will be available, when, and to whom. And even for those businesses that get another round of help, 2021 is likely to be a struggle, she went on, again because of all that uneasiness.
Quink, like most of those in the accounting and tax field, has a good read on the economy and the factors driving it because her portfolio of clients is diverse and represents virtually every sector. Slicing through the phone calls, the questions asked, and the answers provided, she said some businesses have actually done well during this pandemic (she has a few commercial cleaners, for example), others are holding their own, and still others are really struggling.
“There is such a mixed bag with our clients,” she said, adding that this diversity of performance reflects what’s happening across the region. “I have clients that are doing swimmingly well — they’re in the right industries that are flourishing in this environment — and I have others, third-generation businesses, that are closing; we’re helping them wind down.”
She related the story of a second-generation business, a wholesaler that services the airline industry, among many others. Revenues are down roughly 50% from a year ago, not because there are fewer customers, but because most of the existing customers are ordering far less as their needs have diminished.
“We had a conversation today about how to plan, and I said, ‘you should tighten your belt because I think this is going to be a rough ride this year,’” she recalled, adding that she has given this same advice to many of her clients.
Getting back to that sentiment of uneasiness, Quick said there are many things to be uneasy about, from the ongoing pandemic to a presidential election that, while officially over, has been tumultuous in every way, to the deep uncertainty about the year ahead.
“People are waiting — they’re waiting for things to be final,” she said, using that phrase to describe everything from the stimulus package to the pandemic itself. “And I don’t think the election helped anything; all the events surrounding the election have made people uneasy.”
Still another factor contributing to this state concerns changes that have come to how business is being done, and questions about when, or even if, things will go back to normal.
“I have some clients who are international and can’t fly and can’t participate internationally in person,” she explained. “So they’ve had to refocus on how they do business now, and they don’t really know what the future will bring.”
As for her own profession, 2020 was certainly a different year, one with a tax season that never seemed to end. But it was a good year for most, because clients needed more assistance, or ‘touches,’ as she called them, with PPP and other matters.
And 2021 is certainly shaping up as more of the same, with another round of PPP looming, more questions concerning how to plan for the months and quarters ahead, and more of that uneasiness that will certainly play a large role in determining what kind of year this will be.
Editor’s Note: One of the sectors most impacted by the pandemic — and one facing a great number of questions moving forward — is healthcare. We put some questions to Baystate Health President and CEO Dr. Mark Keroack, who has become a very visible leader during this crisis and was recently named one of BusinessWest’s Healthcare Heroes for 2020.
BusinessWest: Dr. Keroack, already we’re seeing a great deal of optimism and expectation accompanying the arrival of vaccines in this nation and this region. What are your thoughts on the impact these vaccines will have on the broader economic picture in this region and when that impact will be seen?
Dr. Keroack: The vaccines represent a major scientific breakthrough, and they are the beginning of the end of the pandemic. Economies depend on consumer confidence, and, therefore, I have always seen recovery from the pandemic and recovery of the economy as one and the same. Removing the pandemic will boost confidence and enable the economy to recover. What is less clear is which businesses will have survived the terrible stress test of 2020 to even be able to recover.
BusinessWest: ‘Normal’ is a word we hear a lot these days, as in ‘when things return to normal.’ With the vaccines now here, is there any more clarity on when ‘normal’ — as in pre-COVID — may return?
“The light at the end of the tunnel is real, but it is still months away, and we are now in a perilous situation with more virus circulating in the community than we had last spring.”
Dr. Keroack: I believe that when a majority of people — more than 70% — receive the vaccine and are immune, case numbers will fall precipitously because the virus will not be able to find new hosts easily. That will enable governmental leaders to lift the restrictions we all have been struggling with these past several months. I suspect that will happen in late spring or early summer.
BusinessWest: Dr. Keroack, this has been a trying year for the healthcare system and hospitals in general. Can you in any way anticipate what 2021 will be like — both in terms of providing services and from a business (bottom-line) perspective?
Dr. Keroack: I think we should expect consumer attitudes to be changed in the wake of the pandemic. For several months, people have been getting used to different ways of getting their needs fulfilled, whether it is virtual visits, remote working, takeout dining, or online retail. I think this will put greater pressure on traditional bricks-and-mortar enterprises, including Baystate, to revisit their business models.
BusinessWest: In many ways, you have been the face of the pandemic in this region, often sending out strong statements on the need to socially distance, wear masks, and take the steps necessary to stem the spread of the virus. What is your message to the community now, 10 months after the start of the pandemic, and with what many are calling a light at the end of the tunnel in sight?
Dr. Keroack: The light at the end of the tunnel is real, but it is still months away, and we are now in a perilous situation with more virus circulating in the community than we had last spring. Many people, especially older people, are doing what they need to do to protect themselves, but many more are minimizing or still denying the risks of infection. It is now more important than ever to follow the guidance on masking, social distancing, and handwashing. Furthermore, we need to restrict our visits to indoor spaces that are not our homes, particularly if masks are not being worn.
BusinessWest: The governor recently rolled back, if that’s the proper phraseology, many of the restrictions on certain types of businesses. Do you believe further restrictions will be needed before the current situation improves?
Dr. Keroack: I think it is likely that the latest restrictions will not be enough to slow down the spread of the virus. We are seeing that some mayors are issuing regulations that go beyond what the governor recently proposed, and I suspect he too will have to roll back things still further before we are through the current crisis.
BusinessWest: Continuing with that thought, many businesses have closed over the past several months, and many more are barely hanging on amid the restrictions placed on them. It’s often been said that elected leaders have to choose between saving the economy and saving lives. Is there any way, in your opinion, to effectively do both?
Dr. Keroack: There are examples of countries that have done both. They are characterized by high rates of rule following, easy access to testing, and financial support for people who are sick and cannot work. Many Asian countries had great success opening their economies while also driving down infection rates. Other countries, like the U.S., were more likely to object to or doubt the effectiveness of the guidelines, and we saw a lot of people deciding to exempt themselves, sometimes with disastrous consequences. We also are not consistent in terms of sick leave, so many were tempted to go to work while sick. For all these differences, it is fair to say that now nearly every country is sliding backward to higher virus levels, because even the most compliant groups get fatigued by these restrictions.
BusinessWest: As a business leader and manager of one of the region’s largest employers, can you talk about the ways this pandemic has changed business and how it’s conducted, and which of these changes may be permanent?
Dr. Keroack: I mentioned earlier the importance of flexibility and meeting the customer where they are. We have recommitted to improved customer service and easier access to care. We are still learning in healthcare to be more like more customer-friendly sectors. I also expect that the strains on the economy will cause healthcare to be examined again for being too high in cost. Baystate Health is the lowest-cost large health system in the state, and yet we still need to drive down costs further. We also need to remember that embedded in the pandemic was the George Floyd killing, which led to a reckoning with systemic racism in our country. Baystate Health as an organization has made eliminating racism and enhancing diversity, equity, and inclusion in our health system a top priority. Finally, I think we need to re-examine and improve how we do preventive public health in our state, and I hope Baystate Health can play a role there.
BusinessWest: They say adversity makes those who endure it stronger. How will this region become stronger because of this lengthy and difficult battle against COVID-19?
Dr. Keroack: If the pandemic has taught us anything, it is that we are all connected to each other. Infections historically have attacked those in lower socioeconomic groups more severely. When those infections spread easily, we all suffer when we have not dealt fully with advancing economic opportunity across all our communities. If we come out of this with a greater sense of community and togetherness, we will have gained something valuable from what was otherwise a terrible ordeal.
BusinessWest: Personally and professionally, what has it been like for you to lead a company like Baystate though this crisis? What have you learned about yourself, as a leader, if anything?
Dr. Keroack: There have been many stressful days, given the unknowns and dangers of this virus. I worry a lot about protecting our employees and see the stresses they have been going through. I am blessed with a wonderful team that has strong experience in infectious-disease management and epidemic containment. I also am gratified by the can-do attitude from so many on the front lines. They show tremendous commitment, compassion, and innovation. I think the major lessons I learned as a leader is to make sure people understand the reasons behind what we are trying to do and then to trust them to find the solutions. I have not been disappointed in that trust.
For a year and a half after F45 Training Hampshire Meadows opened in Hadley, owner Danny Deane knew what members wanted — to get fit, sure, but also to cultivate a sense of family and community with their fellow goal-setters.
“We were sharing equipment, people were shoulder to shoulder, giving sweaty high fives,” he said, noting that none of that has been possible since the pandemic began.
In fact, the fitness center, like all others in this industry, closed its doors for almost four months, a casualty of Gov. Charlie Baker’s sweeping lockdowns in March, following by a slow, gradual, phased approach to reopening — during which time F45 launched online programs and later ran outdoor boot camps before getting the all-clear to invite members back inside.
These days, the Hadley facility — and a second F45 location Deane and his wife, Jessye, opened in West Springfield over the summer — have implemented a series of strict safety protocols, from reducing session sizes and mandating masks to requiring everyone to sanitize, pass a temperature check upon entry, and even change shoes; from reformatting space for physical distancing and barring shared equipment to sanitizing all surfaces, floors, and equipment every 45 minutes. Both studios — and their HVAC systems — have been fitted with the hospital-grade PermaSAFE disinfectant and antimicrobial system and are electrostatically fogged weekly.
The result? Out of 20,027 member visits since July, the two studios have been responsible for exactly zero transmissions of COVID-19.
“Making health everyone’s priority is really why we opened this,” Danny said, which is why he and Jessye considered CDC and state safety recommendations and not only met, but exceeded them, at both locations.
It’s certainly a bold move to expand during a pandemic, especially in an industry as hard-hit as this one by COVID-19 and the associated lockdowns and restrictions.
“The industry is hurting, significantly,” Danny said. “We say failure is never an option for us, but for the majority of fitness in the United States, it is certainly an option.”
Indeed, while most fitness centers say they’re hanging on, many have shut their doors permanently. The most recent capacity rollback in Massachusetts, to 25%, isn’t helping matters for an industry whose leaders have consistently maintained they’re not the problem when it comes to spreading COVID-19.
“These setbacks are crushing,” said Frank Nash, president of Massachusetts Independent Fitness Operators, noting that the industry’s rigid safety measures have resulted in a less than .000034% positivity rate in more than 1.3 million check-ins. “Our industry has collectively spent hundreds of thousands of dollars outfitting studios with ventilation equipment, social-distancing measures, employing robust cleaning procedures, and instituting contact tracing, and it’s working.”
Jessye Deane agreed. “The data shows gyms are not breeding grounds for transmission, and we’ve certainly seen that,” she said, adding that industry stresses go beyond government mandates; some people simply don’t want to return yet, while others, due to economic strain, have had to cut certain things out of their household budgets, fitness memberships among them.
Yet, many gyms and fitness centers are taking lessons from the pandemic and plan to expand upon innovations introduced this year, such as virtual classes.
“We thought COVID-19 was a catastrophic event for our industry, but — although challenging — it has turned into a transformative event,” said Kevin Mannion, vice president of Marketing at Glofox, a consulting firm for the international fitness industry. “Less than a week after most countries went into lockdown, we noticed that gyms everywhere were organically starting to run online classes through Zoom, Facebook, YouTube, and Instagram. Some larger operators were able to offer classes free on their social-media channels, while at the same time developing a paid online service that could reach people the world over.”
For gyms that are moving forward with in-person activity, the safety measures are critical, Danny Deane said. At a time when Baker is rolling back indoor capacity limits and tightening safety mandates due to the recent viral spike, “we’ve had all this set in stone from the get-go, so we don’t have to all of a sudden introduce masks or reduce capacity. We’ve been on point the whole time.”
Added Jessye, “there’s no reason for us not to be as safe as possible. We have members who have compromised immune systems. We have members who have elderly parents. It’s really important to us that we’re protecting all our members — our F45 family, and all their families.
“This is hard,” she said, gesturing at a safely distanced group workout going on behind her. “It’s even harder with a mask. But people have adapted, and it’s been really impressive to see the way our members have been committed to us and stuck by us — because we would not be able to get through this without them.”
Not only has the business survived, but, as noted, it expanded. When the Deanes decided last year to open a second location in West Springfield, called F45 Training Riverdale, the pandemic was months away from anyone’s radar.
When COVID-19 did appear, “did we ever think about turning the other way?” Danny said. “No, absolutely not. It was full steam ahead, always.”
Jessye called it a “burn the boats” move. “We will always adapt, and we’re committed to the people we serve because we’ve seen how it changes lives,” she said. “Every worry has been worth it. We’re giving people years on their lives. We’re not here so people can have abs. Abs are great, don’t get me wrong, but we really want people to live longer and move better. So there was no way we were going to turn our back on that.”
Of course, the planned April opening on Riverdale Street wasn’t going to happen, but they did go ahead with a grand-opening event of sorts: a virtual workout fundraiser to support local healthcare heroes, with all proceeds donated to Baystate Health. The new facility opened its doors to members four months later, in August.
The fitness centers that survive 2020 will have to make their own decisions about how much programming to offer in-person and virtually going forward. As Mannion noted, “COVID-19 accelerated a trend of at-home workouts, and businesses have been forced to respond … The fitness businesses of the future realize they need to be adaptable and offer both in-person and virtual workouts in order to prevent shocks and to cater to the evolving needs of the consumer.”
Still, Jessye Deane said she’s looking to the days when they can once again pack in members at their two physical locations.
“This isn’t the business model we signed up for,” she said of the much-less-crowded studios these days. “I don’t think it’s the business model anyone signed up for. But we wouldn’t be operational at all if we weren’t positive we could offer a safe environment.”
However, they’re both optimistic about what will happen in 2021, as mandates fade and people realize they miss working out together.
“We have done a significant job growing through this, but there’s still a significant pool to tap into once the restrictions are lifted,” Danny said. “I’m really excited to see both facilities back at full capacity.”
Andy Yee was still slogging — his word, and he would use it more than a few times — through the holiday season when he talked with BusinessWest for this Outlook section. But he was already thinking about the next one and what it might be like.
And his thoughts were colored with optimism.
“I think there is going to be a lot of pent-up demand,” he said, referring to that day when the clouds eventually lift and people feel confident returning to restaurants and especially indoor dining. “People have been cooped up a long time. I know people who haven’t been out, and have barely left their houses, since March. When this is over, people are going to be ready to get out and go on the town.”
While he feels confident in that assessment, and even offered a timeline of sorts — projecting some improvement by spring as vaccines are rolled out, much more by summer, and perhaps something approximating normal by Q4, or certainly next holiday season — what he doesn’t know is how many restaurateurs currently doing business in the region be along for that ride, whenever it does come.
“People have been cooped up a long time. I know people who haven’t been out, and have barely left their houses, since March. When this is over, people are going to be ready to get out and go on the town.”
Indeed, several have already been forced to shut their doors, he said, and others will be challenged to survive what will likely be another several months of slogging, even with the promise of additional help coming in the form of support from the state.
“January and February are traditionally leaner months — people have that holiday hangover, although I’m not sure what that will be like this year,” he noted. “It’s going to be hard for some people to hang on. There will be some casualties; there will be more closures.”
There have been several already, due directly to COVID-19 or perhaps the pandemic accelerating the timeline for retirement, said Yee, adding quickly that the number of additional losses to the landscape will be determined by a number of factors, from how quickly and effectively vaccines reach the general population to the level of confidence people have with going back out again, even with a vaccine, to the overall experience level and savvy of the restaurateurs in question.
“This really will be survival of the fittest,” he told BusinessWest, adding that his definition of ‘fittest’ is those with the experience and will to maneuver through this whitewater. “There are some people who have been doing this a long time, and this is a tough business; these are the ones who will probably buckle down and adjust to leaner times.”
Summing up 2020 and speaking for everyone in his sector, Yee said it’s been a long, long, long haul.
Indeed it has, a nine-month stretch of restrictions that have varied in their severity, but have been generally punitive to restaurateurs, limiting how, where, and when they can serve diners. Some have fared reasonably well with takeout, outdoor dining, and reduced indoor seating, he noted, but none are doing anything approaching what they were doing a year ago, revenue-wise.
And many have decided they can’t continue to slug it out, he said, noting closures up and down the Pioneer Valley and also in the Berkshires. As bad as it’s been, it’s been far worse in major cities with much higher commercial lease rates, he told BusinessWest, adding that Boston has been devasted, and perhaps 35% of all the restaurants in New York will chose for good due to the pandemic.
Despite the devastation, the pandemic did provide some positive learning experiences, especially when it came to outdoor dining, something few restaurants had tried, but now were all but forced to undertake. It’s something that may become a permanent fixture.
“It has been a good learning experience for us,” he said, citing the Student Prince in Springfield as perhaps the best example from within the Bean Group of an establishment that invested heavily in outdoor dining and saw some success. “We are going to try to emulate that and duplicate that next year.”
Looking ahead, he does have confidence that the vaccines are cause for optimism, and also that, when this pandemic is over, people will go back to their old habits of dining out — a question that many have been asking over the past several months as the discussion turns to how the pandemic may change societal norms for the long term.
“I agree with people who say we can see the finish line with COVID,” he told BusinessWest. “My feeling is that, by March, things will start to loosen up a little; by the summertime we’ll be back to some kind of new normal, whatever that means; and in the fourth quarter we’ll roar back with people going out and celebrating.”
Meanwhile, for the entrepreneurial — and he certainly falls into that category — there will be opportunities within this sector as the pandemic draws on and more establishments grow weary of the fight.
Yee said he’s already received a number of calls from individuals looking to sell, and he expects those calls to keep coming.
In that respect, 2021 might see many more changes to the landscape in this important sector.
In 2020, virtually every business was caught off guard by pandemic restrictions, which forced them to focus primarily on ways to stabilize and survive. For those that are back in operation, 2021 offers a chance to return to strategic growth — with the right tools.
“While businesses are not in control of whether or not there are secondary or terciary waves of infections, they can adopt a technology plan to support their new workplace environment and ensure productivity,” said Sean Hogan, president of Hogan Technology.
While business owners may have been surprised that their employees actually kept working while remote, they also want to ensure the technology employees are using works, too, he noted.
