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Outlook 2013

Outlook2013-124Outlook2013-133Outlook2013-110Outlook2013-53The Affiliated Chambers of Commerce of Greater Springfield recently staged Outlook 2013, the organization’s annual winter gathering of area business and civic leaders, at the MassMutual Center in Springfield. The event, staged on Feb. 25, drew more than 800 attendees, who had the opportunity to network, receive an update on the chamber’s legislative agenda, and hear from a host of speakers on the state of the economy locally, regionally, and nationally. From top: U.S. Rep. Richard Neal delivers his annual address on the federal economic outlook; keynote speaker Mark Shields, a nationally known columnist and commentator, delivers his talk, titled “How Will History Judge Today’s Headlines?”; Daniel Hodge, director of Economic and Public Policy Research at the University of Massachusetts Donahue Institute, offers his forecast for the regional economy; and the scene in the packed banquet hall at the MassMutual Center.

Cover Story
Searching for Answers to an Uncertain Future

Cover Decemebr 20, 2010

Cover Decemebr 20, 2010

While uncertainty is the one word most experts are using to frame their opinions about 2011, something approaching consensus is taking shape. It appears the region and nation are due for more slow, unremarkable growth, and probably insignificant gains in terms of employment. In other words, it looks like more of the same that we saw in 2010.

Andre Mayer had an intriguing way of summing up what happened with the economy in 2010, one that captured the sentiment of most observers.
“It’s been a year in which conditions have certainly improved … but in a rather disappointing way,” said Mayer, vice president of Communications and Research for the Associated Industries of Mass. (AIM). Indeed, after recording fairly significant growth in the first six months of the year, the economy stumbled, and then seemed to take at least one step backward for every step forward.
“In 2010, we had a pretty good first half in terms of working our way out of a recession,” Mayer continued. “The state economy improved, and business confidence increased, right up until June, and fairly steadily. But then, things began to deteriorate, and some of that has to do with the diminishing impact of stimulus actions on the part of the federal government. We had quite a disappointing third quarter, and while the fourth quarter has been a little better than the third, we’re well behind where we thought we’d be in terms of recovery.”
Karl Petrick, an assistant professor of Economics at Western New England College, agreed.

Karl Petrick

Karl Petrick says a “Mexican standoff” between consumers and business owners is one of the many issues limiting recovery from the Great Recession.

“The recovery’s been shaped like a U, a very long U,” he explained, referring specifically to the horizontal line. “There’s only been a little bit of an upward tick. It’s been really frustrating … we’ve just been bouncing along the bottom on this recovery, and that’s been nationwide, not just Western Mass. And every month there’s good news, the next month, there’s bad news. And the nationwide jobs report has done it again.”
That report — which showed that just 38,000 jobs were added for the month of November, after robust growth in October, and an unemployment rate of 9.8% — has many economists scratching their heads and shrugging their shoulders when they talk about 2011 and what can be expected regionally and nationally.
But while there is certainly a large amount of uncertainty, there is something approaching consensus when it comes to the outlook on the months and quarters ahead — growth that will be slow and generally unremarkable, with probably only slight improvement in the jobs situation.
This goes double for Western Mass., said Bob Nakosteen, professor of Economics at UMass Amherst, because this region lacks what he calls a “jobs-creating fuel source” like the technology and biosciences clusters in Central and, especially, Eastern Mass., which greatly outperformed the western counties in 2010.
“The problem, of course, is that we really haven’t replaced our declining manufacturing base with anything that has dynamism into the future,” he said, with ‘we’ referring to the Pioneer Valley as a whole, but especially its largest city. “Springfield has not reinvented itself; it has a lot of potential, but isn’t that the worst curse in life, to have a lot of potential?”
“We’re just in for a period of relative stagnation, if that’s the right word,” he continued. “There will be slow growth; I think this may start to improve, but it probably won’t happen before midyear. And it’s only when the national economy starts to improve that we’re going to feel some of the benefits in this part of the state. And there just isn’t enough of an economic engine here to have traction once the national economy starts to grow.”
But Mayer was much more positive in his outlook. “I think 2011 should be a year in which it becomes clear that the recovery is taking hold. We should see improvement from a very low rate of growth as the year goes on, and we’ll enter 2012 in much better posture than we’ll enter 2011.
“Unless we fall off completely,” he continued with a laugh, noting that there is just too much uncertainty — in this area code and countries like Ireland, Portugal, Greece, and others — to say with any degree of confidence what will happen.
For its Economic Outlook 2011, BusinessWest talks with several economists about the immediate future and what will shape it from a recovery standpoint. Overall, they said there are far more questions than hard answers.