“In 2020, many businesses were using workarounds to solve communication breakdowns, but by now, there’s no reason for lapses in productivity,” he explained. “In fact, there are plenty of technology tools at our fingertips that businesses are utilizing successfully to keep team members engaged, productive, and efficient, regardless of the physical limitations imposed by the pandemic.”
“For this workplace-interaction strategy to be successful, employees must be backed with technology tools that support key functions.”
Successful small to mid-sized businesses are well aware of the benefits of strategic planning, Hogan noted, and even though the pandemic has posed unforeseen variables, businesses now have enough information to build workplace-interaction strategies that will support revenue growth in 2021. “Although businesses may consider themselves to be lucky to have survived, they need to expand their thinking in terms of setting new goals, instead of being caught in reaction mode once more.”
COVID-19 has forced companies to adapt, he went on, and at this point, every business owner essentially needs three distinct strategic plans for workplace interaction, and the most sophisticated businesses are creating contingency plans for all three potential environments.
The first is a fully remote workplace. Many organizations that were flexible enough to sustain a fully remote workforce have opted to keep everyone remote until further notice. Such a work environment presents its own unique set of challenges, Hogan said, but also new opportunities.
“For this workplace-interaction strategy to be successful, employees must be backed with technology tools that support key functions,” he explained. “For example, employees need to be empowered to remain in constant communication with other team members. Additionally, business owners need to provide them central access to data, with responsible levels of cybersecurity on the network.”
A remote team means more exposure to the network, he added, but it also brings more flexibility than ever before. A full transition to this model means the business won’t be interrupted by further restrictions or lockdowns.
The second model is a hybrid workplace, which majority of businesses believe will be the most likely scenario in 2021. Over the past year, companies have cycled through lockdowns, partial openings, and full reopenings depending on health-risk factors.
If a business owner wants to plan for a hybrid model going forward, he or she must consider ways to secure entrances, exits, and access points with tools like body-temperature scanners or touchless door-access controls. They can also benefit significantly tools like cloud voice with call forwarding, to make transitions seamless when staff migrate from the office to remote-work environments.
“In order for hybrid to work, remote technology needs to be secure and seamless,” Hogan said, “while workers and customers need to feel safe in person.”
The third model is an in-person workplace with social distancing. “For a minority of businesses, all activities are dependent on the physical location remaining open,” he noted. “For these businesses, owners need to consider how to adhere to and accommodate various safety measures to ensure compliance and worker safety.”
Regardless of which workplace environment is chosen, Hogan said, three critical aspects must be addressed to ensure success. The first is that employees need access to cloud voice to keep team members in constant communication and to ensure that office calls are properly routed to cell phones when team members are out of the office. Second, the team needs to be able to collaborate effectively.
Lastly, every workplace environment needs to be kept secure. For in-person strategies, this means secure access points, with tech like body-temperature scanners to ensure illnesses cannot spread. For remote workplaces, this means cybersecurity precautions have to be considered because, generally speaking, home networks pose much higher risks than office environments.
“We are currently meeting with customers, and, depending on what they want to achieve in 2021, we are devising custom technology plans to help them accomplish their strategic goals,” Hogan said. “This is what leaders do — they step up and lead in times of uncertainty. We are using our expertise to provide structure and clarity so that businesses can continue to thrive. Technology just happens to be our particular expertise, but this effort is about honoring our responsibility to the business community at large.”
Editor’s Note: Retail was among the sectors most impacted by the pandemic. Some businesses were forced to close, while all others had to make sweeping changes to how they did things to keep customers and employees safe. BusinessWest asked Charlie D’Amour, president of CEO of Big Y, to put 2020 in perspective and look ahead to what might come next.
BusinessWest: 2020 was certainly a tumultuous year for retail — and business in general. No one has a crystal ball, but what do you project for the year ahead, in terms of the economy and Big Y?
D’Amour: 2020 has certainly been fraught with challenges. Keeping our employees and customers safe while providing essential services has been foremost in our efforts. One of the biggest challenges has been supply chain, and that has been compounded in a number of ways.
First, panic buying ensued, and safety stock that is usually kept in reserve evaporated overnight. Many manufacturers and food suppliers facing their own COVID challenges, from staffing to supply, have not been able to keep up. Distribution centers have also felt these impacts, along with transportation, etc. Going forward, I do not expect that these areas will see a complete return to normal operation until late into 2021 or even into 2022. The recent uptick in COVID cases has put a lot of pressure on transportation and distribution. I anticipate that once we get through the holidays and the winter months, things will slowly improve.
Staffing continues to be an area of focus for us, and we are actively hiring. Currently, we have more than 1,000 open positions. We’ve adapted our training protocols to keep everyone safe yet provide adequate training.
Though I’m optimistic about the economy starting to bounce back in 2021, it is clear that government help will be needed, especially for those who have lost their jobs and for businesses that are struggling. There may be some longer-term systemic changes to the economy that could continue to linger. From my conversations with other supermarket operators both in China and in Europe, it seems that people are still reluctant to venture into inside venues. This has had an ongoing impact on restaurants, gyms, movie theaters, travel and hospitality, etc. As the vaccine takes hold, I believe that this will improve and folks will begin to travel again, and ‘experiences’ will become foremost in returning to some normalcy.
“Staffing continues to be an area of focus for us, and we are actively hiring. Currently, we have more than 1,000 open positions.”
How and where people work, I think, will be forever changed. Even in our own offices, more and more folks are working remotely. We are communicating more with video and virtual meetings. We continue to adapt and adjust. And, though I think the supermarket will continue to be the primary way people get their food and groceries, the growth of online shopping is here to stay. In 2021, we are excited to be opening our first micro-fulfillment center, which was planned and begun before the pandemic hit but which we believe will have an ever-increasing role in the way people shop in the future.
BusinessWest: Big Y has been on a path of steady expansion over the past several years. Will this pattern continue in 2021, and how and where will this growth take place?
D’Amour: We have been pleased that, despite the pandemic, we’ve actually had an exciting year of growth. We have opened two new gas and convenience stores, a new supermarket, completed our new Fresh & Local Distribution Center, and remodeled over 16 supermarkets. We’ve accomplished a lot. We have two new supermarkets planned for next year, several new gas and convenience stores, and, as I mentioned, the opening of our online ordering and micro-fulfillment center in Chicopee.
BusinessWest: Over the course of the past several months, we have seen a number of changes when it comes to how work is done and where. How has Big Y responded to these shifts, and will some of them be permanent?
D’Amour: Obviously, in our supermarkets, distribution centers, gas and convenience stores, and at Table & Vine, a physical presence is required. We very quickly realized in our physical locations that we needed to keep our employees safe, and to that end, we jumped on making sure that the appropriate cleaning procedures were in place and that PPE was available. We were one of the first retailers to install plexiglass shields at our registers, among many many other things. We have made sure to accommodate not only our frontline workers, but everyone with flexible schedules, leaves of absence if required, and continuing to pay employees who had to quarantine or care for a loved one.
We have continued to provide our employees with ‘thank-you’ pay, first as an hourly bump and now through a monthly bonus which will continue into the first part of 2021. We have also provided a holiday bonus to all full-time, part-time, and casual employees to reward and thank them for rising to the challenges we have all faced with this pandemic.
In our offices, we have definitely moved from a company that favored in-person meetings and collaboration to embracing new technologies and remote working. Here, again, flexible schedules and accommodating employees with childcare issues, etc. has been our focus and will likely continue. One area that has been accelerated because of the virus has been our use of virtual meetings and video communications. As our geographic territory has spread, bringing our store folks to our Store Support Center has presented more and more of a challenge. As a result of the virus, we have been forced to explore more avenues to connect, which have, for the most part, been effective and well-received by our employees.
BusinessWest: As the leader of a major corporation, can you talk about the ways this pandemic has impacted your ability to plan long-term, or if it has?
D’Amour: The supermarket business is very dynamic, and, as such, we are always in a state of change and flux. We are also in a business where our customers give us almost instant feedback to what’s new and changing. Our leadership team gets together every year to focus on our strategies and how we are adapting and evolving as our customers are adapting and evolving. As such, we are maintaining our current course of action, and our long-term plans and strategic initiatives have not changed. Every year, there are minor course corrections and adjustments, but our overall direction is the same, and that has not changed because of the pandemic.
BusinessWest: Speaking of leadership, talk about your experiences leading a company through these most challenging of times.
D’Amour: For me, first and foremost was the importance of communication. Being present, being authentic, and regularly communicating with our employees, customers, and other stakeholders was especially important early on when things were changing rapidly and coming at us a mile a minute. While I couldn’t get out to our stores as frequently as I usually like to, being able to find other ways to connect with our stores was essential.
Our employees especially were appreciative that we were visible, even virtually, and that we were genuinely concerned. Though we did shut down our offices for all but the most essential employees, I tried to be in our offices as much as possible to show a physical presence and to connect with our leadership team and others that were in the building. I believe that all of these things helped to inspire confidence within our organization. We tried to push decisions down to the lowest level and trusted in our employees and our teams. We established a crisis management committee, now dubbed the pandemic response committee. As such, we were able to quickly and effectively respond to a very fast-paced and changing dynamic.
Another area that underscored a point of focus for us this past year was in regard to redoubling our efforts regarding diversity and inclusion in our company. While we have made progress over the years, it was clear that we needed to do more. To that end, we have refocused and engaged our efforts, developed a new employee-resource group called “Y You Belong,” and created a steering committee of senior leaders and outside advisors from the community. We also conducted a half-day seminar for our leadership team with the Healing Racism Institute of Pioneer Valley to better understand our role in healing racism in our company and our community.
Throughout this past year, the role of leadership was and continues to be an important linchpin in our ability to deal with the challenges of this pandemic.
‘More of the same.’
For the past several years now, that’s essentially what most economists have been saying when asked about what to expect next year.
And by ‘more of the same,’ they generally meant steady but decidedly unremarkable growth, which is what the nation, this state, and this region have been enjoying — and that’s the right word for it, because it certainly beats the alternative — for the past half-decade or so.
But over the past 18 to 24 months, ‘more of the same’ has come to mean some other things. These include speculation about a recession and even hard predictions that one is right around the proverbial corner; turmoil, especially in the form of a trade war with varying degrees of escalation; and a historically low unemployment rate that is a positive economic sign, obviously, but also a serious challenge to employers in every sector.
And as a new year and a new decade begins, we’re probably looking at … more of the same, as in all of the above, from the slow growth to the recession speculation to the employment challenges.
“Nationally, gross domestic product grows through a combination of an increase in the labor force and increased productivity, and both of those are really in a slump right now,” said Bob Nakosteen, a professor of Economics at Isenberg School of Management at UMass Amherst, while summing things up. “Productivity is in a long-running slump, and our labor force is growing much less quickly. So although there isn’t any obvious risk of a recession, there is an obvious risk of a real stagnation.”
Of course, 2020 is also a presidential election year, which adds yet another intriguing element to the equation, said Nakosteen, adding that, traditionally, election years, especially those featuring presidents seeking re-election, feature policies designed to provide an additional economic jolt or stimulus.
But this year, there’s really not much that can be done, he went on, adding that another tax cut is unlikely, and interest rates are already at near-historic lows, so they really can’t be lowered any further.
“Generally, those in power during election years try to pass legislation or encourage monetary policy that will trigger more growth,” he explained. “I don’t know how much room there is for that currently, especially with these big tax cuts that have ballooned the deficit, and especially with a split Legislature. They’ve completely hamstrung themselves in terms of fiscal policy — spending and taxes, and what can they do with monetary policy; interest rates are edging slowly back down, but there’s not much room to back down. And it’s completely obvious that interest rates just don’t have the effect that they used to on the economy.”
“There was a real consensus that there was real risk of a recession coming. But that discussion has abated, you’re not hearing those comments anymore. Now, there’s consensus that there’s nothing on the horizon that’s especially risky.”
As for the proverbial big picture, 2019 was supposed to the year the expansion, one of the longest in the country’s history, ended, at least in the minds of many economists, who have since amended their speculation and instead projected a recession for some time this year. And a good deal of this conjecture is focused on the dreaded yield curve, which has been a deadly accurate predictor of recession for decades now.
An inverted yield curve is the interest-rate environment in which long-term debt instruments have a lower yield than short-term debt instruments, and when such inversion happens, recession almost always follows; in fact, the yield curve has inverted before every U.S. recession since 1955.
This strikingly accurate track record has prompted many economists to say it’s not a question of if there will be slowdown and then recession, but when.
But Nakosteen said that, despite an inverted yield curve, talk of an imminent recession has diminished, largely because most of the other indicators are generally less forbidding.
“There was a real consensus that there was real risk of a recession coming,” he told BusinessWest, emphasizing ‘was.’ “But that discussion has abated; you’re not hearing those comments anymore. Now, there’s consensus that there’s nothing on the horizon that’s especially risky. There are negative things going on, especially the trade war, and there are parts of our economy that are not doing well, such as manufacturing and agriculture. But overall, there’s not much to indicate that we’re destined for a recession.”
That said, the risk of stagnation — defined as a prolonged period of slow economic growth, usually accompanied by high unemployment, as was seen in the early ’90s during the so-called ‘jobless recovery’ — is very real. And the ongoing struggle to find and retain talent will be the main reason why.
“Finally, the labor-force constraint, the fact that the labor force is growing very, very slowly, has become binding,” he explained. “We’ve been talking about this for years now — we knew it was coming, we just didn’t know when it would hit. And there’s a good chance that it finally has hit.
“Employers just can’t find workforce to fill jobs, and you can’t make more if you don’t have people to make more,” he went on, adding that this workforce crunch is impacting the Bay State perhaps even more than the country in general.
Indeed, Nakosteen believes that low unemployment — actually, what amounts to full employment — is likely the primary reason why the Commonwealth has been consistently lagging behind a national economy that is growing at a rate of maybe 2%.
“We have an industry mix of healthcare, high-tech, and education that should make us a fast-growing state, but we’re not; we’re growing more slowly,” he noted. “And I really think that’s because employers just can’t find workers.”
He said evidence of this can be found within statistics on commuting trends, with the Bay State drawing steadily larger numbers of workers from neighboring states, especially Rhode Island and New Hampshire.
“The downside of growth is always on the supply side, and I consider supply to be supply of labor, which is now confronting the state and especially Boston,” he said, adding that there are a number of factors, from the high cost of living to horrendous commutes, that are now limiting the workforce that can help companies in and around Boston grow.
High-speed rail linking east and west might provide some relief, he admitted, but that solution is likely years away if it happens at all.
As for the stock market, when asked to explain why the markets soared nearly 30% this year despite turmoil and talk of inverted yield curves and recession, he said simply, “I can’t.”
He did offer this, though. “I think you have to look at behavioral economics and behavioral finance rather than analytical economics and analytical finance to explain this. It’s a behavioral thing. [Yale economist] Robert Shiller noted that a narrative starts to dominate, and people start to believe it — everyone says the stock market’s great, and that’s kind of self-fulfilling.”
As for 2020, again, Nakosteen is predicting something he’s been forecasting for the better part of a decade now, even though the term hasn’t always meant exactly the same thing: more of the same.
George O’Brien can be reached at [email protected]
The cannabis industry is in full swing in Massachusetts, with about three dozen dispensaries currently selling products for recreational and medicinal use — about a third of them in Western Mass. — not to mention cultivators, product developers, and a host of other related enterprises.
With 17% of cannabis sales going back to the state as taxes, and communities collecting at least 3% more — usually higher — it’s easy to recognize the financial impact.
But Scott Foster says said it’s important to remember the jobs being generated.
“You can get good employment in this field. A shop might have 20-plus employees working there,” said Foster, a partner at Bulkley Richardson, the Springfield-based law firm that launched a specialty cannabis practice last year to provide guidance for individuals, companies, and municipalities entering this very young industry. “These aren’t small businesses in the sense of 200 or 300 employees, but it’s not just four or five people working, either. It’s a pretty steady base of employment.”
And it adds up, said Jeff Hayden, vice president of Business and Community Services at Holyoke Community College (HCC), which recently launched a Cannabis Education Center to provide needed training and resources for people who want to enter this burgeoning industry.
“In Holyoke, 13 companies have applied for 21 different licenses,” Hayden told BusinessWest. “At present, 50 to 75 people are employed in cannabis-related businesses in Holyoke, but the anticipation is, within a year or two, that will be in the range of 400 to 500 people. It’s potentially a significant occupational opportunity for people. And if Holyoke is looking at 400 to 500, what is Springfield looking at? What about Northampton, Easthampton, Chicopee?”
This career potential is what inspired HCC to partner with the Worcester-based Cannabis Community Care and Research Network (C3RN) on the Cannabis Education Center.
“In Holyoke, 13 companies have applied for 21 different licenses. At present, 50 to 75 people are employed in cannabis-related businesses in Holyoke, but the anticipation is, within a year or two, that will be in the range of 400 to 500 people.”
“At HCC, we focus on what kinds of job skills people need in order to get jobs, whether entry-level or skills to do their job better. The fact that there is so much potential in this new industry in Massachusetts piqued my interest.”
No economic outlook is complete without touching on the early expansion of the cannabis industry in Massachusetts — and its immense promise for further growth, especially as dozens more shops plan to open their doors in 2020. Whether they’ll be able to maintain the sector’s early momentum remains to be seen — but most analysts agree the potential is certainly there.
Foster recently came across an article that listed cannabis among the top four new legal practice areas, among heavyweights like cybersecurity.
“It’s interesting that cannabis has become a front-and-center legal issue across all the U.S., not just Massachusetts,” he said. “It’s becoming more recognized as a legitimate industry. Even though federal law hasn’t changed, it seems to be moving in that direction.”
Indeed, with Illinois joining the list this month, 11 states have now legalized recreational marijuana, and 19 others allow medicinal marijuana. With others set to follow this year, it’s not hard to imagine an eventual shift at the federal level, even if that doesn’t appear imminent.
As one step in that direction, the U.S. House of Representatives passed a bill in 2019 allowing banks to handle marijuana accounts; currently, most cannabis businesses are all-cash enterprises since they can’t use banks.
“Will banks ever start lending to the industry?” Foster asked. “I think yes, but most people in the industry think it probably won’t be in 2020. Maybe, but probably not. They’re expecting it to stall in the Senate, and Washington is occupied at the moment with lots of other stuff.”