Realistic State of Mind
Amid the prevailing disappointment over how 2010 played itself out, there were some bright spots that could prompt optimism if one were so inclined.
Mayer said the state’s performance, which exceeded the nation’s, was one such positive, in part because it showed some depth and diversity in the Commonwealth’s economy, although the good showing likely had more to do with the fact that the Bay State isn’t dominated by the industries hardest hit by the Great Recession, such as home building and automobile manufacturing.
“The fact that we’ve not only been able to keep pace, but actually outperform the nation so far in this slow and halting recovery is a good thing for us,” he explained, adding that, historically, the state has lagged behind the rest of the country when it comes to bouncing back.
Meanwhile, the Commonwealth’s performance helped it retain some talented young people who might otherwise have left for presumably greener pastures.
“We have not seen the kind of outflow of human capital, mostly young people with marketable skills, that we’ve seen after past recessions,” Mayer explained, “because they would leave to seek better job opportunities elsewhere in the country. Right now, there aren’t those kinds of opportunities.
“In fact, the kinds of places where they used to go, the areas with high population growth, like Arizona, Florida, and Nevada, are suffering very badly in this cycle,” he continued, “because those are places where real estate and home construction are very important parts of the economy, and those sectors have just been hammered.”
Overall, the Massachusetts economy — and individual businesses large and small — have “adjusted,” said Mayer, which, roughly translated, means they’ve become more efficient and able to do the same with fewer people, which is another positive from a competitiveness standpoint, but not from a job-growth perspective.
“On balance, companies have been able to adjust to more-difficult circumstances, to a slow-growth economy,” he told BusinessWest. “They’ve been able to keep afloat and in some cases do pretty well, but they’re doing this, in large part, at the expense of job creation; they’ve slimmed down their staffing, and they’re very reluctant to add on new people, so we haven’t seen a whole lot of job creation.”
And, surprisingly, one of the areas where there’s been recorded growth is manufacturing, noted Mayer, adding that this is probably the last sector most observers thought would expand. “Manufacturers can usually squeeze more productivity out of their existing staff, and they’ll usually do that before they add people, so this has been an odd pattern, but something else that bodes well for the state.”
Despite these positive developments, 2010 has been rather forgettable, said Mayer and other observers, and the sluggishness of the past few months, not to mention the November jobs report, makes it that much more difficult to gauge what the year ahead will be like.
“One month you get 172,000 jobs, and the next, 39,000 new jobs, one-fifth the number that was forecast,” said Petrick. “That just really shows how uncertain the recovery remains in terms of when it’s going to gain steam.
“Most forecasters were almost writing 2010 off, saying, ‘we’re going to see some improvement, but not a lot,’ and those people were right,” he continued. “But then, most people were forecasting that things would pick up in 2011; now, some of the more pessimistic forecasts are for 9.5% unemployment nationwide, and the optimistic ones are for 8%, which is significantly higher than it had been, and that doesn’t bode well for Western Mass.”
Petrick noted that perhaps the biggest stumbling block to economic progress, both regionally and nationally, is confidence, or lack thereof. This fear of what is still very much the unknown has both consumers and business owners frozen in their tracks and either unwilling or unable (or both) to step forward with any conviction.
“Consumers are uncertain — they’re holding back as much as they can,” he explained. “Businesses are uncertain, not because they’re worried about taxes, but because they’re worried about what’s happening with consumption. It’s a Mexican standoff between consumers and businesses, each one saying ‘you first.’ Consumers are saying ‘hire us and we’ll spend,’ and businesses are saying ‘spend and we’ll hire you.’”

Stimulating Conversation
Whether there is any relaxing of this standoff in 2011 depends largely on when and to what degree the national economy improves, said Petrick, adding that there are several factors that will play into this.
These include everything from the fate of the announced compromise tax plan to the impact of whatever stimulus funding is still to be spent, to the Federal Reserve’s attempts to actually spur inflation, or at least ward off the more dangerous deflation.
“They are trying to get a higher rate of inflation than we have now, because there are some things that might spring from this that are healthy,” said Nakosteen. “If businesses can get a bit more of a margin in the prices they charge, if low interest rates in the face of a little more inflation prompt investors to get more into the stock market, these are good things, and two outcomes the Fed is trying to get by doing this.
“The risk is that they’re in a little bit of uncharted territory,” he continued, “and it’s not real clear that those actions are actually going to prompt the economy to begin to recover. There are only so many things they can try, and they seem to have tried one of everything; no one really knows.”
Those four words apply to many of the questions concerning the regional and national economy, including the matter of federal stimulus efforts.
Indeed, while many believe the impact of stimulus programs is now mostly in the past tense, Petrick said there remains a substantial amount of stimulus funding that has been allocated for this region but not spent.
“This is construction money, by and large, and it will be helpful, because that’s the sector that’s been the hardest-hit,” he explained. “There still could be a positive effect in the next year from that money that’s been allocated for different projects but hasn’t been spent.”
Locally, progress for the short and long term may well depend on if and to what degree the region can advance the process of reinventing itself.
Petrick sees some signs of progress in the Valley’s ongoing efforts to build its ‘green’ sector.
“This is a region that could, with a lot of work, start to make a name for itself in terms of green technology,” he said. “We have some green shoots — individually, they’re not much, but collectively, this could be a positive thing that could prompt hiring across a number of skill levels.”
But Nakosteen says the region still has a lot of work to do with regard to the process of reinvention.
“We’ve had this long-term decline in our base,” he explained. “There’s nothing really stopping that, and there’s nothing arising to take its place. There’s nothing taking hold to get these gateway cities going, and Springfield is one of those gateway cities.”
The biggest concerns for the year ahead involve jobs and the likelihood that this state and region won’t be creating many.
“We’ve done all right in Massachusetts relative to the rest of the nation,” said Mayer. “October was a pretty good month, maybe the first we’ve had, and then the November report came out, and we went backwards. So it’s very hard to predict what will happen next year.”

U Guessed It
While the past few months have shown that seemingly anything can happen in 2011, economists are in general agreement that the nation and region will likely continue moving along what is the bottom of the U that several referenced when taking about the shape of the recovery.
There may be more movement back up, Petrick told BusinessWest, predicting what amounts to more of the same for at least the next few quarters.
In other words, when 2011 nears its end, you may be seeing and hearing economists say there was improvement, but in a rather disappointing way.

George O’Brien can be reached at
[email protected]

Sections Supplements
The Economy Is Improving, but Where Are the Jobs?
Suzanne Bump

Suzanne Bump says a recent, slight drop in unemployment in Massachusetts bodes well for the Bay State.

Just before President Obama hopped aboard Air Force One en route to China earlier this month, he announced a December ‘jobs summit’ to address a big question facing his administration — will this be a jobless recovery, as many experts are predicting?

And the focus of the summit will be on preventing, or minimizing, such an eventuality.

Nationally, unemployment has crept over the 10% mark, and there are signs that many companies that have made do with fewer employees in an effort to ride out the downturn are still cautious about hiring again. This has prompted questions, both regionally and nationally, about what kind of recovery can be expected if there is no real surge in employment — and if such a development could even be called a recovery.

Gerald Epstein, a professor at the Political Economy Research Institute (PERI) at UMass Amherst, doesn’t believe that term applies to what he’s seeing.

“If you have an unemployment rate that is measuring 10.2%, that doesn’t take into consideration discouraged workers, or part-time workers who want to work full-time, because then it’s upwards of 17%, and for certain demographic categories, like young people, it’s over 20%,” he explained. “Statistics like that are not those of a recovery.”

Elaborating, he said the current surge on Wall Street, which has seen a more-than-50% climb since March, cannot be expected to continue unless or until there is substantial job growth.

“The stock markets can’t continue to go up if the underlying basis of the economy, people’s ability to work and spend and consume, isn’t supported,” he said. “Any growth will just be a bubble, and an unsustainable one at that.”

Here in the Bay State, the numbers look a little better, jobs-wise, at least according to the state Office of Labor and Workforce Development, which announced last month that unemployment had actually dropped from 9.3% to 8.9%. LAWD Secretary Suzanne Bump told BusinessWest that such news is not only encouraging — in that things are not getting any worse — but also heralds signs of the Commonwealth’s climb onward and upward.

However, she added that job loss is a significant concern for the Patrick administration, and that while the state has seen some growth in key sectors — health care, professional, scientific,and business services — there are still some residual effects from past recessions.

“Coming out of this recession, we will be regaining some jobs,” said Bump. “But it has taken us a long time to regain those past job losses. In fact, I’m not sure that we did regain all of the jobs that we lost during the last recession of 2001-02.”

For its Economic Outlook 2010, BusinessWest looks at the recession from the lens of employment, both regionally and nationally. Epstein and some his colleagues at PERI discuss the likelihood of a jobless recovery, but also about ways in which job growth can be stimulated.

Help Wanted

On the day the latest unemployment figures were released in the Bay State, Bump told BusinessWest that such numbers bode well for the state’s economic health.

“We are as surprised as anyone by the magnitude of the drop in unemployment,” she said. “It is evidence that this particular recession continues to defy economic predictions.”

The construction sector continues to be hard-hit, she noted, adding quickly that while this is bad news for the overall health of the state’s economy, that particular sector isn’t as dominant an economic force as it is in other states. However, key sectors that are “growth engines,” as she called them, for the Bay State’s economy are gaining stability.

“Looking at health care,” she offered as one example, “we’ve maybe missed one beat over the past year, and in general they have been in an upward trend. I think that, literally, there was one month that we saw a contraction in health care and social assistance.”

The sectors that are seeing growth in Massachusetts are those that require advanced skills or education, said Bump, adding that, consequently, the Patrick administration has ambitious goals for its education-reform agenda. Citing training that leads to credentials, certifications, and post-secondary degrees as key areas of necessary spending, she said that, “if we are going to grow our economy, that’s what we have to focus on. Job training is not just about putting someone through a simple computer class, or giving them advanced manufacturing training.”

But while Bump sees reason for optimism, Epstein and others at PERI sound far more somber notes, and on many aspects of the employment scene.

According to Jeannette Wicks-Lim, an assistant research professor at PERI and author of several books on wages and employment in the U.S., while many are understandably focused on the number of jobs lost and the potential for gains, it is also important to bracket that with the quality of existing employment nationwide.

“When you don’t have job growth, there is slack in the labor market, and jobs don’t get wage gains,” she explained. “It’s great that you do have a job, but if your pay is stagnating over time, then it becomes harder and harder to meet your budget’s needs.”

Meanwhile, Epstein, Wicks-Limm, and and Robert Pollin, co-director at PERI, say the forces, or tools, of recovery are simply not strong enough for them to express much optimism for at least the short term.

Two main tools the government has been employing to help shore up the nation’s stability are stimulus funding and low interest rates, which these days hover close to zero. However, some ask, if that low-interest money doesn’t get into the right hands, then what is the benefit?

“It’s not generating real loans to small businesses, to businesses that want to borrow to invest to hire new workers,” said Epstein. “A lot of the money that is available right now is going into speculation that’s driving up stock prices, or it’s going overseas and driving up the value of other currencies, but it’s not going into generating new jobs.”

Work in Progress

Pollin said that such untapped reserves could offer a very real possibility of an immediate boost to the nation’s business sector — those very entities who can and would contribute to increased job creation.

“There’s about $700 billion sitting in bank reserves that wasn’t there a year ago,” he explained. “Banks received all this bailout money, and now they’re sitting on it in cash; they’re not putting it out. There’s no reason to lower interest rates if the banks are just going to sit on that money.”

Incentivizing the distribution of such money into the economy wouldn’t cost taxpayers a single penny, he added, and loan guarantees would encourage lenders to loosen their grasp on the funds.

“The government needs to create ways for loan guarantees, with other kinds of benefits, for those banks to get the money out,” he said. “Yes, loan guarantees have gotten a bad reputation because of TARP, but at the same time, we have massive loan guarantees in the economy, about $300 billion per year in student loans, small-business loans, agricultural loans … we do have a reasonably effective system.

“The way you create jobs,” he continued, “is to spend money.”

Increased spending on jobs could very easily occur, all three professors agree, in sectors that would not migrate overseas. Echoing a sentiment often heard lately in this region, Wicks-Lim said that “we know we could invest our resources in a green economy, and a lot of jobs could be created by focusing our energies there.”

Pollin said a recent idea put forth by both former President Clinton and venture capitalist John Doerr has both great potential and a great name: Cash for Caulkers. Money could, and should, be invested in energy-saving building retrofits, from the highest echelons of the federal government on down to the simplest of home renovations. But, it is up to Washington, Pollin said, to lead the way.