For now, communities that have embraced this new world — like Holyoke, which is starting to fill its former mills along the canals with a mix of cannabis-related businesses — appreciate the additional tax revenue and retail traffic in town, but also, as Hayden notes, those jobs.
“Will cannabis provide thousands of jobs, like the state has predicted? Who knows, but 300, 400, 500 new jobs is significant,” he said. “More than 90% of the businesses in the Valley are small businesses — not by the definition of the Small Business Association, with 500 employees or fewer, but with 50 or fewer.”
Collectively, that’s a lot of positions to fill, especially as more of those small businesses come online.
“This is like any other business in the sense that they need people ready to work and have some skills to do the jobs they want to hire for,” Hayden said. “The more we can work as a community college on skills training that gets people ready for work, the better.”
In many cases, shops are hiring people who may face skill barriers to other types of employment; it’s a relatively even playing field in that, because the industry is so new, almost everyone needs training. HCC’s Cannabis Education Center is doing its part, both through courses and one-day programs like an upcoming workshop series on planning and starting a cannabis business, as well as getting into medical marijuana.
“Our goal is to get people into jobs, but in the context of a career,” Hayden said. “A job is a great thing, but if it’s just a 15- or 20-hour job, that’s not going to support you or your family for long. We want to get people on a career pathway through skills training.”
For example, he went on, “in cultivation, someone might come in trimming plants, working with growers, learning what the process is, and might become a cultivation technician, an assistant grower, even a master grower. There are definitely steps along the way to get not just a job, but a career in cannabis.”
Foster said he doesn’t have a crystal ball when it comes to the cannabis industry, but he does have his eye on some intriguing trends.
“We’re already seeing consolidation. Many of our clients are receiving unsolicited offers to buy them out. They’re not actively soliciting offers; people are contacting them. It’s mostly out-of-state money — and it’s not small money. That will be interesting to see, if the industry changes from being completely locally owned to being owned by out-of-state players, creating national cannabis businesses.”
Another murky area right now is the effectiveness of the state’s social-equity piece, which aims to provide priority access, training, and technical assistance to individuals and communities negatively affected by the drug war — a key target audience for HCC’s training efforts. “That’s another big unknown which may get some clarity in 2020,” Foster said.
What is clear is that the market, as it stands now, is humming along — and creating those jobs.
“All the folks I’m seeing are still trying to keep up with customer demand. At least from what I’m hearing, competition hasn’t slowed business. Will that change if New York and Connecticut were to legalize? Possibly,” he noted, citing casinos as a case study; there’s no doubt Foxwoods and Mohegan Sun have lost some business to their northern neighbor since the Bay State got into that business. “But for the moment, Massachusetts is the only game in town when it comes to cannabis.”
It’s a game with lofty goals and an uncertain — but undoubtedly promising — future.
“It’s a maturing industry,” Foster said. “So it’s going to have maturing-industry challenges.”
Joseph Bednar can be reached at [email protected]
There’s still a lot of confusion surrounding the cannabis industry.
Despite the fact that medical marijuana was legalized in Massachusetts in 2012, and recreational marijuana in 2016, the business community is juggling countless regulations and laws, whether looking to get into the cannabis industry themselves or just dealing with this new economy in general.
On Tuesday, Jan. 28, many of these questions will be answered.
From 12:30 to 5 p.m. at the Springfield Sheraton, the Springfield Regional Chamber will host “The Buzz About Cannabis: Marijuana in the Marketplace and the Workplace,” a collection of business, legal, and medical marijuana professionals, distributors, and entrepreneurs, as well as state cannabis officials, who will give attendees all the information they need to know about cannabis.
Nancy Creed describes retail cannabis sales as just one spur on the wheel of an industry that has pushed its way to the forefront over the last several years, and the president of the Springfield Regional Chamber is making plans to prepare business folks for this rising economic driver.
“The cannabis industry is clearly a, no pun intended, budding industry,” Creed said. “When you look at the revenue associated with it and the taxes, it really is the next economic engine of its time.”
It was a meeting with Cannabis Control Commissioner Kay Doyle that inspired Creed to begin researching this topic.
“This, to me, was kind of a no-brainer,” Creed said. “We need to make sure that we are at the front of the industry and we are helping businesses either get into the industry or, on the flip side, deal with this new economy.”
The conference itself features an opening keynote from Doyle, breakout sessions focused on topics like “Business Structure and Banking in the Cannabis Industry” and “Cannabis in the Workplace,” and a closing keynote by Beth Waterfall, founder of Elevate Northeast, titled “Cannabis: What’s Next?”
Chamber leaders thought carefully about what their goals were for the cannabis conference — the first time a chamber in the region has hosted an event of its kind.
Creed said this first conference will take a general focus, building a solid foundation on the basics of the industry — and leaving room for a potential focus on hemp, CBD, or other spokes on the wheel, as she calls them, next year.
The main goal of the conference is to educate attendees on what cannabis is, what they need to know when getting into the industry, and how it affects the economy.
“It’s a place for business people to come and get educated,” she noted. “I think it’s also an opportunity to recognize the growth of the cannabis industry and how that will positively impact our economy and be able to shine a light on it, so people see it as the future of our region.”
In order to accomplish this, she knew they needed to bring in several experts and professionals from different parts of the industry — including someone from the commission, Doyle, to talk about the landscape of the industry and the regulations entrepreneurs need to grapple with.
Next, Creed wanted to ensure the conference featured someone who could help businesses figure out what they needed to know about not only getting into the industry, but also what type of business they would be classified as.
Perhaps most importantly, they needed an expert in the banking industry. Because marijuana is still federally illegal, almost no bank will deal with marijuana businesses — although that could eventually change. Tina Sbrega, CEO of GFA Credit Union, will accompany Scott Foster, partner at Bulkley Richardson, to talk about banking and business structure.
“I want to make sure that businesses understand that, so they are successful when they start out, and aren’t just starting out not thinking through all of the things you need to think through to be a successful business,” Creed said.
She added that this conference is not just for people looking to get into the business, but also for people who just need to understand how it works.
Joanne Berwald, vice president of HR at Mestek; Erica Flores, attorney at Skoler Abbott; and Pam Thornton, director of Strategic HR Services at the Employers Assoc. of the NorthEast, will lead a breakout session about recruitment, retention, and employment law.
“There are a lot of complex laws that come into play,” Creed said. “We wanted to make sure, for the rest of the business world that isn’t interested in getting into the cannabis industry, that we had information about what is it like for the other folks working and hiring in a cannabis world.”
For the final breakout session, Creed explained that she wanted to bring in a panel comprised of a marijuana grower, a user, and a distributor, but did not have the internal resources to find people who fit the description. That’s when she reached out to Michael Kusek, cannabis journalist and publisher of Different Leaf magazine. He crafted a team — Noni Goldman, Leslie Laurie, Ezra Parzybok, Karima Rizk, and Payton Shubrick — to talk about their individual niches and how they navigate the cannabis industry in different ways.
Overall, Creed hopes to help as many people as possible navigate a still new and quickly growing industry.
Because it is the first event of its kind, she is unsure just how many people will register, but believes that, once people learn more about the event, they will see the benefits of attending.
“I really don’t know how much the business community is going to understand the conference and embrace the conference,” she said. “Our hope is that they will, but it’s new.”
What she does know is that the cannabis industry is evolving at a rapid rate, and keeping up with the high demand is a must for the chamber.
“It’s a place for business people to come and get educated,” she said. “I think it’s also an opportunity to recognize the growth of the cannabis industry and how that will positively impact our economy, and be able to shine a light on it so people see it as the future of our region — because it’s here.”
Kayla Ebner can be reached at [email protected]
Webster defines that word in several ways, including this one: ‘strength or force gained by motion or through development of events.’
Over the past few years, and especially in 2018, there was a good deal of motion and quite a few singular and ongoing events that have made this region stronger and created quite a bit of momentum, said Rick Sullivan, president and CEO of the Economic Development Council of Western Mass. (EDC).
And this movement has been across a number of sectors and most all area communities, not just Springfield, although that’s where it is easily most visible and palpable.
“We’re seeing a great deal of momentum across the region,” he said. “And it’s across the board — manufacturing, healthcare, higher ed, tourism.”
Elaborating, he cited just a few examples of this momentum, starting with the most obvious:
• MGM Springfield opened its doors on Aug. 24, but it began to impact the regional economy long before that, through the filling of more than 2,000 jobs, proving a boost for area hotels (see related story, page 27), inspiring movement toward additional market-rate housing projects in and around the downtown, and even awarding life-changing vendor contracts with several area businesses, from a bus company in Chicopee to a dry cleaner in the Forest Park section of Springfield.
• Eds and meds. The region’s two main economic drivers, education and healthcare, are thriving and becoming ever-larger contributors to economic development in the region, he said, noting, on the education side, that the region’s community colleges continue to find ways to step up and help meet workforce needs and provide specific skills needed in the workplace.
• The cannabis industry. This intriguing new era in Massachusetts history is impacting everything from the commercial real-estate market to traffic in downtown Northampton, where a dispensary became just one of two sites in Massachusetts selling marijuana for recreational use.
• A host of other forces are at play in downtown Springfield, ranging from new tenants on Bridge Street to the revitalization of Stearns Square; from a new Starbucks (actually, two of them; there’s also one at MGM) to soaring interest in new housing projects; from new train service coming into Union Station to the opening (soon) of the Innovation Center.
“When I’m out downtown, I generally have to wait in line to get lunch — and I’m happy to do it. That’s a good thing; it means the economy is doing well.”
• Progress continues with developing new sources of jobs in fields such as cybersecurity (Bay Path University and UMass Amherst are becoming regional and even national leaders in that field) and water technology — a $3.9 million demonstration center is set to open at UMass Amherst within the next two years.
• The construction industry, usually a bellwether for the economy, remains sound, with many companies reporting they have ample jobs on the books for the coming. “The phones have been ringing — and that’s always a good sign,” said Tim Pelletier, president of Ludlow-based Houle Construction.
Sullivan has another, far more personal measure of progress and momentum. “When I’m out downtown, I generally have to wait in line to get lunch — and I’m happy to do it. That’s a good thing; it means the economy is doing well,” he told BusinessWest, noting that there is considerably more foot traffic in the central business district, and many businesses are benefiting from this.
Yes, there are some challenges to contend with, and even a few possible storm clouds on the horizon; workforce issues are impacting most all sectors, and they could stifle the growth of some companies (see related story, page 22), and most economic analysts are predicting a slowdown (but not a recession) in 2019.
But for the most part, there is momentum and continued cause for optimism, even as question marks grow in number.
“Several sectors are doing very well — education, construction, multi-family housing, green energy, and others,” said Tom Senecal, president and CEO of Holyoke-based PeoplesBank, who spoke from the perspective of his own bank, which saw roughly 8% growth this calendar year, and what he’s seen and heard anecdotally.
Senecal said he’s seen a noticeable slowing of residential real-estate business over the past month to six weeks, after a strong start to the year — a development probably linked to rising interest rates — but overall, as he said, the local economy is chugging along nicely.
Keith Nesbitt, vice president and Commercial Banking Team leader at Community Bank’s Springfield location, agreed.
“I would describe what’s happening in Western Mass. as transition against a backdrop of real stability,” he said, using ‘transition’ to mean many things, from the beginning of the casino era to the passing of many businesses from one generation to the next. “There’s a lot of certainty around those well-established, mature businesses that we have in this region. And those businesses that haven’t been around as long but are growing … they’re pretty solid, and they’re pretty confident.”
Both Senecal and Nesbitt put that word ‘stable’ to use early and quite often as they talked about the local economy and what they’re witnessing.
And in most all respects, ‘stable’ — and ‘steady’ and ‘predictable,’ words that were also used — is good, Senecal noted, adding, as many others have over the years while analyzing the local market, that while this region hasn’t soared like some others, including Boston, where the commercial and residential markets are white hot, that means it isn’t susceptible to the dramatic falls that those cities and regions also see.
“Fortunately, and sometimes unfortunately, we don’t see the highs and lows economically; we’re sheltered a little bit,” he explained. “We have a very stable economy when it comes to healthcare, education, and our nonprofit sector — those are three stable industries that keep Western Mass. insulated from the highs and lows.
“I would equate ‘stable’ to ‘predictable,’” he went on. “And for a small business, predictability is a huge part of job growth and just economic growth in general for small business.”
His own business moved forward with several initiatives in 2018, including the acquisition of First National Bank of Suffield and the start of work to convert the former Yankee Pedlar restaurant into a new and intriguing branch. And he said many businesses had the requisite confidence to move ahead with their own growth initiatives, be it through workforce expansion, new facilities, or new business lines.
And he expects this stability to continue into 2019, although possible, if not probable, additional interest-rate hikes (the Fed was set to vote on one as this issue went to press) could bring uncertainty, and therefore greater cautiousness, to the fore.
“Anything that stays stable and is predictable is good for economic development, and anything that is unpredictable is a slowdown in economic development,” he said, adding that there is uncertainty regarding everything from interest rates to the trade war.
“I would equate ‘stable’ to ‘predictable.’ And for a small business, predictability is a huge part of job growth and just economic growth in general for small business.”
Like Sullivan, though, Senecal said MGM has provided a boost to the local economy in several ways — through the jobs it has created and its contribution to greater vibrancy downtown. And it is just one of the many factors contributing to the improved picture locally.
Others include the steady performance of education and healthcare and movement toward creating new sources of jobs.
Sullivan cited the work being done at Bay Path and UMass Amherst in cybersecurity — Bay Path recently entered into a partnership with Google, for example — and creation of the water-technology demonstration center as developments to watch.
“Those are jobs of the future, and there’s real excitement about what can develop,” he noted. “There are now some partnerships with large companies, like Google, and tremendous promise.”
Elaborating, he said that, across the region, colleges and universities are playing key roles in providing individuals with the hard and soft skills to thrive in today’s technology-driven economy, and thus, they’re playing a major role in economic development.
Examples abound, from Holyoke Community College’s new culinary-arts facility, which is helping to meet the needs of individual employers like MGM and a growing field in general, to Greenfield Community College and its efforts to train workers for the manufacturing sector, to Holyoke Community College and Springfield Technical Community College working together with MGM to create the Casino Career Training Institute.
“What it comes down to is that economic development for this region, and across the country, for that matter, is all about workforce — developing, finding, and retaining talent,” he said. “And the good news for us is that we have a very robust higher-ed presence — four-year public and private, and the community colleges as well — and the future is bright.”
Returning to the subject of downtown Springfield, he said that, in addition to that waiting in line for lunch, he’s seen other signs of vibrancy and, most importantly, interest on the part of developers in investing in that area.
“We’ve had a number of investors express interest in possible hotels and potential housing, both market-rate and workforce-housing projects,” he noted. “And those are discussions that may not have beem happening in … pick a time period — five years ago, 10 years ago, 20 years ago. It’s been a while since we’ve seen this.”
Nesbitt concurred, and noted that, while the multi-family housing segment of the commercial real-estate market is heating up — it has been for some time — there is movement across the spectrum, much of it fueled not only by MGM, but by a promising outlook for the future.
“Long-time property owners are realizing that now is the time to realize value, so they’re putting those properties on the market,” he said of multi-family units but also other holdings. “And those that are speculating on the future are generally thinking that now is the time to get into the market based on some of those other transitions that are going on. So the commercial real-estate market has been very consistent.”
“Consistent.’ ‘Stable.’ ‘Predictable.’ ‘Steady.’
Those are the words you hear most often in discussion of the local economy today and what is likely to happen in 2019.
There is a good amount of uncertainty in the air regarding everything from trade balances (or imbalances, as the case may be) to interest rates to the political scene in Washington.
But locally, stability and momentum seem to be the prevailing forces.
And they should enable the region to build on that momentum in the year ahead.
George O’Brien can be reached at [email protected]
What’s that old saying about death and taxes? It notes that they are the only real certainties in this world.
Actually, there’s another one: when it comes to the economy and making plans for the future, business owners and consumers certainly don’t like uncertainty.
Unfortunately, there is no shortage of that commodity at the moment, and the volume may only be growing. Indeed, there is political uncertainty — lots and lots of that — and uncertainty about the housing market. And the trade war with China. And with the workforce — the nation as a whole is at or near full employment, and business owners and managers across all sectors are asking out loud where the workers are going to come from (see related story, page 22). There’s uncertainty about the stock market, except that there’s considerable amounts of turbulence (we’re certain about that). And about interest rates and what will happen with them. And about whether the tax cuts introduced a year ago will continue to be a source of economic fuel (although the consensus seems to be that they won’t be).
Add it all up, and, as we said, there is a lot of uncertainty out there.
Certainly enough to likely cause a slowdown in the economy, but not a recession in the technical sense of that word, said Bob Nakosteen, a professor of Economics at the Isenberg School of Management at UMass Amherst and a frequent voice in BusinessWest’s annual Economic Outlook.
“When there’s uncertainty, businesses tend to pull in their horns, and consumers, by and large, do the same; they wait until there’s more certainty about what they can expect,” said Nakosteen, adding that, instead of a growth rate between 3.5% and 4%, which is what the country and this region saw in 2018, both are probably looking at 2% to 2.5% for next year.
Again, that’s not a recession, but it is a slowdown.
Like Nakosteen, Karl Petrick, an associate professor of Economics in the College of Arts and Sciences at Western New England University, is predicting that this is what the nation, this state, and this region will see.
Note the future tense.
“When there’s uncertainty, businesses tend to pull in their horns, and consumers, by and large, do the same; they wait until there’s more certainty about what they can expect.”
“I really don’t think the slowdown has started yet. But I think it’s coming,” he said, adding quickly that there are signs things are cooling off somewhat.
He pointed to robust sales in the days and weeks following Thanksgiving as solid evidence that many Americans still have the confidence to spend. But a few months of severe turbulence on Wall Street, large amounts of political uncertainty, and a host of other factors will eventually erode some of that confidence, he added.
“We’re starting to see people become more cautious,” he noted. “They start to see what’s going on, they start to look at their 401(k) statements — even if they’re fairly young, they start to look at such things — and we’re going to start to see people be more cautious. And if and when that happens, companies start to become more cautious, too, because they start to see their markets dry up a bit.
“The momentum will carry into 2019, but unless we see some more certainty, that momentum will peter out into 2020,” he told BusinessWest. “The earliest a recession could happen is 2020, but there’s a lot of time between now and then to avoid that.”
For this issue and its Economic Outlook focus, BusinessWest talked with Nakosteen and Petrick about the proverbial big picture.
As he talked about the state of the economy and what is likely to happen in 2019, Nakosteen acknowledged that some economists are, in fact, using the dreaded ‘R’ word as they look into their crystal balls.
He’s not ready to join them — yet. But he said there are more than enough signs that a slowdown is coming — if it hasn’t arrived already.
Starting with the housing market.
“The housing market is clearly slowing down, and it is so important to so many segments of the economy and so many parts of the country,” he told BusinessWest. “It’s not well-recognized, but we’ve had a period since 2012 of one of the most sustained increases in housing prices in our history; in fact, it comes close to matching what happened during the price bubble [of 2007-08]. The difference is that there isn’t this froth around it, and there isn’t this huge toxic-credit buildup.
“I don’t see this as a danger to the economy in terms of it exploding and dragging us into a recession,” he went on. “But I do see a slowdown affecting the overall economy and the economy of this state.”
Beyond the housing market, there are other signs, or indicators, of whitewater, including the trade war, if it can be called that, with China, Canada, and other countries.
Nakosteen said this region doesn’t produce many, if any, of the products directly affected by rising tariffs, but this area is affected indirectly because its precision manufacturers provide links in the supply chains that are impacted by the tariffs.
Petrick agreed. “We need to find some stability when it comes to our trade relationships,” he said. “Trade wars are not good for anybody.”
There’s also diminishing impact from the tax cuts implemented a year ago — “those cuts gave the economy a sugar high, but almost everyone thinks that effect will dissipate in 2019,” said Nakosteen — as well as all that turmoil on Wall Street.
Indeed, as of this writing, the S&P was in negative country after being up more than 8% for the year a few months ago — and there wasn’t much time left in 2018 to get onto the plus side.
Then there’s the workforce issue. While things are bad in this region in terms of employers finding good help (see related story, page 22), they’re much worse in other markets, including Boston, said Nakosteen.
“One of the things going on in this state is that we’re running out of workers, especially in the eastern part of the state,” he noted. “For the past 18 months, we’ve hired a lot of people, and no one’s quite sure where they’ve come from. And at some point, the labor-force constraint is going to be binding to our economy, and that’s going to slow things down; it’s going to be like squeezing a rock.”
But the biggest issue heading into 2019 is the one that’s fueling some of the problems listed above — growing uncertainty about the economy, the markets, jobs (GM announced plant closings and significant layoffs, for example), trade, and more.
This uncertainty generally leads to greater cautiousness, which manifests itself in several ways, said those we spoke with, starting with the obvious, such as slowdowns in home sales and other significant purchases.
Some signs are perhaps less obvious, such as the roller-coaster ride on Wall Street, said Petrick, adding that, when there is uncertainty, or no clear trends, the market becomes far more “news-driven,” as he called it, which manifests itself in wild swings, sometimes over the course of just a few hours, as news breaks.
“These big swings happen with the smallest provocation because people want to react to something,” he explained. “And whatever comes up on the news wire is what they’re reacting to.”
Looking at the proverbial big picture, Petrick said political uncertainty and economic uncertainty pretty much go hand-in-hand.
“That’s how we’re wired,” he said, adding that about the only thing that appears certain for 2019 is ongoing uncertainty.
“Business decisions, as well as household decisions, regarding big-expense items such as cars, appliances, and houses, depend in large part — not totally, but in large part — on expectations of the future: ‘am I going to lose my job?’ ‘Am I going to get a raise?’ ‘Is my product going to keep selling?’ ‘Are my suppliers going to be disrupted?’”
Like he said, in many cases, they will hold off on such purchases until there is more uncertainty.
And as things are looking now, it might be a pretty long wait.
George O’Brien can be reached at [email protected]
Meredith Wise says it’s probably not a recent addition to the business lexicon. But it was certainly new to her when she heard it the first time.
‘Ghosting’ is the phrase in question, and it refers to a situation where an individual applies for a job, is given an offer, accepts the offer, passes a drug test, is given a starting date, accepts the starting date, and when it comes … he or she just doesn’t show up for work.
“That individual doesn’t feel the need or have the courtesy to call the company and say, ‘I’m not going to take the job; I have another opportunity that’s going to be better for me’; they just don’t show up,” said Wise, executive director of the Employers Assoc. of the NorthEast (EANE), adding that, when she first heard the term from one of her members, she thought it was an aberration and certainly not a common occurrence.
Suffice it to say that she has been corrected on that viewpoint at several of EANE’s monthly member roundtables over the past year or so.
“When I first brought it up I said, ‘oh, this can’t really be happening — this isn’t something people would do,’” she recalled, flashing back several months. “I expected pushback and people saying, ‘no, that doesn’t happen to me.’ Instead, there was agreement around the table that it is happening — a lot.”
Wise said this pattern of ghosting, which is happening in many sectors and at all rungs of the ladder — from entry-level service jobs to senior engineering positions — might be a form of role reversal when it comes to the employment process, and a very clear sign that this is an employees’ market.
“When employers get applicants, there are many times when they don’t communicate back to people; they don’t say, ‘thanks for applying, but we don’t have anything at this time,’” she explained. “As a candidate, you feel your résumé or your application has gone into a black hole. And it almost feels to me like the candidates are turning the tables on employers and saying, ‘I’m not going to get back in touch with you, and I’m just going to do what’s best for me.’”
Bryan Picard, president of Springfield-based Summit Careers Inc., agrees with Wise’s take and can certainly verify the overall tightness of the market, at least through most of this year — and the ghosting phenomenon.
To capture it, he cited the example of a company in Northampton trying to fill a basic warehouse position, with the emphasis on trying.
“We had to fill that same position six or seven times,” he explained, “because the first five people just didn’t show up for the job, and this is a position paying $5 an hour more than the average. There were so many opportunities for strong candidates to go somewhere else, they just didn’t show up.”
Finally, Summit decided to send several people to this client at the same time with instructions to pick the one it liked most — on the theory that at least one of them would show. And a few did, actually.
Meanwhile, the firm has strongly advised its clients to condense the overall hiring process — especially the period between when one is offered a job and when one starts — to hopefully keep would-be employees from becoming ghosts.
“The reality is that minimum wage went to $12 an hour four months ago. There are still companies paying $11 an hour, but the vast majority of them are paying more than what the minimum wage is because they know it’s required.”
All this is part of life in the current employment market, one that is expected to continue into 2019, in most ways and in most sectors — although Picard is seeing some signs of a slowdown in manufacturing (more on that later), and economists, in general, are projecting that the pace of expansion will slow in the year ahead.
“Overall unemployment numbers should stay steady into the first quarter of 2019, said Larry Martin, director of Business Services and Market Research for the MassHire Hampden County Workforce Board, noting that unemployment was quite low — 4% to 5% — across the region this year. “We see things being steady in the first quarter without any major shifts or changes — we should remain fairly flat.”
Wise agreed, and said flat means more challenging times for employers. Indeed, for now and the foreseeable future, the laws of supply and demand clearly favor employees, she said, with business owners adjusting, out of necessity, with slightly higher wages and better benefits.
“Employers are now sometimes having to buy talent,” she explained. “The applicant pool just isn’t what it was, and to lure people away from their current employer, they may need to be paying a few dollars per hour more to get people to come.”
For this issue and its Economic Outlook 2019, BusinessWest takes an in-depth look at the employment market and what employers can expect in 2019. For the most part, it is more of the same.
Picard told BusinessWest that, although the minimum-wage hike to $12 an hour — the first in a series of incremental increases contained in the so-called ‘grand bargain’ legislation — doesn’t become law until Jan. 1, practically speaking, it went into effect long ago.
“The reality is that minimum wage went to $12 an hour four months ago,” he said. “There are still companies paying $11 an hour, but the vast majority of them are paying more than what the minimum wage is because they know it’s required.”
And this upward movement on wages, at least on the lower end, is yet another sign of how tight the labor situation is and how this is an employees’ market. And while there is speculation on just how long it will stay that way, employers for the moment face a number of challenges, and are responding accordingly, said Wise, who said it starts with the applicant pool, or what passes for one, in many cases.
“Employers are finding real problems with the applicants — they’re just not getting the volume of applicants they used to get, and the people they are getting just don’t have, in many cases, the qualifications and the skills that they’re looking for.”
But the problems certainly don’t end there, Wise said, adding that a huge issue for employers is finding applicants that can pass a drug test. The percentage of applicants that can’t would surprise some, but certainly not anyone working in human resources today, she told BusinessWest.
And if they do have the skills and they can pass a drug test … that generally means that they have many opportunities to choose from and are a solid candidate to become a ghost.
“When we would get candidates of a higher caliber that we would send on a temp-to-perm type of position, the challenge we saw was that they didn’t just have one job offer, they had five job offers,” said Picard. “And the companies that were really struggling starting bringing up their pay scales.”
Indeed, in response to all this, wages are increasing, but the pace of increase is still sluggish, as the chart on page 24 shows.
“I think wages are slightly higher, but wage growth is, overall, very slow,” said Wise, adding that there are several reasons for this, including the fact that retiring Baby Boomers are being replaced by less-experienced, lower-paid employees. Also, pay increases at the top end of wage earners are smaller increases for lower-wage earners, resulting in a lower overall average increase.
Beyond ‘paying for talent,’ to whatever extent they are doing so, employers are also responding to the tight market by altering their hiring policies and practices in some ways to keep good talent from going elsewhere and thus becoming ghosts.
“These trends are forcing employers to go back to what might be considered best practices,” Wise explained, noting, as one example, that after having an applicant accept an offer, the company in question is working harder to stay in touch with that applicant until they arrive for work, asking if they have any questions or just staying in communication with them.
Meanwhile, others are sending soon-to-be employees what she called “swag bags” or “swag items” such as a jacket with the company’s logo on it or a mousepad or other items as a gesture designed to show that the individual is valued.
Meanwhile, and as noted earlier, companies are being advised to condense the hiring process, especially the period between when one is hired and when that individual is slated to start work.
“If there is someone good that you want to put in a position, you put them in right away,” said Picard, adding that he went to far as to encourage clients to skip or accelerate the interview the process, hire promising candidates, and essentially interview them after they were hired.
If all this seems a world apart from what was happening only a few years ago, it is, said Picard, adding that conversations he had with colleagues in this field from across the country revealed that this past year, and especially this past summer, was among the most difficult times anyone could remember when it came to securing qualified help for clients.
“They said it was the worst summer they’d seen in … forever, or at least 50 or 60 years, and that’s understandable with unemployment being at an all-time low,” he said, adding that, while things were not that bad in this market, employers in many markets struggled to find and keep talent.
That’s certainly been the case with precision manufacturing, one of the specific sectors that Summit specializes in.
“Every single company out there right now is looking for CNC machinists,” he told BusinessWest. “Many have more work than they can get out the doors, or more sales orders than they have people to fill them.”
“Employers are finding real problems with the applicants — they’re just not getting the volume of applicants they used to get, and the people they are getting just don’t have, in many cases, the qualifications and the skills that they’re looking for.”
The $64,000 question heading into the new year concerns how long things will stay this way.
As noted earlier, Picard said he has witnessed a slowdown when it comes to some segments of the manufacturing sector, and somewhat easier going when it comes to finding employees for those clients.
“I think things are changing; a lot of times, manufacturing is a leading indicator for what’s going to happen with the economy,” he explained. “The summer was very tight, but now, probably over the past month and a half, things were not as tight. We’re seeing very qualified, strong candidates that are coming through that four months ago … well, we would be begging for someone with half the talent that we’re seeing right now.”
Elaborating, he said he projects that 2019 will be “an interesting year” for his company and a less-busy one for some of his clients, especially those in manufacturing, and he comes to that conclusion mostly by comparing numbers from the fourth quarter this year compared to last year.
“In the fall of 2017, we were very busy, and I brought on someone to help in November,” he recalled. “I said, ‘this is our slowest time of the year, it’s a great time to come on, we’ll be able to do some coaching, things will be nice and easy.’ About January, she said, ‘when is it going to slow down again?’ because it never did.”
This year, it has, and Picard says it may be a sign of what’s to come in the year ahead.
Martin, meanwhile, is projecting essentially the status quo when it comes to the employment market — in manufacturing and most other sectors.
“For manufacturers, it’s going to be steady going, and they are going to need skilled help because of the individuals who are retiring,” he explained. “That’s not going to slow down whatsoever.”
He noted that the region essentially absorbed the arrival of MGM Springfield and its hiring of more than 2,000 people without major disruption to most sectors of the economy, even the broad culinary field, primarily because of proactive steps in anticipation of that seismic event.
“There was a lot of foresight and forecasting done in advance of MGM,” he explained. “There were a lot of new partnerships established, especially with the community colleges to help meet specific needs, such as those in culinary.
“Several sectors were impacted — culinary, retail, financial services, and others — but enough forecasting was done ahead of time to prepare for MGM’s arrival,” he went on. “And a lot of companies planned ahead and internally provided financial encouragement or other types of encouragement for existing staff.”
The challenge moving forward will be with the inevitable churn that the casino complex will experience, he went on, adding that while MGM, working with those partners he mentioned, had enough employees to get the doors open, it must now deal with ongoing turnover and the task of keeping workers in the pipeline.
As he talked about the job market and what may come in 2019, Picard concurred with Wise when she talked about many workers not exactly being courteous when it comes to taking better offers and instead becoming ghosts.
Likewise, he said all this amounts to a kind of payback, if you will, for how employers act when the laws of supply and demand are tilted in their favor.
He warned, however, that too much moving around and a great many lines on a résumé may come back to … well, haunt those ghosts when things change and the market is not so tight.
For now, though, it’s an employees’ market and will be for the foreseeable future, and employers looking to land good talent quickly and easily likely have a ghost of a chance of doing so.
George O’Brien can be reached at [email protected]
They call it the ‘need period.’
There are probably other names for it, but that’s how those at the Greater Springfield Convention & Visitors Bureau (GSCVB) refer to the post-holiday winter stretch in this region.
And that phrase pretty much sums it up. Area tourist attractions and hospitality-related businesses are indeed needy at that time — far more than at any other season in this region. Traditionally, it’s a time to hold on and, if you’re a ski-related business, hope for snow or enough cold weather to make some.
But as the calendar prepares to change over to 2019 — and, yes, the needy season for many tourism-related businesses in the 413 — there is hope and optimism, at least much more than is the norm.
This needy season, MGM Springfield will be open, and five months into its work to refine and continuously improve its mix of products and services. And there will also be the American Hockey League (AHL) All-Star Game, coming to Springfield for the first time in a long time on Jan. 28 (actually, there is a whole weekend’s worth of activities). There will be a revamped Basketball Hall of Fame, a few new hotels, and some targeted marketing on the part of the GSCVB to let everyone know about everything going on in this area.
“The last half of 2018 has been great, and we’re very optimistic — our outlook for tourism is really positive for 2019. Certainly, MGM is a factor — it’s a huge factor, it’s a game changer — but it’s just part of the story.”
So maybe the need period won’t be quite as needy as it has been.
And if the outlook for the traditionally slow winter months is brighter, the same — and more — can be said for the year ahead, said Mary Kay Wydra, president of the Greater Springfield Convention & Visitors Bureau, noting that expectations, based in large part on the last few quarters of 2018 and especially the results after MGM opened on Aug. 24, are quite high for the year ahead.
“The last half of 2018 has been great, and we’re very optimistic — our outlook for tourism is really positive for 2019,” she told BusinessWest. “Certainly, MGM is a factor — it’s a huge factor, it’s a game changer — but it’s just part of the story.”
Elaborating, she said MGM is helping to spur new development in this sector — one new hotel, a Holiday Inn Express, opened in downtown Springfield in 2018, and another, a Courtyard by Marriott, is set to open on Riverdale Street in West Springfield — while also filling more existing rooms and driving rates higher.
Indeed, occupancy rates in area hotels rose to 68.5% in October (the latest data available), up nearly 2% from that same month in 2017, and in August, they were up 5% (to 72.6%) over the year prior.
Meanwhile, room revenue was up 4.6% in October, from $113 a night on average in this region to $119 a night, and in August, it went up 7.2%.
And, as noted, MGM is just one of the reasons for optimism and a bright outlook in this sector, Wydra said. Others include the renovated hoop hall, yearly new additions at Six Flags, and the awesome drawing power of the Dr. Seuss museum on the Quadrangle.
For 2019, the outlook is for the needle to keep moving in the right direction, she said, noting that some new meetings and conventions have been booked (more on that later); Eastec, the massive manufacturing trade show, will be making its biennial pilgrimage to this region (specifically the Big E); the Babe Ruth World Series will again return to Westfield; and the AHL All-Star weekend will get things off to a solid start.
John Doleva, president of the Basketball Hall of Fame and a member of the executive board of the GSCVB, agreed.
“With MGM now in the marketplace and being active, there does appear to be a lift, much more of an excited spirit by those that are in the business,” he noted. “Everybody is saying that, at some level, their business is up, their interest in visitation is up — there is a general feeling of optimism.”
Doleva told BusinessWest that MGM opened its doors toward the tail end of peak season for the hoop hall — the summer vacation months. Therefore, it’s too early to quantify the impact of the casino on attendance there.
But the expectations for the next peak season are quite high, he went on, adding that many MGM customers return several times, and the hope — and expectation — is that, on one or several of those return trips, guests will extend their visit far beyond the casino’s grounds.
“Once people return a few times, they’re going to be looking for other things to do,” he said. “I definitely feel a sense of excitement and anticipation, and I’m definitely looking forward to next summer when it’s the high-travel season, and really get a gauge for what the potential MGM crossover customer is.
“Conversely, there are probably individuals that would probably have the Hall of Fame on their list of things to do,” he went on, “and now that there’s more of a critical mass, with MGM right across the street, I think we rise up on their to-do list.”
But MGM’s arrival is only one reason for soaring expectations at the hall, said Doleva, adding that the facility is in the middle of an ambitious renovation project that is already yielding dividends.