“The Pentagon itself owns 55,000 buildings in the U.S.,” he said. “If the government just put out a procurement for those buildings, that would be an enormous stimulus, and it saves money down the line.”

Pollin said he has long been an advocate of ideas like Cash for Caulkers. “I’ve been in debates where the questions are, ‘is the return on investment 30%, 20%, 35%, 40%?’ Nobody questions that you get your money back in five years at the most. So, why aren’t we doing it?”

He explained that the market for such large-scale retrofitting is still immature, acknowledging that it is a financial outlay for homeowners at a time when their priorities are on money coming in, not going out.

“Someone once told me, we need to get to the point where we have a McDonald’s for retrofits,” Pollin said. “You call someone, and it’s easy. But the only way it’s going to happen fast is if the government begins this massive spending on retrofits. You hire the 2 million construction workers who have been laid off in the last two years, and that will mature the market and create momentum and publicity for the private market. This could be a major undergirding for a recovery for the next few years.”

Meanwhile, Epstein told BusinessWest that funds must be diverted directly to the states more effectively than has been the case. “Otherwise, we’re going to start seeing large numbers of teachers, firefighters, and other jobs like that joining the unemployment rates,” he said.

Pollin added that these jobs funded by the states are not only desirable, but non-exportable.

“Just think of this — reducing classroom sizes, hiring more teachers,” he said. “This has been a goal for 50 years, raising the quality of education. If the average size of classrooms was 25 students, what if we lowered it to 20? That would increase the number of teachers by 20%.”

The Job at Hand

These are all ideas that will come up during Obama’s jobs summit, said Epstein. But a comprehensive situation still needs to be addressed that will focus on employment and green initiatives, something other countries have already started doing.

“Unless we pursue a green agenda,” said Epstein, “when we start recovering, instead of manufacturing in these kinds of products and having the R&D here, we’re going to end up importing it from abroad. And that’s neither sustainable nor going to create jobs.”

Overall, Epstein and others said the recovery, in whatever shape it takes, doesn’t have to be jobless — and, for the long-term health and well-being of the country, steps have to be taken to ensure that it isn’t.

40 Under 40 Class of 2009 Cover Story
Cover

Cover

Back in 2007, when BusinessWest’s inaugural 40 Under Forty honorees gathered for a group photograph outdoors, the sky was clear and bright — appropriate, since the clouds that now darken the nation’s economic outlook were a long way off.

It was an impressive group of entrepreneurs, innovators, and community leaders — in short, success stories that any region would be proud to tout. Last year’s group of honorees — in the second go-round of our annual celebration of the region’s young talent — was equally impressive, even if the economy was growing shakier by the week.

This year, economic bad news is everywhere, and the clouds only seem to get darker by the day. But guess what? Our third 40 Under Forty class shines just as brightly as the first two.

Not that this should come as a surprise to anyone with a finger on the pulse of the region. In fact, the vibrancy of the area’s young achievers — and getting younger; this class includes more 20-somethings than either of the previous two — gives those who care about Western Mass. plenty of optimism about the future. Even in the midst of perhaps the worst recession in 70 years, these individuals are starting and expanding companies, growing profits and creating jobs, seamlessly taking the reins of family businesses … and, in most cases, staying intimately involved in their communities through service on boards and volunteer efforts with charitable organizations.

Better yet, they’re creating lasting legacies that will inspire others to follow in their footsteps. Check out Kathy LeMay, this year’s highest-scoring honoree, who is cultivating philanthropic connections that will make a difference throughout the region for years to come. Brenda Wishart has worn a number of hats over the past decade, all aimed at building the next generation of entrepreneurs. Corey Murphy takes time away from his insurance agency to help kids read and do well in school — maybe giving a leg up to a future 40 Under Forty winner along the way.

By most expert accounts, the clouds will clear. And when they do, what will be left standing are the 40 Under Forty and others like them, who are working hard to build a buzz — and a foundation for long-term economic health — in the Pioneer Valley and beyond.

And now, we’d like to tell their stories, so you can be inspired, too.

—Joseph Bednar

The Class of ’09

Departments

Debt Doesn’t Slow Hoop Hall Plans

SPRINGFIELD — As area residents start to make their summer travel plans, officials at the Naismith Memorial Basketball Hall of Fame hope that a visit to the hoop hall is among their stops. Hoop hall officials note that attendance is up 12% from last year and is expected to increase when NBA star Michael Jordan is enshrined in September. In recent weeks, trustees have noted a need to restructure the hall’s debt and bring in more revenue to address a seven-year, $3.5 million loan from PeoplesBank. The organization has to pay $500,000 in principal and $300,000 in interest on that loan every year. The debt was incurred when the hall moved into its current building in 2002. Trustees had planned to pay the debt with revenue it would have received from loaning items from its collection to the Sports Museum of America in New York City; however, the museum never materialized. Trustees stress that there is enough cash on hand to operate the hoop hall throughout the year. John L. Doleva, Hall of Fame president and CEO, has recently visited interested parties in California, Arizona and Nevada who may be willing to take artifacts and memorabilia from the hall on the road to raise funds.

NBA Development League Team Comes to Springfield

SPRINGFIELD — NBA Development League President Dan Reed recently announced that the city has been awarded a team to begin play in the 2009-10 season. Joining Maine as the league’s first two teams in New England, Springfield will play its home games at the MassMutual Center. The franchise’s ownership group is led by Mike Savit, who is the managing general partner of the HWS Group. Springfield’s roster will begin taking shape with the NBA D-League draft, which typically is conducted in early November. Founded in 2001, the NBA Development League is the NBA’s official minor league. For more information about season tickets, call (413) 746-3263.

Northwest Suspends Amsterdam Service; Runway Reconstruction Underway

WINDSOR LOCKS, Conn. — Connecticut Department of Transportation and Bradley International Airport (BDL) officials recently announced that the flight by Northwest Airlines to Amsterdam, set to resume June 3, has been suspended. Given the challenging economic climate and poor advance reservations, airline officials from Delta Airlines decided that the flight is not financially viable at this time, but will be reconsidered as economic conditions improve. A reduction in the flight schedule from daily to four times a week, and lower fuel costs, still couldn’t offset a drop in demand, according to airline officials. According to the Air Transport Association, Delta Airlines, parent of Northwest, cut transatlantic capacity by 11% to 13% this winter and plans to cut another 10% starting in September. Revenue for U.S. airlines fell 19% in February 2009 compared to February 2008 — the fourth consecutive month of decline. Worldwide, the International Air Transport Association estimates global loss for 2009 will be $4.7 billion. Meanwhile, passenger travel worldwide was down 10.1% year over year. In other news, a major project to reconstruct the main runway at Bradley is underway. The project, which the Federal Aviation Administration (FAA) recommends that airports perform every 20 years, was last done in 1989. The reconstruction will involve the milling, resurfacing, grooving, and painting of the 9,500-foot Runway 6/24, which serves as the primary arrival and departure runway at Bradley. Additional components of the $16 million federally and state-funded project include the upgrade of a major water main crossing and the installation of new electrical ductbanks and lighting cable. The Department of Transportation has coordinated closely with the airlines so there will be minimal disruption to flight schedules. The project will be funded through an FAA Airport Improvement Program grant and BDL Improvement Program and Passenger Facility Charge funds.

Redevelopment Plan Set for Chapman Site

SPRINGFIELD — The City Council recently approved the establishment of the Indian Orchard Business Park Urban Renewal Plan, a step toward redeveloping 54 acres in Indian Orchard that has been vacant for decades. City officials hope one day to create office space for businesses, as well as light industry, on the site that once housed Chapman Valve. Before the property can be developed, however, city officials must negotiate with the owners of the six parcels and complete testing of the soil for potential contamination. The city currently owns two adjoining parcels to the site. City officials also note that a series of underground tunnels and pits found on the site may compromise the strength of the foundation. Brian M. Connors, acting city chief development officer, added that the urban-renewal designation must be approved by the state Department of Housing and Community Development.

State Foreclosure Deeds Dip 4%

BOSTON — Fewer state properties were foreclosed on in February compared to the prior month and a year earlier, according to a new report from the Warren Group, publisher of Banker & Tradesman. The number of foreclosures initiated by lenders has climbed, however, for four consecutive months. There were 823 foreclosure deeds recorded in February, a 4.3% decline from 860 foreclosure deeds in February 2008. February foreclosure deeds were also 16% lower than January when there were 980 deeds recorded. Still, foreclosure deeds jumped 8.6% during the first two months of 2009 to 1,803 from 1,660 a year earlier. Lenders filed 2,295 petitions to foreclose in February, a 17% jump from 1,960 petitions in January; however, foreclosure petitions fell 19.1% from the same month in 2008, when 2,838 petitions were filed. Foreclosure petitions are the first step in the foreclosure process. So far this year, 4,255 foreclosure petitions have been filed, a 29.7% decline from 6,050 foreclosure petitions during the same months in 2008. The Warren Group tracked 917 auction announcements in February, down 27% from 1,256 in February 2008 and down 30.2% from 1,313 in January.

Consumer Confidence Relatively Unchanged in March

NEW YORK — The Conference Board Consumer Confidence Index, which had declined sharply in February, was flat in March. The Index now stands at 26.0 (1985=100), up from 25.3 in February. The Present Situation Index declined to 21.5 from 22.3 in February. The Expectations Index increased to 28.9 from 27.3 in February. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by TNS, a custom research company. The cutoff date for March’s preliminary results was March 24. Consumers’ assessment of overall present-day conditions remains unfavorable. Those claiming business conditions are “bad” rose to 51.1% from 50.5%, while those claiming business conditions are “good” edged down to 6.8% from 7.0% in February. Consumers’ appraisal of the labor market was somewhat more pessimistic in March. Consumers’ short-term outlook was moderately less negative in March. The percentage of consumers saying jobs are “hard to get” increased to 48.7% from 46.9% in February, while those claiming jobs are “plentiful” was unchanged at 4.6%.

Lenox Touts Benefits of WorkSharing

EAST LONGMEADOW — In an effort to avoid more layoffs, officials at Lenox Industrial Products & Services has put most of its production workers at the Lenox American Saw factory on a four-day work week. Workers will receive four days of pay and one-fifth of what their unemployment benefit would have been had they been laid off, according to Daniel P. McDonough, vice president of personnel at Lenox. In addition, workers receive a percentage of the $25-per-child dependency allowance under certain conditions, as well as keep their company benefits. The arrangement is coordinated through the state’s WorkSharing program. Company officials note that if the WorkSharing program was not available, they would have had to lay off 60 to 70 workers. Currently, the factory employs 600 employees, including 220 production workers. The WorkSharing program was established in the 1980s and has seen an increase in usage since the recession. As of mid-March, 252 companies and 3,873 workers were participating in the WorkSharing program, compared to 372 employees in the program a year ago. The government allows for the program, but not every state has one.

Tekoa Country Club Sold

WESTFIELD — An East Longmead-ow-based real estate developer has acquired Tekoa Club for $1.3 million. Dan Burack bought the 114-acre, 18-hole golf course and its buildings and property at an auction staged April 6. He also bid $100,000 for the club’s liquor license. The club was purchased several years ago by the Remillard family, which made significant investments to upgrade the course and its facilities. However, the family was unable to achieve projected revenues and recently fell behind in tax and utility payments, prompting the auction of the 110-year-old club. In remarks to the local media, Burack said, “I’m going to finish what the Remillards started. I think it will be a premier course.”