Indeed, phase one of the project included an extensive makeover of the lobby area and the hall’s theater, and those steps have helped inspire a significant increase in bookings for meetings and events.
“Our renovations have led to a great number of facility rentals for events that are happening in our theater, our new lobby, and Center Court,” he said, adding that the hall was averaging 175 rentals a year, and will log close to 240 for 2018. “Before, the theater wasn’t a hidden gem, it was just hidden; it was like a junior-high-school auditorium — it was dark, it was gray, it had no life. Now, it’s a great place to have a meeting or presentation like a product launch.”
Phase 2 of the project, which includes a renovation of the third-floor mezzanine, where the Hall of Fame plaques are, and considerable work on the roof of the sphere, will commence “any minute now,” said Doleva, adding that the work should improve visitation numbers, but, even more importantly, revenue and profitability.
The improved numbers for the hall — and the optimism there concerning the year ahead — are a microcosm of the broader tourism sector, said Wydra, adding that a number of collaborating factors point toward what could be a special year — and a solid long-term outlook.
It starts with the All-Star Game. The game itself is on a Monday night, but there is a whole weekend’s worth of activities planned, including the ‘classic skills competition’ the night before.
“Even with the average daily rate going up and occupancy growing, we still have that need period — which is true for all of Massachusetts,” she noted. “When you have an event like the All-Star Game in January, that really helps the hotels and restaurants.”
Additional momentum is expected in May with the arrival of EASTEC, considered to be New England’s premier manufacturing exposition. The three-day event drew more than 13,000 attendees last year, many of whom patronized area restaurants and clubs, said Wydra, adding that MGM Springfield only adds to the list of entertainment and hospitality options for attendees.
The Babe Ruth World Series is another solid addition to the year’s lineup, she noted, adding that the teams coming into the area, and their parents, frequent a number of area attractions catering to families.
Meanwhile, the region continues to attract a diverse portfolio of meetings and conventions, said Alicia Szenda, director of sales for the GSCVB, adding that MGM Springfield provides another attractive selling point for the 413, which can already boast a host of amenities, accessibility, and affordable hotel rates.
In June, the National Assoc. of Watch and Clock Collectors will stage its 75th annual national convention at the Big E, she said, an event that is expected to bring 2,000 people to the region. And later in the summer, the Professional Fire Fighters of Massachusetts will bring more than 900 people to downtown Springfield.
Those attending these conventions and the many others slated during the year now have a growing list of things to do in this region, said Wydra, who mentioned MGM, obviously, but also the revamped Hall of Fame; Six Flags, which continues to add new attractions yearly (a Cyborg ride is on tap for 2019); and the Dr. Seuss museum, which is drawing people from across the country and around the world.
“The Seuss factor is huge,” said Wydra. “It’s a big reason why visitation is up in this region. Seuss is a recognizable brand, and the museum delivers on the brand, and they keep reinventing that product.”
This ‘Seuss factor’ is just one of a number of powerful forces coming together to bring the outlook for tourism in this region to perhaps the highest plane it’s seen.
Pieces of the puzzle continue to fall into place, and together, they point to Western Mass. becoming a true destination.
As noted, even the ‘need period’ is looking less needy. The rest of the year? The sky’s the limit.
George O’Brien can be reached at [email protected]
As a student — and a professor — of economics, Bob Nakosteen fully understands that the region and the nation as a whole are, as they say, due for a recession.
Maybe even overdue.
Indeed, eight and a half years is a long time to be in an expansion, if history and especially 20th-century history is any guide, and that’s about the length of the run the country has been on, said Nakosteen, a long-time educator at UMass Amherst who pegged the summer of 2009 as when the Great Recession ended and the upswing — as unspectacular as it has been, for the most part, in this region — began.
But he quickly noted that there’s no actual relationship between how long a country has been in an expansion and when it’s due for a recession. Time isn’t officially one of the factors that determine such things, he noted, adding that none of the issues and indicators that do are — at this moment, at least — pointing toward recession.
The issues in the state economy, especially in Western Massachusetts, are not macro-economic nearly as much as they are structurally micro-economic; there are individual sectors that are really struggling.”
“The expansion is old, certainly, but there’s nothing on the horizon to interrupt the expansion,” he told BusinessWest, adding quickly that a host of factors will shape what course a continued expansion takes. “The issues in the state economy, especially in Western Massachusetts, are not macro-economic nearly as much as they are structurally micro-economic; there are individual sectors that are really struggling.”
Karl Petrick, an economics professor at Western New England University, agreed, and summoned another word for what he’s projecting for at least one more year: boring.
Trickle-down doesn’t really come to fruition the way people say it will. It’s been promised for decades and decades, but it’s never really happened.”
“Unless you were on Twitter, last year was pretty boring,” he said, tongue firmly planted in cheek while focusing his remarks on what was happening in this region economically. And that was essentially the same thing that’s been happening for the past several years — steady if unspectacular growth that amounts to a few percentage points on average and not the kind of boom times that traditionally follow a recession, especially like the one of almost a decade ago now.
“Even with the tax break, the projections are for the U.S. economy to grow at 2.5% in 2018, and in 2019, 2.1%,” he said. “And if we did see a big increase in growth, it’s very likely that that the Fed will raise interest rates to slow down inflation. The forecast is for another boring year — I hope.”
Indeed, for many in business, boring translates into a decent year, and that’s what Tom Senecal, president of Holyoke-based PeoplesBank, said many of his clients — commercial and residential alike — experienced.
He told BusinessWest that the residential real-estate market is enjoying a surge fueled by low inventories, and that many individual sectors are experiencing steady growth. And he expects tax reform to lift most boats still higher.
Inventory is extremely low in many area communities, and this is having a big impact on prices. We’re going back to seeing sale prices in excess of asking prices, and that hasn’t happened since the late ’80s and early ’90s.”
“With corporate tax rates projected to decrease from 35% to 20%, that will have a significant impact on most businesses,” he went on. “I expect that to be a determining factor in what our local economy will be like in 2018.”
There are other determining factors, obviously, and some areas of concern, both nationally and locally, including persistently stagnant wages.
Despite steady growth in the economy and soaring corporate profits that have fueled a nearly 20% rise on Wall Street this year, wages have remained flat, said Petrick. And he doesn’t believe — despite what leading supporters say — that tax reform will change that equation. And if wages remain stagnant, that might slow the economy down.
“Trickle-down doesn’t really come to fruition the way people say it will,” he explained. “It’s been promised for decades and decades, but it’s never really happened.”
Meanwhile, Nakosteen said the precipitous decline of traditional retail could pose some problems regionally (more on that later), as could a host of other factors ranging from escalating student debt to tighter immigration laws that could keep some foreign students from landing on area college campuses.
But overall, these concerns are not expected to significantly alter the picture or impact those projections for more of what the region has seen over the past several years.
That’s the word Senecal summoned early and often as he talked about the local economy, and it’s another word business owners always like to hear.
He said the region’s economy has historically been fueled by education and healthcare (‘eds and meds’), and that trend continues. And those sectors are, well, stable, to say the least.
“If you think of the spin-off economies in the Western Mass. market, we clearly benefit from those sorts of industries [healthcare and education] that are not recession-proof, but they certainly come through recessionary times much more stable than the rest of the economy,” he said. “And I see this in the numbers from our residential loans and our commercial loans. The stability and continued growth has been there, and we expect it to continue throughout next year.”
Beyond eds and meds, Senecal noted, a number of sectors are doing “pretty well,” as he put it. These include ‘green’ energy businesses, commercial construction (although moreso in the eastern part of the state than this region) and the residential real-estate market, which, as noted earlier, has picked up dramatically over the past few years.
“Inventory is extremely low in many area communities, and this is having a big impact on prices,” he explained. “We’re going back to seeing sale prices in excess of asking prices, and that hasn’t happened since the late ’80s and early ’90s; it’s clearly a seller’s market right now.”
Surveying the scene locally as well as nationally, those we spoke with said there is no indication of anything that will disrupt this stability to any significant degree.
But that doesn’t mean there aren’t some question marks concerning the year ahead. And perhaps the biggest concerns tax reform and what it will mean.
Petrick and Nakosteen said such reforms — usually measures to be administered during a recession, not an expansion — can’t (or shouldn’t) be expected to trigger the wage hikes and subsequent consumer spending predicted by supporters of the legislation, because … well, because history shows this isn’t what happens, they told BusinessWest.
“Tax cuts really have little effect,” said Nakosteen, “especially when the economy is not in recession and is near full employment.”
Also, early and unofficial polling of business leaders indicates that wage increases for their employees are not in their plans.
“Many big corporations have already said that, whatever tax breaks they get, they’ll use them to buy back stock,” Petrick noted. “That will do wonders for the stock market, but there’s no indication they’ll use that tax break to raise wages.”
But Senecal projected that tax reform might, in fact, provide a real boost for the economy in the form of investments made by business owners.
“Tax reform has a significant impact on corporate spending,” he opined. “I think that, right now, a lot of businesses are waiting and seeing on tax reform to determine how aggressive or reserved businesses are going to be come 2018.”
As for other factors that might impact the year ahead, to one degree or another, Petrick put wages, and the stagnancy of same, at the top of that list.
“We see growth, but the foundation for continued growth continues to be a little bit shaky, in terms of wages at the national level and the state level,” he told BusinessWest. “They’re just not growing, even as unemployment comes down.
“And that is a bit of conundrum for us at the state level and the federal level, because that puts more pressure of households, especially with uncertainty with what’s going to happen with the individual mandate and how that might impact insurance rates,” he added. “It also impacts state tax revenue, because if wages don’t go up, the state doesn’t collect more.”
There are many reasons why wages are stagnant, he went on, listing everything from soaring health-insurance costs for employers to the decline of labor unions, to the retirement of Baby Boomers and their replacement by younger workers earning lower salaries. But the bottom line is that, generally, flat wages are not good for the economy.
Meanwhile, Nakosteen said the continued decline of traditional retail would further change the local landscape, and it might impact the economy in some ways.
Giant retailers like Sears, Toys R Us, Kmart, and others are closing stores in huge volumes, leaving malls with large boxes to fill (or not, as the case may be) and worries about their very existence. Meanwhile, many smaller retailers are disappearing from the landscape, for reasons ranging from the intrusion of online shopping to a lack of a succession plan.
All this is creating a number of empty storefronts and a lot of commercial real estate for sale and lease, said Nakosteen, adding that the problem is impacting even the most vibrant of downtowns, including Northampton’s, where tenants are asking, ‘why are lease rates so high if so many storefronts are empty?’
“And that’s a very good question,” he said, adding that the higher rates will impact existing retailers and perhaps dissuade others from coming downtown.
But it’s an issue in nearly every area community.
“There are so many empty storefronts,” Nakosteen went on, “and the retail sector is so important to so many downtown areas.”
Meanwhile, workforce issues might also have an impact on the course and strength of the ongoing expansion, he noted, adding that a lack of qualified workers within some sectors might stifle growth.
“The state, as a whole, has issues with the labor force not growing fast enough to accommodate the economy,” he explained. “And Western Mass. is even worse. We have very slow labor growth here; you can’t grow the economy faster than you can hire people to fill the jobs.”
Interest rates could play a role as well, the experts noted, adding that, if the economy does start heating up, the Fed will likely raise rates to keep it from overheating and sending inflation higher.
“Prime rate effects people’s home-equity loans, and it effects commercial borrowers,” Senecal explained. “And if the Fed increases rates two or three times, and that’s clearly their intent, that could have an impact on spending.”
‘Stable. ‘Boring.’ ‘Steady.’ Those aren’t exactly headline-generating adjectives when we’re talking about the economy and where it might head in the months to come.
But they represent reality, and for many in this region — which, as has been noted countless times in the past, doesn’t enjoy stunning highs and crippling lows like other regions — those words are welcome, and much better than the alternative.
And if tax reform works, as Senecal and others believe it might, the region just might wind up doing better than ‘more of the same.’
George O’Brien can be reached at [email protected]
By Richard Sullivan
The state of the region’s economy is strong, and the economic outlook is bright. That’s a simple statement, but let’s look at the facts that support that optimism.
We all have read of the important investments that MGM and CRRC, the Chinese rail-car manufacturer, are making in Springfield. Less-reported is the some $5.2 billion of economic-development projects that have recently occurred or are currently underway in our region.
In a 2016 study, the Economic Development Council of Western Mass. (EDC) catalogued the growth in each community — from housing developments to manufacturing companies expanding and relocating to the area; from transportation investments to growth in our public and private education systems. That study shows strong and important regional investments, and this trend is continuing.
MGM and CRRC are certainly important regional economic-development projects for the jobs they are creating, the taxes they will pay, and the many public benefits they are required to provide through their host-community agreements. However, the biggest economic impact the projects will have is when they contract with local businesses as part of their operational and supply chains. MGM specifically is using best efforts to annually contract locally for $50 million in goods and services. These dollars will stay local, provide additional economic opportunities, and create more jobs in companies that are part of the fabric of our communities, hiring our neighbors, paying local taxes, and supporting our local charities. It is an opportunity we are capitalizing on, but one that we can’t lose sight of.
Another bright spot within the local economy is tourism. You may think Boston, San Francisco, or New York, but maybe not Western Mass., when it comes to this important sector. However, tourism is the third-largest industry in the region. Approximately 3 million visitors come to the area each year, spending $750 million, producing an estimated $17 million in state and local taxes, and supporting 5000 jobs.
Mary Kay Wydra, president of the Greater Springfield Convention & Visitors Bureau, is bullish on the growth of tourism in Western Mass., with the addition of MGM, the Dr. Seuss Museum, a soon-to-be-refurbished Basketball Hall of Fame, continued investment at Yankee Candle and Six Flags, and more. She is confident that annual visitorship will grow. Tourism is a vital part of our economy and will become even more important beginning in 2018.
Still another source of optimism and good news is the growing amount of entrepreneurial energy in the region.
Indeed, at the recent “State of Entrepreneurship in the Valley,” hosted by Steve Davis and the EDC entrepreneurship committee, the focus was on the growth of a relatively new sector for the region — innovation, startups, and entrepreneurship. In 2015 and 2016 alone, more than 9,000 people attended a Valley Venture Mentors (VVM) event; there are currently 613 part-time and 227 full-time jobs in the startup ecosystem, and just under $27 million of revenue and investment was created in the region. If all the startups were under one roof, they would represent the 11th-largest company in Springfield.
The entrepreneurship ecosystem is growing up and down the Valley. VVM works closely with initiatives in Franklin County and SPARK in Holyoke; our local colleges and universities have all carved out leadership positions; Greentown Labs, based in Somerville, Mass., has opened a manufacturing office at the Scibelli Enterprise Center; and the Grinspoon Entrepreneurship Initiative is a national leader in elevating the importance of entrepreneurship and recognizing entrepreneurial excellence among college students. A new group, Women Innovators & Trailblazers (WIT), is establishing itself in order to ignite a women-led innovation economy in Western Mass. and beyond. This is an exciting and quickly growing sector in the region.
I see additional new sectors growing in the region that can become centers of excellence for Western Mass. This year, UMass Amherst, in cooperation with the EDC, hosted an event highlighting its national leadership position in the field of green technology and the environment. The event was sponsored by the Massachusetts Clean Energy Center and focused on building technologies, water innovation, and clean energy and storage. Companies from across Massachusetts came to discuss the quickly growing green-technology cluster and the partnerships that can be developed between the private sector and the university for research and development, but also talent development.
Bay Path University recently staged its fifth annual Cybersecurity Summit, showcasing the work it is doing in the field of cybersecurity. President Carol Leary, who serves as a member of the Department of Homeland Security’s Academic Advisory Council, said “it is critical for higher education to be a central part of this emerging cyber ecosystem. We are developing the right talent, the diverse talent needed to be a part of the cybersecurity workforce. To the students pursuing a cybersecurity career — you are the future, you are qualified, and we need you more than ever.”
Western Mass., because it is home to a significant number of universities, colleges, community colleges, and technical schools, finds itself in an enviable position because it can supply the workforce of the future. Still, there is no doubt that the biggest issue facing our existing companies, and the companies of the future, is their ability to find, develop, and retain a high-quality workforce.
We need to coordinate with all the great workforce-development organizations in the region and leverage the high-quality education institutions that call Western Mass. home to meet this demand.
When we do, our future economy will be bright.
Richard Sullivan is president of the Economic Development Council of Western Mass.; [email protected].
By Nancy Creed
We might remember 2017 as the year of the much-anticipated reopening of Union Station as a dramatically renovated transportation hub. The more than $90 million renovation additionally created office and retail space, transforming this area of Springfield’s North End. The Innovation Center on Bridge Street welcomed new tenants with continued construction on additional office and retail space, and the new, $11.8 million Mercedes-Benz of Springfield dealership opened in Chicopee.
This past year was also one during which many projects made significant progress toward their anticipated 2018 completion dates.
Awaiting us in 2018 is a mix of opportunities and challenges. Springfield and the region have been experiencing unprecedented growth in the last couple of years. While 2018 is the year in which we will see the finishing touches put on some major projects and programs, we are also faced with the uncertainty and potential effects of healthcare, tax reform, and ballot initiatives which could impact all of us.
On the growth side, the I-91 viaduct construction is ahead of schedule, with the highway expected to be in full use by February; production of MBTA subway cars at the new 204,000-square-foot, $95 million CRCC rail-car factory off I-291 in East Springfield will kick off in 2018; and the much anticipated opening of the $950 million MGM resort casino is on track for a late-2018 opening.
There is also opportunity to help small businesses grow and prosper. The city of Springfield has launched “Rise Up Springfield,” an innovative collaboration between the city, the Assoc. of Black Business & Professionals, and the Springfield Regional Chamber. Powered by Boston-based Interise’s award-winning StreetWise MBA curriculum, this seven-month, intensive, hands-on program provides the knowledge and know-how business owners need to create and manage a three-year strategic business plan. This a key opportunity for the city to capitalize on the entrepreneurial spirit of the region and to encourage our smaller, less-established businesses get to the next level in their growth.
Advocates of a ballot question are pushing for an additional income tax on those making above a certain income threshold in order to fund some of the areas I mentioned above. However, other states have taken a similar approach, which only resulted in businesses relocating to lower-tax jurisdictions. At its core, this proposal is bad for business. Why would we tax talent — our state’s principal competitive advantage.”
While we are encouraged and excited about growth in the region, our business community will face some significant challenges in the coming year. Healthcare continues to remain of grave concern. Costs continue to rise at uncontrollable rates, not only impacting the bottom lines of our businesses, but crippling the state budget. With 40% of the state budget allocated to MassHealth, there is virtually no room for additional funding in critical areas such as education, transportation, and local aid.
Advocates of a ballot question are pushing for an additional income tax on those making above a certain income threshold in order to fund some of the areas I mentioned above. However, other states have taken a similar approach, which only resulted in businesses relocating to lower-tax jurisdictions. At its core, this proposal is bad for business. Why would we tax talent — our state’s principal competitive advantage?
Another ballot question that we could be faced with is one that provides for paid family and medical leave. Not only does our business community understand the value of fringe benefits and attracting and retaining the top talent, but they want to do the right thing for their employees. Those businesses that are financially able to offer ‘above and beyond’ benefits do so, but not every small business is in a position to compete with the benefits offered by a Fortune 100 company.
The ballot question as proposed would require employers of any size to offer paid leave at a rate of 90% of an employee’s wages. It is estimated that this would have a $1 billion financial impact across the Commonwealth.
There is one other ballot question we could be faced with come November 2018 — an increase in the minimum wage, to $15 an hour by 2022. A back-of-the-napkin calculation estimates this to be an increase of 25% to a company’s salaries/wages line item. Again, while the business community wants to do the right thing, it comes at a cost to the competitiveness of our state.
While we are optimistic about our growth, we are concerned about what lies ahead that could derail that growth. We are concerned for our business community here in Western Mass., but equally concerned as to what the impact could be across the state, on the Commonwealth’s fiscal health, on attracting new growth, on remaining competitive with our neighboring states and across the country, and on ensuring Massachusetts and our region remain at the forefront of innovation.
Throughout the chamber’s 127-year history, we have worked to encourage and facilitate economic growth. We have faced and weathered challenges and advocated on behalf of the region’s businesses. Our mission will continue in 2018 and beyond, as we support and collaborate with regional businesses and advocate for them at the local, state, and federal levels and work to ensure our continued growth is not stunted.
Nancy Creed is executive director of the Springfield Regional Chamber of Commerce; (413) 755-1309.
Rarely, economists note, does the U.S. economy grow for a full decade without hitting a recession. So the continuing strength of the economy — reflected most notably in falling unemployment — is a mixed bag of news. In short, while the growth is welcome, some caution is warranted.
“At the state and national level, the recovery has been going on for six years, and while there are no hard-and-fast rules about this, we could expect some moderation after six years of growth,” said Karl Petrick, assistant professor of Economics at Western New England University. “Every year of growth makes it more likely that the downward part of the business cycle is closer.”
A year ago, Bob Nakosteen, professor of Economics at the Isenberg School of Management at UMass Amherst, called the economic outlook “fuzzy,” but said last week that 2016 solidified into a positive year on many fronts.
“Growth statewide has been somewhat modest, but continuous; we haven’t seen the unemployment rate this low since 16 years ago, the turn of the century,” said Nakosteen, who is also co-editor of MassBenchmarks, the quarterly publication devoted to analysis of the Bay State’s economy. “I don’t think the economy is going gangbusters, but it’s been steady, moderate growth over a long period of time, with higher employment numbers and the total number of workers higher.”
Slowly and steadily, if not spectacularly, he went on, the economic outlook since the low point of the Great Recession has morphed into a remarkable period of expansion. In Massachusetts, the main drivers include the usual suspects, such as information and communications technology, healthcare, and education. “These are industry sectors that are in high demand both nationally and globally, and we have the good luck, at least in the recent past, to have a heavy dose of those sectors. Any time there’s a big demand in the national economy for the services and industries we specialize in, it’s going to help us, and that’s what’s happening.”
Massachusetts, Petrick noted, has outpaced the national rate of growth since 2008. For example, the state’s economy expanded at an annual rate of 3.7% in the third quarter of this year, while the national annualized rate of growth was 2.9% during that same period.
A similar trend holds in the category of unemployment rate. In October 2016, the last month for which state data is available, the Bay State’s unemployment rate was 2.7%, compared to the U.S. unemployment rate of 4.9%.
But is unemployment falling because more people are finding jobs, he asked, or because people are leaving the labor force and aren’t being counted? Comparing October 2016 to Oct 2015, the labor force grew while the unemployment rate fell (from 4.5% in Oct 2015 to 2.7% in Oct. 2016). While that’s a sign of success, one result is a tightening job market.
“The unemployment rate is falling for the right reasons, but it does also signal that it will be harder to keep up the pace of economic growth that we have been experiencing as the labor market gets tighter,” he told BusinessWest. “Effectively, it will be harder for those who are unemployed to find work.”
Meanwhile, the 2.7% number doesn’t tell the whole story. The official (U3) unemployment rate, the one that gets reported, counts anyone who is either working or willing to work, defined as someone who has looked for a job in the past four weeks, he explained. A broader measure of unemployment is the U6 rate, which includes workers who have given up looking for work but would return to the labor force if jobs were available, as well as people who are employed part-time because they can’t find a full-time job. The average U6 number in Massachusetts is 8.8%.
“The difference between that and the state U-3 rate does indicate that there is potentially more room to grow in Massachuetts,” Petrick said. “That’s a lot of potential workers that are on the sidelines who could return to the labor market if things continue to improve.”
Whether the economy will, indeed, continue to improve is the big question.
Petrick and Nakosteen both noted that breaking the state down by region results in a much more mixed picture for Western Mass.
Specifically, while Hampden County’s U3 rate fell from 6.0% to 3.6% from October 2015 to October 2016 — and similarly decreased from 8.3% to 5.1% in Springfield and 7.4% to 4.3% in Holyoke — those figures trail other metro areas in Massachusetts, including Boston (2.6% in October 2016) and Worcester (3.3%). In fact, Springfield’s 5.1% rate ranks among the highest city unemployment rates in the state.
“The recovery started sooner in Eastern Mass., and it took a while for the effects to be really felt in the western part of the state,” Petrick said. “Over the past year, we have seen a degree of catching up … after lagging in Western Mass. for a few years, the rate of job growth is now pretty consistent across the state.”
One interesting result over the past year, he noted, has been a rebound in the construction industry in Massachusetts, which saw employment grow by almost 38%. But much of that growth — particularly new construction — has been concentrated in the Greater Boston area. Still, he went on, as construction was hard-hit by the recession, a rebound in this sector is a positive sign.
I don’t think the economy is going gangbusters, but it’s been steady, moderate growth over a long period of time, with higher employment numbers and the total number of workers higher.”
“It’s always been the case that the growth in Boston spreads very unevenly, and it dissipates as it gets farther from Boston,” Nakosteen added. “In Western Massachusetts, our employment numbers have increased, but not dramatically.”
One oft-discussed reason has been the decline of the manufacturing base over the past few decades, with no one industry stepping up to replace it. “We have a smattering of everything, and a number of manufacturing companies, but nothing very big.”
Area economic-development leaders hope the emergence of CRRC USA Rail Corp., a subsidiary of the China-based world leader in rail-car manufacturing — which promises to create more than 150 manufacturing jobs in Springfield when its plant on Page Boulevard opens in 2018 — is a harbinger of more good news for the region’s manufacturing sector. At the same time, downtown projects like Union Station and MGM Springfield, coupled with a surge in entrepreneurial activity in the region, bode well for the future.
So do the continued health of the ‘eds and meds’ sectors in the region. Nakosteen noted that people think of Massachusetts’ world-class hospitals when they think of the state’s healthcare prowess, but in addition to that anchor, companies that perform pharmaceutical research and build medical devices are thriving — although, again, mainly in the eastern part of the state.
Still, he went on, “there has been some convergence of the economic prospects of the eastern and western parts of the state, and that’s a good thing.”
Nancy Creed, president of the Springfield Regional Chamber, said her organization’s members are mainly bullish on the year ahead.
“There’s a lot of optimism. I hear it on the streets and in chamber meetings,” she said. “We’re seeing new business come into the city — small businesses, especially, that want to be part of what’s happening here. And the chamber is growing — chamber members are increasing job growth, increasing spending. I think, overall, people are feeling good about the city of Springfield.”
However, “I would say it’s also tempered with what could potentially happen with the new federal administration,” she added. “Who knows what’s going to happen with healthcare and the ACA? So there’s also some caution overall.”
Indeed, Petrick noted, markets don’t like uncertainty, and they tend to be volatile during an election year in the U.S. — particularly one as unpredictable and unusual as the one that gave rise to President-elect Donald Trump and his aggressive rhetoric regarding trade.
“Certainly two of our biggest trade partners at the national level, China and Mexico, have both responded by letting us know that a trade war is a very bad idea for the U.S. as well as for them,” he said. “They have also both let the incoming administration know that there’s not a whole lot of good will there after a series of inflammatory statements regarding both countries during the campaign.
Those relationships need mending, he said, and it’s in the interest of both the U.S. and Massachusetts economies for that to happen. At the national level, he noted, much uncertainty lingers — more than what is typical after an election — and both companies and consumers want to see what the incoming administration will do, particularly after so many statements, many of them contradictory, regarding potential policy.
“So, because of both economic and political reasons, I think the state economy is entering into a period of more uncertainty,” Petrick said. “Luckily, we are doing so after a period of robust economic growth, so, as a state, we have a good foundation to weather this uncertainty.”
In the financial world, indicators reflect general economic health, said Thomas Senecal, president and CEO of PeoplesBank.
“Interest rates, obviously, drive most of what we do,” he said, adding that the Fed is expected to raise rates another 25 basis points this week, and he anticipates further jumps in the spring and perhaps the fourth quarter of 2017. “We see it as a moderate increase in rates that won’t have a huge, detrimental effect.”
In fact, he added, the Fed moves should instead translate into positive consumer confidence, which usually brings positive economic impact.
Meanwhile, Senecal added, “unemployment is significantly down in Western Mass., and we see in the banking industry that foreclosures are down, delinquencies are down — these are all positive signs for the economy.”
Other fundamentals at the national level remain positive, Petrick said. The International Monetary Fund (IMF) estimates that the U.S. economy will grow by 2.2% over the next year. That’s a strong rate of growth, although one part of the IMF forecast — higher energy prices — is better for some states (like Texas and North Dakota) than for Massachusetts. The IMF also estimate that the U.S. dollar will weaken over the coming year, which is good news for exports from Massachusetts, as a strong dollar over the past two years has seen state exports to many top trade partners suffer.
While the national economy is still growing, Nakosteen noted, it’s growing at a slightly slower rate than in previous years, and that’s bound to affect Massachusetts. “We can only be healthy to the extent of a strong national economy.”
Meanwhile, globally, China continues its transformation from an export-led economy to one more consumer-driven, and that could be a painful process. “It’s not clear that transition will be successful or happen any time soon,” he said, “and it’s not clear the politics in that country will be able to sustain it.”
As for Europe, “what they consider good news, we’d call stagnant. We’d be lamenting it here, but they’re happy there. There’s not much in the tea leaves to say that will change any time soon,” Nakosteen said, adding that slowdowns in commodities exports — a problem from Asia to Africa to Canada — are proving to impact economies negatively as well.
“The world isn’t on the brink of anything, but it’s certainly challenged in a number of ways, and certainly just slogging along,” he said. “We’re not disconnected from any of that. Even though we have a really dynamic economy, these trends are bound to suppress growth at some point. We’ve managed to keep modest growth continually for a long time, but there are troubling outside signs.”
Petrick agreed. “A generally sluggish world economy doesn’t help the U.S. or the Massachusetts state economy. The weakened Chinese economy, a sluggish European Union, and the continued fallout from the Brexit vote in the UK all bear watching.”
Michael Oleksak, executive vice president, senior lender, and chief credit officer at PeoplesBank, noted, as many analysts have, that Western Mass. is to some degree more shielded from national trends than, say Boston — never reaching the same heights or plumbing the same depths.
“The last few years, we’ve seen positive trends for both our customers and prospective customers,” he said, adding that he sees some staying power in regional trends like rising household incomes, strong commercial occupancy levels, and an uptick in home purchases in the mortgage realm after several years of refinances dominating that sector. Meanwhile, he sees the casino and other large projects causing a trickle-down effect of renewed investment interest in the region.
“I think the casino and CRRC will have an impact on the Western Mass. market; there will be some economic spilloff from that,” Senecal added. “Any time you see cranes in the sky, it makes you feel good about what’s going on in the immediate area.”
Meanwhile, some sectors are dealing with trends that are more cultural than economic, notably retail, which continue to grapple with Internet sales cutting deeply into their bottom line. Nakosteen said he has talked to store owners who say they hear that things are getting better, but they’re not seeing it themselves. “Retailers across the state and nation are struggling to deal with the Internet world.”
In summary, Petrick expects Massachusetts’ economic growth to remain positive in 2017 but at a slower rate, closer to the U.S. national rate of growth.
“It’s really hard to continually outpace the national rate of growth after so many years of doing so,” he said. “I suspect, for at least part of the year, we will grow faster than the national average, but the gap will get narrower.”
One advantage the Bay State has is a high percentage of educational attainment, as 41.5% of residents in age 25 or older have a bachelor’s degree or higher; the national rate is 30.6%. “That is one of the reasons that Massachusetts is an attractive place for companies to locate.”
On the other hand, they still grapple with skills gaps, trying to match their needs with the available talent. But one of the more positive stories over the past decade in Western Mass. has been the region’s efforts to attack that problem.
“The skills gap is always going to be a concern, as businesses evolve and have different needs,” Creed said, adding, however, that the city has been fortunate to see robust partnerships emerge between its colleges, technical schools, and workforce-development agencies to prime the pump of talent and keep it in the region. “That’s the nature of the beast — businesses evolve, the skills they need evolve, and we’ve got to keep pace with that.”
Those partnerships don’t happen everywhere and shouldn’t be taken for granted, she added — but they are being noticed by both local companies and those looking for a place to plant new roots.
“I hear it from people at my events — they want to be downtown, they want to be part of the excitement. They want to be part of what’s happening here.”
It’s an optimism being felt across Western Mass. — admittedly, more strongly in some communities than others — as the calendar turns to 2017, and all the economic questions a new year brings.
Joseph Bednar can be reached at [email protected]
Dan Flynn calls it “soft confidence.”
That simple, two-word phrase goes a long way toward explaining the current state of the local and national economy and the general attitude concerning it among business owners.
Elaborating, Flynn, executive vice president and chief operating officer of Wholesale Banking for West Springfield-based United Bank, said many of the institution’s commercial clients are doing well — not as well as before the so-called Great Recession that started in 2008, but performance has been solid. Some even recorded their proverbial ‘best year ever’ in 2015, he noted, adding that most saw at least improvement over 2014.
But — and this is an important ‘but’ — these business owners are not at all sure that such performance is sustainable given a host of factors that are almost all well beyond their control. These range from global and domestic violence to still-spiraling healthcare insurance costs to extreme uncertainty about who will prevail in the 2016 presidential election — and what he or she might do after getting elected.
Thus, existing confidence is, well, soft.
“For most business owners, their inventory backlog or their job backlog is building, but they don’t have the confidence that this will sustain itself in 2016 or 2017,” Flynn explained. “They think it will, but it’s not like that flat-out ‘we’re confident, we’re going to hire a couple of extra people, we’re going to add a second shift.’ They’re not that confident.”
John Patrick agreed. The CEO of Farmington Bank, which recently made a foray into the Western Mass. market with locations in West Springfield and then East Longmeadow, said there is some optimism about the year ahead, but there are also serious doubts, enough to keep confidence from becoming deep or profound.
“The economy, especially the local economy, is all about confidence,” he noted. “And I wouldn’t say there is strong confidence in the marketplace relative to everything that’s happening around them.”
And by ‘everything,’ he meant factors ranging from terrorism in Paris and California to the ever-rising cost of health insurance.
Bob Nakosteen concurred, summoning another word to describe the current picture and outlook for 2016: ‘fuzzy.’
He would go into much greater detail, obviously, but Nakosteen, professor of Economics at the Isenberg School of Management at UMass Amherst and co-editor of MassBenchmarks, the quarterly publication devoted to analysis of the Bay State economy, said that one word pretty much does the job.
Indeed, the outlook is fuzzy, as in not sharp, not clear, and, for the most part, not predictable.
“The picture is fuzzy, and through the fuzziness, we see a lot of positives, but we also see some risk,” he explained. “There’s a lot of internal strength in the U.S. economy, and it is going to overcome various weaknesses, and that means this state is going to do well. It’s a mixed picture, but the overall trend is positive. But do I have 100% confidence in what I just said? Absolutely not.”
That’s soft confidence personified.
“We’re in the middle of a slowdown … it’s not anywhere near a recession, but we’re definitely seeing some slowing,” Nakosteen went on. “The economy has been growing at 2% or a little less, and that’s not vibrant.”
Moving beyond ‘fuzzy,’ Nakosteen, like Flynn and others we spoke with, said there are a number of factors impacting the state and national economy — everything from a weak Canadian dollar, which is hurting exports to that country, to the fact that most Americans are not putting the money they’re saving at the gas pump back into the economy, to impressive job growth in the Commonwealth (if not Greater Springfield). Together, they make predicting what will come next an even more difficult assignment than it generally is.
Most observers are expecting growth to remain right around that 2% level, but it could go higher or lower depending on how matters evolve, especially that critical confidence level among business owners.
As he talked with BusinessWest about 2015 and what will likely happen in the year ahead, Nakosteen said there are certainly plenty of reasons to look at the glass and declare it at least half-full.
“Within the lack of clarity that we’re seeing, there lies a solid core of economic strength,” he explained, adding that the Bay State continues to match or outperform the nation overall, but it is very much dependent on the relative health of this country, as well as international markets, for its success.
As evidence, he cited some recent data showing that Massachusetts is experiencing an economic expansion in many ways reminiscent of the late ’90s, though without the impetus of the tech bubble that drove that cycle, meaning that this one is more well-rounded.
Gross state product is growing robustly, he went on — 7.1% for the second quarter compared to national GDP growth of 3.7% — and employment growth is steady, although limited geographically. The unemployment rate remains low by historical standards, and has been below the national rate since — and even before — the Great Recession.