CEOs See Declining Economy

NEW YORK, N.Y. — The nation’s CEOs see their company’s sales, spending, and employment falling over the next six months, and project an overall decline for the economy this year, according to a survey released recently. The Business Roundtable, an association of CEOs, said 67% of its members expect sales to decline, 66% project a drop in capital spending, and 71% foresee a decrease in employment over the next half-year. Overall, the group said CEOs expect a 1.9% decline in 2009 gross domestic product (GDP), compared with a projection of no change in GDP three months earlier. The government said last month that GDP declined at a 6.3% annual rate in the fourth quarter of 2008. The Business Roundtable’s CEO Economic Outlook Index fell to negative 5 from a positive reading of 16 in the previous quarter. The index ranges from 150 to negative 50, with a reading below positive 50 signaling economic contraction. The group said the index’s decline was less dramatic than the plunge from 78 in the third quarter of last year. Business Roundtable chairman Harold McGraw III, the head of publisher McGraw-Hill Cos., saw some signs of promise in the stimulus being made by the U.S. and other governments. “Improving consumer confidence and demand, both in the United States and abroad, is the key to jump-starting the economy,” said McGraw. While “recently implemented administration policies will take time to have an impact, they already have begun to restore confidence in our markets.” The Business Roundtable consists of executives whose companies represent 10 million workers and more than $5 trillion in yearly revenue.

Cover Story
Young Professionals and the Future of Massachusetts

Greg Torres, president of MassINC, said that, when it comes to the latest study completed by the nonprofit research entity he leads, the proof is in the statistics, and the devil is in the details.

“We make it a practice to look at specific demographic groups and their attitudes, and in turn to look at how the economics of the state stack up, given those attitudes,” he said. “But we don’t make any specific recommendations. We frame the problem and get the research out.”

The latest group studied by MassINC is one that has not been examined closely in the past — young adults in the Commonwealth, ages 25 to 39. The study, titled Great Expectations: A Survey of Young Adults in Massachusetts, delves into this demographic’s views and priorities, with the goal of evaluating what impact these perceptions have on the Massa-chusetts economy.

“There is plenty of research on Boomers, but very little looking at young adults,” said Torres, adding that what the study found was in parts surprising — including a high level of positive thinking regarding the state and its future — and intriguing, such as the discovery of an equally high level of cynicism when it comes to state and federal government.

It also touched upon a disparity in opinions and concerns between different types of residents — those who moved here versus those who were born and raised in the Bay State, for instance, or those living in Greater Boston versus those in southeastern, central, and western communities.

In this issue, BusinessWest takes a closer look at Great Expectations, as well as how it relates — and does not relate — to the pressing issues of Western Mass.

A Case for Education

Torres noted that studies like Great Expectations are research-heavy and light on specific recommendations. However, the statistics presented become important tools for regional employment boards and other economic-development entities across the state as they implement new programs to better the Commonwealth’s economic outlook and retain its young population.

The need to get a finger on the pulse of this age group has become doubly important, Torres added, due to the growing emphasis on the Commonwealth’s knowledge-based economy. It’s a big piece of discussions surrounding the potential for Massachusetts to lead the country in areas such as life sciences and biotechnology, but on a broader scale, education has a marked impact on economic stability, and today’s young-adult population is a more educated group on the whole than the any other, both regionally and nationally. According to Great Expectations, about 46% of this group has earned a college degree or higher, 49% earn $50,000 or more annually, and 54% own a home.

“When you look at education levels and the extent to which young people are doing well economically, there’s a direct tie-in,” said Torres. “A high-school diploma used to be the standard, but all of our research suggests that a college degree is now the key.”

There are other trends, Torres continued, that are perhaps more intangible than the education piece, but no less intriguing. The largest common denominator among the young adult set, he said, was an undercurrent of optimism regarding the future.

“We were struck by that,” Torres said. “The optimism that was reflected regarding their economic standing and that of their children surprised us a little bit, especially with the economic storm clouds on the horizon and no real wage growth over the last decade.

“It struck us that, as a group, young adults are pretty confident that they’ll be able to do better moving forward,” Torres continued. “They believe they’ll be able to increase their economic standing.”

The Cynical Side of the Street

There is a downside to this optimism, however — not only are young adults upwardly mobile, they’re not averse to taking their talents elsewhere if they feel they’re not reaching the heights they’re capable of in the Bay State, an already historically expensive place to live.

“Twenty percent are saying if they can’t get a handle on costs in Massachusetts, they would consider leaving in the next five years,” said Torres. “We’re a high-cost state, and there’s no getting around that. It’s not going to change in any immediate sense.”

Even more specifically, Torres said, Great Expectations reveals that this demographic has a greater respect for and confidence in the private sector, and a lack of confidence in public sector.

“This offers us some interesting insight that we intend to focus on,” he said. “What this means is that the majority of young adults in Massachusetts believe that solutions to problems like environmental issues are going to be driven by creative work in the private sector, and further, that confidence is low in public sectors.”

He said that while some political candidates, including Gov. Deval Patrick and presidential candidate Barack Obama, have successfully tapped into the overriding optimism of young adults on the campaign trail, MassINC’s research offers an opportunity to delve further into the potential pitfalls of low confidence in state and federal government.

“The less confident the population, the higher the rates of non-participation,” he said. “People who don’t believe the public sector can do what needs to be done are less likely to vote, and support for taxes goes down. We hope to explore politics more so candidates can reflect on it — and, in general terms, we need more of a balance between public and private sectors.”

Curb Your Enthusiasm

Anita Dancs, an economics professor at Western New England College, agreed that the attitudes of this demographic have an impact on the state’s economic outlook, as well as some of its existing realities, including in the political arena.

“It caught my attention that this group is so cynical about government; I wonder what future impact that could have,” she said. “They’ve heard all through their lives that government fails, but I do find that a concern, because there is a role for government to play, especially in terms of the race with the rest of the world.”

However, Dancs added that she takes certain aspects of the MassINC report with a grain of salt, particularly when applied to Western Mass., which is working to clear its own hurdles that differ from those in other parts of the state.

For one, she said, the high percentage of optimism could be colored by certain variables.

“I think the first thing we need to realize is that this is an age group that is in the prime of their lives,” she said. “Buying a home, starting a family, advancing in a career … these are all things that are happening to these people because of their life stage, and they’re hopeful.”

More specifically, the optimism reflected in the report is driven in part by people who have moved to Massachusetts because of the better, knowledge-driven jobs in Greater Boston,” Dancs said, referencing one of three groups, ‘the Imports,’ into which the surveyed demographic is broken in Great Expectations.

According to the report, 37% of the 25-to-39 demographic represent this sub-group — those who grew up outside of Massachusetts and relocated. The remainder consists of ‘the Boomerangs,’ 23% of the total, who grew up in Massachusetts but have lived outside of the state for a year or more before returning, and ‘the Homegrowns,’ the largest percentage of young adults at 40%, who have not lived outside of the Commonwealth for a significant period of time.

“If you take apart the report a little more and look at the homegrowns, this is the group that is more representative of Western Mass.,” said Dancs. “There’s more concern over finances in this group and more concern over availability of jobs. In Western Mass., wages tend to be lower, and we have fewer high-paying technical jobs.”

Indeed, the MassINC study states that “imports are the most satisfied with the way things are going for them.” The majority are college graduates (60%), while only 32% of Homegrowns have an advanced degree. Further, three-quarters of Imports work in professional or managerial jobs, compared to 41% of Homegrowns. Finally, 71% of the Imports live in Greater Boston.

Dancs went on to note that some pervasive economic issues also run contrary to the positive view many young adults have of their own futures and that of the state; it just may take longer for these effects to be felt within the surveyed population.

“It’s likely that a recession will be coming on, and economic indicators aren’t looking very promising,” she said. “There are also a few general, national trends that Massachusetts follows that need to be taken into account; optimism may exist, but income inequality is also growing tremendously. Massachusetts had the third-largest income-inequality growth in nation in last two decades.

“There’s also income instability,” Dancs continued. “People’s wages go up and down more than those of their grandparents or parents, and we also know that weekly earnings are lower than in the 1970s in real terms. There’s something about this report that flies in the face of economic reality.”

Great Expectations does state that outside of Greater Boston, the survey population focuses on a different set of concerns than their Hub-based counterparts. For one, those in the Boston area cite high costs of living as a primary worry, while others — particularly Homegrowns — speak to the need for job creation.

Offering this research to be applied to new or existing programs to augment the Commonwealth’s young workforce is one of MassINC’s primary goals, according to Torres; however, in areas where problems such as high unemployment and high-school dropout rates already exist, including in many locales of Western Mass., the approach employment organizations and departments must take is not so straight-forward as reading the statistics and trying to reflect them.

Rather, in many ways, these findings represent an ideal that may exist within much of the 25- to 39-year-old age group now, but could easily wane if the economy continues its downward trend, or if younger populations are not educated on their options and offered opportunities by assistance agencies, schools, and employers alike.

Tomorrow’s Adults,

Today’s Concern

Melissa Scibelli, manager of Youth Projects with the Hampden County Regional Employment Board (REB), said she works primarily with youths ages 13 to 21 to provide educational, career-ladder, and work-training opportunities. She agreed with Torres that education and career experience are intertwined and proven to have a marked effect on employment rates.

However, in Hampden County, the road to that ‘new standard’ of a bachelor’s degree to prepare for career stability and advancement is a long one.

“Education and work experience are aligned,” she said, “and with a 50% non-graduation rate over four years in this area, many of today’s students need support that previous generations did not. We have to start early to educate students on their options and cultivate their goals.”

This is an objective that doesn’t start and stop in high school, either. Scibelli said her department’s work begins with children as early as pre-kindergarten, and carries on to young-adult populations.

“This is how we are preparing the next generation — by finding every way possible to get kids connected and contributing to the community.”

Further, this work cannot include only young, developing populations. Instead, Scibelli explained that the latest push in youth development and career training in Hampden County is engaging businesses in the process of developing tomorrow’s workforce.

“Many businesses are stepping up to the plate,” she said, citing MassMutual, Big Y, Baystate Health, and Western Mass. Electric Co. among the REB’s largest partners. “They’re providing career-ladder training, internships, and educational opportunities that help students develop 21st-century skills. But more importantly, these businesses are signaling to the students what positions exist for them following education and training. This, ultimately, is what’s going to keep those young people in the area.”

As more area businesses sign on to work more proactively with young populations, Scibelli noted that new opportunities are surfacing, which could lead to further development of the connection between education and economic security cited in Great Expectations among the 25-to-39-year-old set.

“More partners are realizing they need to be a bigger part of the picture,” she said, “and they’re starting to introduce programs that link to internships and scholarships at the higher-education level. They’re essentially building a new infrastructure that’s aimed at knowledge transfer, and helping younger people to do better overall.”

Common Ground

In its closing assessment, Great Expectations reports that, overall, “there is a lot of goodwill toward the state, which leaders can build upon as they try to attract and retain young adults.”

In response, Dancs said this is the greatest strength of the study and its findings.

“There are a lot of questions that come up when we read this; it will also be interesting to see five years from now if that level of optimism still exists,” she said. “But in the end, any optimism is going to have a positive effect on the economic outlook.”