“The current expansion appears to be on firm footing — the economy in the state has slowed down recently, but it’s still been a really good year,” he said while offering the global view.
“We’re expecting strong growth over the year or so,” he went on, using ‘we’ to mean the editors at MassBenchmarks. “It might be as strong as what we had up to the second quarter of this year, but pretty solid growth. How much of it makes its way out to the western part of the state remains to be seen.”
“Overall, clients performed better over the past 12 months than the previous three to four years,” he said while generalizing the comments of business owners within the bank’s portfolio. “As a whole, they’re not seeing the same rate of return as before the recession, but they’re doing better than they were a year ago.
“And it’s across the board,” he went on. “You can take retail, manufacturing, wholesalers … generally, companies are performing better than they had.”
Given all that, though, the question looming over 2016 is whether that performance — by individual companies and the economy as a whole — can be sustained. And strong doubts about whether it can have led to heavy use of phrases such as ‘soft confidence,’ ‘fuzzy picture,’ ‘mixed signals,’ and the always-popular ‘cautiously optimistic,’ which Flynn said he’s heard repeatedly.
That’s because most all of the factors that will decide the fate of 2016 come complete with ‘ifs,’ ‘buts,’ question marks, and both points and counterpoints.
Take the jobs picture, for example. The nation’s economy added another 211,000 jobs in November after a gain of nearly 300,000 in October, a solid boost by most accounts that exceeded almost all expectations and propelled the stock market to a more than 2% gain the day the figures were released.
But do those numbers and the stated 5% national unemployment rate reflect real progress in what’s happening locally? The short answer is ‘no’ or ‘probably not.’
“I was in New York recently, and I heard a nationally respected economist who said that, if you really take a look at the numbers, unemployment on a normalized basis is closer to 9% when you take into consideration all the people who are unemployed and those working part-time who would prefer to be working full time,” said Patrick.
Like others, he noted that, overall, many employers have not yet reached — and likely won’t reach for some time — that threshold of confidence needed to add back some of those employees trimmed during extensive efforts during and after the recession to become more efficient and rightsize.
“Businesses are a little apprehensive about continuing to make significant investments in people, technology, and franchise, because they’re just unsure about what’s going to happen,” Patrick told BusinessWest. “And there many businesses that, because of the cost of healthcare, don’t want to go over that 50-employee number, and they’re trying to manage their business accordingly.”
Meanwhile, Nakosteen said, despite the start of work on the Springfield casino and a host of other construction projects across Western Mass., the employment needle has “barely budged” in the city of Springfield, meaning the jobless rate is still hovering around 9%, in sharp contrast to what’s happening elsewhere in the Commonwealth.
“Employment in the state has really grown at an amazingly fast clip over the past year to 18 months, but it’s not the same in Western Mass., as is usually the case,” he explained, adding that the Bay State has added 50,000 to 60,000 jobs over the past year, most of them in technology-related sectors, although healthcare and education remain solid contributors to such growth.
“A different picture emerges out here,” he went on, talking from his office on the UMass Amherst campus. “Springfield has added a few jobs but not many — at least it hasn’t gone down. The picture is better in the larger metropolitan area, but all the construction is in Springfield, so that’s where it should be recorded, but so far we’re not seeing it.”
Another factor that is contributing to uncertainty is the stronger U.S. dollar. It certainly benefits those traveling overseas and has provided a huge boost for airlines and cruise lines, but overall, a strong dollar hurts exporters, including the many precision manufacturers that call the Knowledge Corridor home.
“I think many of the manufacturers in this region got off to a good start in 2015 and had good backlogs,” said Patrick, referring to companies on both sides of the border. “But companies within that corridor are usually producing a product that has export potential, and because of the strong dollar internationally, they’ve seen a lot of the orders slow down and some of them put on hold, with the buyer saying, ‘what we’ll do is wait for the dollar to drive down in value a bit.’”
There was some movement in that direction in early December, he noted, but overall, the dollar remains quite strong against all other currencies, and until a pattern of weakness occurs, exports will continue to suffer.
Nakosteen agreed, and said one country often overlooked when it comes to currency rates is Canada. It is a big trading partner, and at the moment that country’s dollar, also known as the ‘loonie,’ is in a hard spiral fueled by a host of factors, including falling energy prices and questionable monetary policy.
“Canada is our most important trade partner; a year ago, it was about one U.S. dollar to one Canadian dollar; now, a Canadian dollar is worth about 70 cents,” he explained. “What that means is for Candians, U.S. products are much more expensive, and you can see it in the export numbers — they’ve really dropped over the past year.”
As for falling oil prices, which analysts say will remain low for the foreseeable future, they are not producing a surge in consumer spending, as some had predicted, and in the meantime, they are taking a hard toll on the energy industry, which is having a ripple effect, in this country and elsewhere.
“We have not seen the surplus from lower gas prices turn into consumer spending — it’s going into savings or to reduce debt,” Nakosteen said. “It has not created the bump that was expected by everyone, including me.
“From everything I’m reading in the energy industry, low gas prices are here for a while,” he went on. “So it will be interesting to see if, over time, consumers start behaving a little differently and take this surplus and spend it.”
Still another factor is interest rates, which, after that strong November jobs report, are almost certain to rise after roughly seven years of stagnancy. The projected 0.25% increase, though minor, will finally bring some measure of relief to investors who have focused on low-risk options, such as bonds, which have yielded marginal returns. But the hike will also make borrowing more expensive, and this may slow the economy somewhat.
Cliff Noreen, president of Springfield-based Babson Capital, told Bloomberg News Radio recently that he welcomed the U.S. interest rate hike — “I think it’s about time; it’s been seven years, and we’ve been living with manipulated rates for that long, and we should go back to a more normal rate environment.”
“I think the biggest victims today are retirees — they retired with the assumption five or 10 years ago that they would earn a risk-free rate of 4%, 5%, or 6%; now, the risk-free rate is zero,” he told Bloomberg. “So they have to take more risk to make their return to live on, and they’ve been forced to invest in higher-risk assets like high-yield bonds and stocks, and they’ve had to adjust their asset allocation to make up for the zero-percent rate environment we’re in globally.”
Overall, Noreen said there were several surprises in 2015 — from falling commodities prices to spiraling foreign currencies (see charts) to gasoline prices that could have fallen further than they did — and all signs point to these conditions (and the negative impact and uncertainty they bring) continuing into 2016.
“We expect lower-than-normal investment returns for all asset classes,” he noted, “and slow economic growth globally, although things have been stabilizing, and continued very, very low interest rates that are in the process of rising.”
And there are still other factors to consider looking ahead, said Noreen, listing everything from a slowing of the growth rate in China to slowing corporate-profit growth in this country, and historically low yields on bonds, with many European countries, including Germany, France, Belgium, and the Netherlands, gaining status in what Noreen called the “negative-rate club.”
As for the upcoming presidential election, Nakosteen noted that, while elections themselves typically don’t have an impact on the economy and individual presidents don’t often dictate fiscal policy, elections do generate anxiety, which has its own trickle-down effect.
Speaking from experience, Patrick agreed, noting that the one commodity business owners dislike the most is uncertainty.
And because there is no lack of it at the moment — not just because of the election but all those other issues mentioned above — there is a corresponding shortage of perhaps the most important element for at least the short-term health of the regional and national economy: confidence.
There is confidence that the progress measured in 2015 can be sustained, but, as Flynn noted, it is soft confidence.
And as long as that condition remains, the picture for 2016 will remain fuzzy.
George O’Brien can be reached at [email protected]
And these limits have resulted from a host of factors that have stood in the way of more profound recovery. They include everything from lackluster hiring trends to high energy prices and their impact on businesses and consumers alike; from economic turmoil abroad, especially in Europe, to political chaos in Washington, as with the so-called fiscal cliff of early 2013; from a floundering housing market to a persistent lack of confidence among business owners.
But as the new year approaches, say experts we spoke with, much of this whitewater seems to be giving way to smoother conditions that are much more conducive to progress. The coast isn’t clear, they imply, but it is much clearer.
Indeed, Bob Nakosteen, a professor of Economics at the Isenberg School of Management at UMass Amherst, told BusinessWest that he sees positive signs almost everywhere he looks, something he hasn’t been able to say for at least the past seven years.
That includes the latest employment statistics for the Bay State, which show unemployment in Springfield at 8.4% (down from 10.6% a year ago), which he considers a bellwether.
“What’s happening now is that the economic recovery is actually permeating Western Massachusetts, something you couldn’t say over the past several years,” he noted, adding that Boston, Cambridge, and other communities have enjoyed a far-more-robust recovery. “If you look at the employment numbers, we’re adding jobs in this part of the state, and that’s a really good development.”
That also includes the gas pump, where the prices for regular are now below $3 a gallon in all but a few of the 50 states and below $2 in a few (Oklahoma, for example). By all indications, they should stay at those levels, or drop even further, in the weeks ahead.
“And this simply puts money in people’s pockets,” Nakosteen explained. “When you pay for gas at the gas station, most if that money leaves the state — some of it stays, but most of it just goes away. Now, that money is staying in people’s pockets, but hopefully not for long; there are some estimates that people will spend at least half of what they save at the pump, and that goes to local businesses.”
The positive trends also include the housing market, the balance sheets of both businesses and families (both are carrying less debt), and consistently rising numbers when it comes to business confidence.
And then, there’s that $800 million casino project in Springfield’s South End. It isn’t officially underway yet — at least in terms of demolition or construction — but it is already generating excitement, movement within the long-stagnant commercial real-estate market, and talk of opportunities in many forms.
“We’ve had two vendor fairs, and they were very well-attended by small and medium-sized businesses who are looking at the possibility of doing business with the casino, and that’s a real positive sign,” said Jeff Ciuffreda, president of the Affiliated Chambers of Commerce of Greater Springfield, noting that there is anticipation with regard to jobs — both construction and permanent — and the casino’s vast potential for bringing more meetings and conventions to the city and region as a whole.
Meanwhile, the announcement that Changchun Railway Co. will be building subway cars in the former Westinghouse site has spurred anticipation of more than 150 well-paying manufacturing jobs as well as hopes for further growth within the region’s once-prominent manufacturing sector.
Despite all this welcome news, there are some points of global economic concern, said Cliff Noreen, president of Springfield-based Babson Capital Management LLC. He cited everything from a slowing growth rate in China to falling bond rates in many European countries to the fact that, while corporate profits are soaring, that wealth is, by and large, not being shared with employees.“In the third quarter, U.S. corporate profits were up 9% on revenue growth of 4%,” he explained. “And this results from a very intense focus on managing expenses, which is to the detriment of employees; wages as a percentage of GDP have dropped to 43%, the lowest level in years.”
But, overall, Noreen and others are generally optimistic about the year ahead, so much so that the adverbs ‘guardedly’ and ‘cautiously,’ which have preceded that term since the recession officially ended nearly six years ago, have been generally dropped from most commentary.
“I do think that the mood of small-business owners is positive — I sense a better buzz, a better feel now than I have in the past several years,” said Ciuffreda. “Some of this is downtown-centric, with UMass here, the progress at 1550 Main Street, NPR’s new facilities, new tenants in 1350 Main St. … the feeling is a lot better; the city is more positive than I’ve ever seen it.”
Like Nakosteen, Noreen called falling gas prices a form of economic stimulus, and he offered some eye-opening numbers to get his point across.
“Every penny that gas drops results in $1.3 billion of additional money or funds for consumers and business in the United States — discretionary spending,” he explained. “Gas has dropped approximately 55 cents from the beginning of the year, which should result in a savings of $73 billion, which is effectively stimulus, which comes out to about four-tenths of 1% of GDP.”
Nakosteen cited estimates that the average family will save perhaps $60 a month due to the falling gas prices. “And if you do the arithmetic, take half that and add that up over a whole lot of households, that’s really money being spent in the region,” he said. “And from all I’m reading, this decline in fuel prices is not going to be short-lived; it’s going to last for a while.”
This windfall — unexpected but in some ways not surprising, given the explosion in the production of shale oil in this country — is just one of many reasons, large and small, for rising optimism regarding the economy, even as those numbers are tempered by the damage done to the energy sector when oil falls to below $70 a barrel.
Nakosteen said the improving employment numbers are equally important, if not moreso.Elaborating, he noted that, for the most part, whatever recovery this region has enjoyed over the past several years has been generally of the jobless variety. But recent employment reports show that perhaps that scenario is changing.
“It’s been really a slow slog,” Nakosteen said of employment in the four western counties and especially Springfield. “Maybe the recovery is really gaining traction in this part of the state, and recent developments are only going to help.”
With jobs come disposable income and a resulting trickle-down, said Noreen, noting quickly that optimism does need to be kept in check by the fact that many jobs being created, not only in Massachusetts but nationwide, are part-time in nature, and with wages that are not keeping pace with inflation.
“More than 321,000 new jobs were created on a net basis in November,” he said, citing the most recent jobs report. “Our concern, and we’ve been saying this to clients all year, is that the quality of jobs is not what it used to be, and many of these jobs are part-time jobs, they’re in service-type industries that are very low-wage, and many of the jobs are being taken by workers over 55 years old, either because they want to work or they need to work.”
But, overall, the job growth is being seen as a positive sign for the region’s economy, as is the growing confidence among business owners, said PeoplesBank President Doug Bowen, who cited not only the Associated Industries of Massachusetts’ monthly business confidence index and its recent steady improvement, but also trends and activity he’s noticed locally.
“The Massachusetts economy is on track to strengthen, with solid economic growth, and add more jobs in 2015,” he said. “We have a positive outlook for Western Mass. Companies in our portfolio, in general, are doing well and showing moderate growth. Some of these business owners are selectively investing in capital equipment and, to a lesser degree, new facilities.
“But we are seeing growth,” he went on. “We’re seeing some that are adding additional shifts, which always precedes the actual physical construction of new space.”
One of the sectors where he’s seeing such movement is aerospace, or machine shops, which he considers a positive sign because those jobs are generally well-paying. But he’s also witnessing growth in other manufacturing, healthcare, hospitality, and IT.
He said that most of these expansions are resulting not from speculation, but rather from current backlog and existing orders, which leads some to speculate on how long this might continue. However, Bowen noted that he’s seeing generally forward movement and, overall, less hesitation when it comes to additional hiring.
If there are speed bumps down the road for the region’s and nation’s economy, they will likely result from action — or inaction, as the case may be — in other corners of the globe, said those we spoke with.
“Japan is struggling, the Russian ruble has declined substantially, and China is growing at less than people thought,” Noreen explained, adding that these factors and others add up to less demand for U.S. products and commodities such as oil, iron ore, and concrete, which may eventually slow the pace of growth in this country.
“Over the past three years, China used more concrete than the U.S. used in the last 100 years,” said Jay Leonard, a director with Babson Capital Management. “That’s a stunning number, and it helps explain why, with China’s slower rate of growth, oil prices are down, copper prices are down, and steel is getting crushed.”
Meanwhile, Europe continues to be the biggest disappointment on the global economic stage, said Noreen, pointing to bond rates on 10-year government yields (2% in Spain, 1% in France, and 0.77% in Germany) that he called shockingly low.
As 2015 approaches, those representing several economic sectors anticipate that this will be a year of change, but also challenge and, in many cases, opportunity.
For the long-suffering construction industry, one of the sectors hardest-hit by the recession and the lackluster recovery that followed, change is almost certainly good, said Dave Fontaine, president of Springfield-based Fontaine Brothers.He told BusinessWest that, while 2014 has not been a banner year for his company — “we had work, but it was all booked in 2013” — there has been some improvement in several areas within construction, from home building to infrastructure work (roads and bridges). And the consensus is that 2015 will be better because of what he called “pent-up frustration.”
But easily the greatest source of optimism within the industry is the approaching start of work on the casino.
While the general contractor for this massive project will certainly be a firm from well outside the 413 area code, undoubtedly one with several casino projects in its portfolio, Fontaine said, there will be a trickle-down effect, with many area subcontractors and individual tradesmen (all unionized) in line to win much-needed work.
Just how much work remains to be seen, obviously, but Fontaine expects the project to have a deep impact on the sector and its workforce.
“The casino project is going to be good for the general trades, because I know that, for bricklayers, carpenters, and laborers, their hours were down significantly this past year,” he said. “These types of projects certainly employ a lot of people, and they employ them quickly and for a lot of hours, but then they’re done.”
What the sector will have to guard against, to whatever extent possible, is a shortage of manpower for other projects because of the attractiveness of the casino work in terms of hours, wages, and the opportunity for overtime.
“There’s the potential for some manpower shortages, because everyone would want to be down at the casino because they’re getting overtime and six days a week and whatnot,” Fontaine explained. “But our group of tradespeople that work for us, I don’t see them packing up and abandoning us to give their life to the casino for two years.”
Change is also expected in the banking sector, where Bowen believes the recent spate of mergers and acquisitions will give way to a more stable environment.
Indeed, 2014 saw the completion of the merger of equals between United Bank and Connecticut-based Rockville National, and the announced acquisition of Hampden Bank, the last institution based in Springfield, by Pittsfield-based Berkshire Bank.
“To a large extent, it’s pretty much over,” he told BusinessWest. “There may be one or two more organizations that come into play, but the organizations that positioned themselves for merger or acquisition have pretty much achieved their objective.”
These mergers present opportunities in several forms, especially for community banks like PeoplesBank, said Bowen, noting that, whenever such acquisitions take place and management of the acquired bank shifts away from Greater Springfield, commercial and consumer accounts will be moved to small institutions. Meanwhile, such unions generally result in downsizing, which enables banks to recruit talented individuals that already know the local market.
“As an independent, mutually owned bank with no shareholders, we often become the bank of choice for customers who have experienced some disruption in their banking experience,” he said. “This year alone, we’ve increased deposits by more than $100 million; a typical year might by three-quarters that amount.”
Another sector that bears watching in 2015 is healthcare, which is still struggling to cope with the changes brought on the Affordable Care Act (Obamacare) and the ongoing shift from a fee-for-service system to one focused much more on population health.
Such a shift requires providers to make significant investments in equipment, systems, and personnel, said Dennis Chalke, Baystate Health’s chief financial officer, treasurer, and senior vice president of Community Hospitals, adding that these investments come at a time when reimbursements for care are flat or declining and inpatient stays, a major source of revenue, are falling.
Thus, it’s becoming increasingly difficult to make them, especially for stand-alone hospitals, he said, which explains why North Adams Regional Hospital closed in 2014 and why Stewart Health Care System announced that it was shuttering Quincy Medical Center, the largest hospital closing in the state in more than a decade.
“Right now, Medicare is penalizing people if their readmission rates are too high,” he explained. “That means you have to now invest in tools and other things to decrease readmissions, so when patients leave the hospital you have to make sure they follow up with physician office visits and they that they are adhering to their medications and so forth — and that takes investments in things you wouldn’t traditionally invest in.
“That’s a good thing,” he went on. “But we’re not getting paid to do that. We avoid losing dollars when we do that; it’s almost like a negative incentive. And that’s the biggest challenge facing the industry moving forward.”
As for the casino, Ciuffreda said that, overall, apprehension about the gaming facility is diminishing, at least within the business community, and it is generally being replaced with optimism, although some concern remains about its long-term sustainability.
“The mood is very positive — the only slightly gray cloud hanging over the casino is its sustainability 10 years out or so,” he said. “About 95% of the people feel very comfortable about the next five years, and 75% are comfortable about the next 10 years, but some questions start to creep in about what happens after that.”
Challenge and opportunity. Those two words sum up the outlook for each sector and the regional economy as a whole.
But, overall, the emphasis this year seems to be more on opportunity, as it pertains to jobs, growth through additional discretionary spending, expansion, and the many forms of trickledown anticipated from the casino.
As Nakosteen said, it appears that the economic recovery is actually permeating Western Mass.
And it’s about time.
George O’Brien can be reached at [email protected]
By JEFFREY S. CIUFFREDA
The year now drawing to a close might best be known for all of the planning that went into several projects, and therefore 2015 will likely become known as the year of construction, because many, if not all, of these planned projects entered into the construction phase.Indeed, 2014 saw a fair amount of construction, and some of what took place was rebuilding from the 2011 tornado that ripped through Springfield and the surrounding area. Several schools in Springfield were either repaired or rebuilt, bringing construction volume to more than $100 million. While the construction trades had suffered double-digit unemployment for a few years, these public projects helped keep some of those workers employed.
Some long-time institutions spent considerable money in 2014 to upgrade their facilities, and in some cases add jobs. Mercy Medical Center completed a $20 million addition to its campus, and National Public Radio renovated a downtown building at the cost of $3 million, adding to the rebirth of the downtown that brought some jobs down from their Amherst location. Caring Health Center completed its renovations in the South End, spending $15 million to do so.
Looking ahead to 2015, there is more construction to come, but this time complete with new jobs.
This past year saw an up-and-down planning process with expanded gaming in Massachusetts, culminating in a final vote by the citizens of the Commonwealth to move forward with this concept. That gave the green light to MGM to commence its $800 million project in Springfield’s South End. It is expected that a general contractor will be named, and it will choose its subcontractors by spring, and construction will begin. Roughly 2,000 construction jobs are expected on site once the project is fully underway. The 3,000 permanent jobs this development promises will not be seen until 2017, but the planning for those jobs, including job training, will commence in 2015.
Another project that was in planning during 2014 and will begin construction in 2015 promises to bring 150 jobs to start. Changchun Railway Co., a Chinese firm, won the state’s bid to construct rail cars for the MBTA and chose to do so right here in Springfield. This company is a worldwide entity, yet, until this decision, it had no presence in North America. It hopes to make Springfield its North American headquarters and grow those original jobs to 300 within one to two years. These are good-paying machinist positions as well as countless other support jobs, all of which will greatly add to the economic well-being of our region’s major city and its people.
Adding to the region’s inventory of hotel rooms and, therefore, boosting the tourism sector of our economy is the new $ 5 million Hampton Inn on East Columbus Avenue in Springfield, which will open in 2015. The Silverbrick Co.’s rehabilitation of the old Morgan Square in downtown Springfield will remake those buildings into market-rate housing, and many of those units will be on the market for 2015. While these private-sector jobs are essential to economic development, there are several public-sector projects that will also be underway in 2015, many, again, related in some way to the devastating storms suffered over the past three years.
A new, $8 million South End Community Center, a $12 million senior center, and an $8 million police station will all add up to better facilities and better services. The year ahead will also be marked by the start of the largest infrastructure project the area has seen in a decade — the complete rehabilitation of the elevated section of I-91 that runs through Springfield from the I-291 intersection to just south of State Street.
This $235 million project will begin in late spring of 2015 and continue on for three years. While no project of this magnitude can be done without some inconvenience, it will guarantee the region a safe roadway, which is the crucial economic link to our Western Mass. region.
Meanwhile, the $82 million rehabilitation of Union Station into a transportation hub, complete with amenities and available office space, will be mostly completed in 2015, creating a true anchor for the North End of Springfield.
If 2014 was the planning year, and 2015 the construction year, 2016 will be filled with ribbon cuttings and new jobs, both construction and permanent. The outlook has not been this positive for our region’s major city in quite some time.
Jeffrey S. Ciuffreda is president of the Affiliated Chambers of Commerce of Greater Springfield.
By SUSAN G. FENTIN, Esq.
For employers in Massachusetts, 2014 was quite a year: in addition to multiple Supreme Court decisions, the Equal Employment Opportunity Commission (EEOC) issued guidance on the Pregnancy Discrimination Act, and new Massachusetts legislation increased the minimum wage, created rights for employees who are victims of domestic violence, and mandated paid sick leave for employers of more than 10 workers.So what can employers expect from the new year? Based on Congress’s recent inability to pass any meaningful legislation, we don’t expect much from that body, and we don’t have a crystal ball as to what we can expect from the Massachusetts Legislature. But several cases pending before the U.S. Supreme Court could have significant impact on Massachusetts employers. Plus, we can count on some revised regulations related to wage-and-hour exempt status.
Here’s a summary of some issues that employers should watch for in the coming year.
In March, President Obama directed the secretary of Labor to modernize and streamline the existing wage/hour regulations, specifically to consider how the executive, administrative, and profession exemptions should be updated to provide minimum wage and overtime protection to more employees.
In May, the Department of Labor (DOL) announced its plans to review these so-called ‘white-collar’ exemptions. Many labor and employment advisors expected proposed regulations to be issued after the November elections, but the DOL has announced that these regulations will not likely be rolled out until early 2015. There is no question that the regulations governing exempt status will be revised; the only questions are how and when. This is a change that will definitely take place in 2015, and employers should plan now to re-evaluate their exempt classifications when the final regulations are issued.
Supreme Court Cases
• Integrity Staffing Solutions v. Busk: In October, the court heard oral arguments in this case, which deals with whether time spent going through security is compensable under the Fair Labor Standards Act. Integrity staffs warehouses for its customers and requires workers in those warehouses to pass through security clearance before leaving for the day, a process that sometimes takes up to 25 minutes to complete.
If the court determines that the time spent in security is ‘integral and indispensable’ to the employees’ principal job activities — fulfilling online purchase orders — the employees will be entitled to be paid for that time. However, if the security line is determined to be ‘postliminary’ to the employees’ work, it’s not compensable.
• M&G Polymers v. Tackett: This is a labor case that wrestles with the interpretation of collective-bargaining agreements under the Labor Management Relations Act. At issue are retiree healthcare benefits for M&G’s unionized employees, as outlined in the CBA. In 2006, M&G announced that retirees would be required to begin making contributions toward the cost of their healthcare coverage. The union objected, arguing that, since the agreement was silent on the duration of the benefit, the employees were entitled to lifetime retiree healthcare benefits without any contribution. According to M&G, other documents, ‘cap’ letters, and ‘side’ letters were intended to modify the agreement for M&G’s plant in Apple Grove, W.V. The court will decide what type of language is required to support a benefit of indefinite duration.
• Mach Mining v. EEOC: In the Bay State, the vast majority of discrimination charges are handled by the Mass. Commission Against Discrimination, so many Massachusetts employers do not have to deal with the federal EEOC. However, for those that face an EEOC charge, this case may have consequences. When the EEOC finds probable cause in a discrimination case, it is required to engage in discussions with the employer in an effort to resolve the matter prior to litigation. In this case, the EEOC cut short the conciliation efforts and filed suit.
Mach Mining claimed that the EEOC did not attempt to conciliate in good faith and that the company should be able to defend the lawsuit on that basis. The court will decide whether litigating the EEOC’s good-faith efforts at conciliation can be considered an affirmative defense in such cases.
• Young v. UPS: This case dovetails with the EEOC’s newly issued enforcement guidance on the Pregnancy Discrimination Act. Young’s doctor restricted her ability to lift more than 20 pounds after she became pregnant, and as a result she could not meet one of the essential requirements of her position. Although UPS had a light-duty policy, it was available only to employees who had been injured on the job or who suffered from a disability under the Americans with Disabilities Act.
UPS gave Young an unpaid, job-protected leave until she could return to work, but the leave was unpaid, and she lost her medical coverage. UPS claimed that its light-duty policy was “gender-blind” because both women and men who were injured at work or disabled under the ADA were eligible for light duty. Young claimed that she was entitled to light duty under the PDA. The court’s decision will have far-reaching impact on the ability of pregnant workers to claim entitlement to light duty as a reasonable accommodation for pregnancy-related work restrictions.
• EEOC v. Abercrombie & Fitch: Samantha Elauf wore a hijab (head scarf) to her interview for a retail position at Abercrombie. Although she scored well on the interview, she was not hired. She believed it was because her head scarf conflicted with the company’s dress code, although she never discussed her head scarf or any religious beliefs with the interviewer.
A lower court ruled that, because religious beliefs are personal, Elauf was required to tell Abercrombie that she wore the scarf for religious purposes in order to trigger Abercrombie’s duty to consider whether exempting her from its dress code would be a reasonable accommodation for her religious beliefs. The court will decide whether Abercrombie had notice of Elauf’s religious beliefs and their impact on her attire simply because she came to the interview dressed in a head scarf.
Employers who are interested in staying up to date on these and other significant developments in labor and employment law can sign up for a blog, “The Law@Work,” available at www.skoler-abbott.com.
Attorney Susan G. Fentin has been a partner at Skoler, Abbott & Presser since 2004. Her practice concentrates on labor and employment counseling, advising large and small employers on their responsibilities and obligations under state and federal employment laws, and representing employers before state and federal agencies and in court. She speaks frequently to employer groups, conducts training on avoiding problems in employment law, and teaches master classes on both the FMLA and ADA; [email protected]; (413) 737-4753.
As the director of Economic and Public Policy Research for the Donohue Institute at UMass, Dan Hodge has been involved in a number of initiatives in — and involving — Springfield.
He had a role in the post-tornado initiative called Rebuild Springfield, for example, and has been both a close observer and color commentator of sorts with regard to the many different types of development that have emerged over the past several years.
Summing up the mood, or attitude, he believes is taking shape in the City of Homes, he said, “people are asking, ‘when are things going to happen here?’”
The answer, he went on, is now, or very soon.
Indeed, 2014 could be a watershed year, especially for Springfield, but also for the surrounding region, he said, noting such initiatives as the long-awaited redevelopment of Union Station and the recent announcement that UMass Amherst will proceed aggressively with establishment of a so-called satellite center at Tower Square, a $25 million undertaking.
And then, there’s that casino project that MGM Resorts International wants to build in the city’s South End. It is, at the moment, the only bidder for the coveted Western Mass. casino license still on the table. If MGM’s plan wins the favor of the Mass. Gaming Commission, and if the entire gaming initiative isn’t delayed — or waylaid — by a statewide referendum question now picking up speed (two big ‘ifs’), then cranes could start appearing on Main Street by next fall.
As he talked with BusinessWest about the economy, the ongoing but limited recovery, and the forces that will shape the foreseeable future, Goodman summoned that old Chinese proverb (some would call it a curse): ‘may you live in interesting times.’
Some would use a different adjective to describe this period, but that term works, he said, adding that this has certainly been an intriguing time in which to watch the economy, discuss developments in the classroom, and attempt to make projections about what will happen next.
Clayton-Matthews agreed, and set the tone for his analysis by saying, “this has been a nightmare of a recession.”
And by that, he meant both the actual downturn, the so-called Great Recession, which officially ended toward the middle of 2009, and the often-painfully slow recovery that followed.
In many respects, it has been like the recession of the late ’80s and early ’90s — noted in Massachusetts for the loss of an entire industry (minicomputers), multiple bank failures, a 12% reduction in GDP, and an equally long and slow recovery period — but in some ways, especially the force of the turbulence confronting progress, it’s been worse.
But is the nightmare over?
That’s the $64,000 question, said Clayton-Matthews, adding that there are definitely signs that it might be.
These include three consecutive months of payroll growth registered in August, September, and October, he said, adding that, while the gains were outwardly not significant (perhaps 1.5%), they are made more impressive by the “significant headwinds coming from the federal government,” as he called them, referring to everything from sequestration to the shutdown.
“Considering all that, it’s nice that we’re having any payroll growth,” he said. “This is much faster growth than I was expecting.”
Clayton-Matthews said the payroll figures contradict, to some extent, household-survey results, which indicate that that there are fewer Massachusetts residents working now than at this time last year, but overall, he considers the payroll numbers more reliable, and he believes they translate into improving confidence and increased spending.
“It appears that both the national and state economies have been growing — not at a rapid rate, but they’ve been growing,” he said. “And that has been resulting in higher levels of employment and, therefore, household income, and the ability to spend and the willingness to spend.”
Cliff Noreen, president of Babson Capital, which has more than $188 billion in assets under management, agreed, offering this broad summation: “the U.S. economy continues to heal, but is not yet healthy.”
Elaborating, he said he has a host of numbers he can summon that would seem to justify optimism about the economy and where it’s heading, but also give credence to his belief that the healing process is far from over.
Work in Progress
But while the economic skies would seem to be brightening, there are many forces that could impede progress, said Goodman, adding quickly that many of these forces originate outside the borders of this state, and the country, for that matter.
And with that, he returned to what he called “ongoing political shenanigans” on Capitol Hill, and his analogy to hitting the gas at the same time the emergency brake is on.
“The Fed is doing everything in its power to encourage growth,” he said. “It’s keeping interest rates low, it’s making it more attractive to borrow, it’s increasing the monetary supply through quantitative easing … the Fed is just trying to snap us out of this by encouraging investment and sparking economic growth.
“But at the same time, we’ve been engaging in these austerity-related budget policies,” he went on. “We have sequestration, the inability of the federal government to even pass a budget, moving from continuing resolution to continuing resolution, which injects all kinds of uncertainty into important parts of the economy, and the periodic brinksmanship, which has had such a demonstrably negative impact on economic activity in the periods leading up to those moments of truth.”
Although the Senate eventually passed a budget last week, other challenges loom. In another eight to 10 weeks, the latest continuing resolution that allows the federal government to continue operating will come to an end, said Goodman, adding that the debt ceiling is also nearing its limit. Which means there are more moments of truth to come, and they make it extremely difficult to project what will happen nationally and regionally.
Meanwhile, the same is true for what’s happening — or not happening — overseas, he said, adding that the international economy remains weak, and its overall health is certainly something well beyond the control of state and national leaders.
But it bears watching because of the Bay State’s strong export economy and its vulnerability to adverse conditions in Asia and especially Europe, where more than 40% of the state’s exports wind up.
“That’s been a growth driver for the entire state, and it has allowed us to do, until quite recently, a bit better that the country as a whole,” he said, referring to what’s generally referred to as the ‘innovation economy.’ “We’ve grown a bit faster until very recently, and we’ve had quite a difficult time with employment, housing, and other areas, even though we’ve certainly had challenges.
“All of that is driven by businesses and consumer markets around the world purchasing our products and services,” he continued, listing everything from healthcare to computer technology. “All of these things have been driven by demand from around the world, and we don’t know what’s going to happen with that demand.”
Compounding this vulnerability is the general uncertainty, not to mention actual cutbacks, in federal spending resulting from sequestration and other austerity measures, he went on.
“The fuel for the innovation economy has been not just that international and national private demand, but also federal funds in the form of research dollars, government contracts, and government expenditures,” Goodman explained. “When we think about the Pioneer Valley and its precision-manufacturing base and its reliance on government funding, the changes that are taking place, with many of them resulting from government policy choices, are putting some downward pressure on demand and creating a lot of uncertainty.”
At the same time, there are some other forces at play with regard to the economy, he went on, noting, for example, that many of those aforementioned products and services being exported but also sold in this country are enabling businesses to effectively do more with less, meaning fewer employees, which is certainly contributing to tepid gains in employment.
Also, noted Hodge, Massachusetts is facing the difficult challenge of creating employment opportunities for those without a college education, who increasingly face the prospect of being left behind in this innovation economy.
Elaborating, he said the state’s unemployment rate is at essentially the same level as the rest of the country — 7%. But because this state has a higher percentage of people with college degrees than other states, its unemployment numbers are skewed toward those who are less educated.
“This is a big challenge for the state,” he said, adding that there are several initiatives being undertaken, and a workforce study involving the Donahue Institute and the Pioneer Valley Planning Commission has been launched in an effort to identify strategies for enabling more members of this demographic to enter the workforce and stay in it. “One of the things we keep hearing is that there are some good programs out there, but they’re just not reaching enough people.
“The unemployment rate in Springfield is still over 10%, and it’s the same in Holyoke,” Hodge went on. “And the longer people are detached from the workforce, the less they see a future, and the harder it’s going to be for them. This is a big segment of the population, and it’s a largely untapped resource.”
The Bottom Line
When asked if it’s difficult to make a projection for the future of the regional and state economies, Clayton-Matthews laughed.
“It’s not difficult to make a projection,” he said, responding to the specific wording of the question. “But it is difficult to make an accurate projection.”
That’s because, while many arrows are pointing up, there are those headwinds to consider, as has been the case since the recession officially ended and the recovery, such as it is, began.
If all goes well — or at least better than it has — then that emergency brake Goodman mentioned may finally be taken off, and if it does, then the economy might actually be able to pick up some speed.
George O’Brien can be reached at [email protected]