For now, the economic outlook is hazy. But the belief that things will get better, and that the young workforce of Massachusetts will be a driving force thereof, is a documented fact.

Cover Story
What’s in the Forecast for the Nation and Region?
December 24, 2007

December 24, 2007

As 2007 winds to a close, the talk is about the ‘r-word’ — recession. Some economists say the country will likely be in one by mid-year, but others say the nation and region are due merely for a sluggish year with fairly modest growth. Locally, economic-development leaders are buoyed by a more fiscally stable Springfield and the beginnings of a ‘green’ cluster. But there are concerns, especially about the need to close an alarming skills gap that is preventing many employers from filling job vacancies.

Sections Supplements
Commerce Show Organizers Want Some Net Results at the Hall
Gail Sherman and Doris Ransford

Commerce ’07 organizers Gail Sherman, right, president of the Chicopee Chamber of Commerce, and Doris Ransford, president of the Greater Holyoke Chamber.

In 2006, organizers of the Commerce trade show took their game up a notch by relocating the annual fall event to the Basketball Hall of Fame. The change of venue, coupled with some different programs, generated some new excitement for the show. Seizing on that momentum, planners have brought the show back to the Hall, but with some new wrinkles to the game plan designed to bring more value to exhibitors and visitors alike.

‘Elevate Your Game.’

That’s the theme for Commerce 2007, the 17th edition of the annual fall trade show staged by the Chicopee and Greater Holyoke Chambers of Commerce, slated for Nov. 1. It was chosen to draw a strong connection between the event and its new home, the Basketball Hall of Fame, to which the show was first taken last year; the event’s brochure is replete with double entendres covering both sports and business. But it also speaks to business owners about the opportunities that show organizers believe the event offers for companies to take their marketing efforts to a higher plane.

Indeed, there are several new wrinkles to the traditional trade show format designed to give participants more exposure. These include a ‘star exhibitor status’ package, which gives vendors more visibility, both on the show floor and in marketing materials for the event. Meanwhile, companies can also sign on as ‘playmakers,’ an upgraded ‘star status’ product tailored toward companies that plan to offer demonstrations or mini-seminars at their booths.

But ‘elevating the game’ also refers to what show organizers, especially Chicopee Chamber President Gail Sherman and her counterpart in Holyoke, Doris Ransford, have been trying to do with their trade show. The move to the Hall of Fame energized some long-time participants and sparked enough curiosity to attract several newcomers last fall, said Sherman, noting that the chambers want to seize on that momentum and make the show an even more attractive marketing option for business owners.

To that end, they have created the new initiatives aimed at exposure, while also tweaking the show layout and some of the programs — all in an effort to add value. Last year, booths were spread out over several levels of the Hall and many different rooms, which many attendees found inconvenient; this year, all the booths are on one floor, but over a broader area. Last year, breakfast was in the Hall’s auditorium, with people essentially eating out of their laps; this year, a buffet-style restaurant will be staged in Pazzo’s restaurant in the Hall complex.

Meanwhile, show attendees will also be given free entrance to the Hall of Fame’s exhibits, as they were last year, and visitors and exhibitors alike can mix their time at the show with a visit to one of three restaurants located within the complex.

“We think it’s a very attractive package of programs and opportunities for networking,” said Ransford, adding that show organizers are expecting to at least match last year’s turnout, a considerable feat considering an ongoing trend of declining participation in trade shows, coupled with an economic outlook now featuring many question marks.

In this issue, BusinessWest previews Commerce ’07, a show that promises exhibitors some real scoring opportunities.

Hook Shots

Flashing back to 1991, Ransford said the Commerce Show was launched to provide area companies, many of them smaller businesses with limited marketing budgets, a chance to gain some important exposure at a time when they needed it — the start of a prolonged recession — and when most couldn’t afford to market themselves extensively, or thought they couldn’t.

The Western Mass. landscape has changed considerably since then, and the economy is obviously much improved, although there are some concerns about the future and more frequent references to the dreaded ‘R’ word, said Ransford. But the basic mission of this trade show hasn’t changed — it remains an opportunity for companies to gain some cost-effective exposure and gain some potentially valuable leads.

“These days, it seems that there’s far less human interaction when it comes to sales and marketing, and technology has a lot to do with that,” said Ransford. “Today, people use E-mail and voice mail to communicate. But there’s no substitute for face-to-face contact, and the show gives people a chance to reconnect.”

Since the beginning, the challenge has been to keep the show fresh and make it well worth it for business owners and managers to devote a day, some expense, and considerable energy to the event.

“Business owners make a big investment in the show in terms of their time, their employees’ time, and the cost of exhibiting,” said Sherman. “We want to make this a prudent investment for everyone, and we do that by providing a lot of bang for the buck in terms of exposure to decision-makers.”

The Commerce Show has been well-traveled throughout its history. It started out at what is now the Plantation Inn in Chicopee, and later spent a number of years operating out of one of the large hangars at Westover Air Reserve Base. The events of 9/11 made those facilities unavailable, so organizers took the show to the Big E, where it remained until the MassMutual Center opened in the fall of 2005.

That year’s Commerce Show was one of the first events staged at the downtown Springfield facility, and it went well, said Sherman, but there were some glitches. Parking was a problem, either real or perceived, she explained, and there were some other logistical and practical concerns; organizers tried a shuttle bus from downtown parking lots, but it didn’t prove popular.

Weighing the pros and cons of that location, Commerce organizers considered other venues, and gave the Hall of Fame a hard look. The uniqueness of the facility, the potential to collaborate and co-market with the Hall, and acres of free parking made the site an attractive alternative.

What the Hall provided was a clean break from the look and feel provided by the traditional, large exhibition hall, said Sherman, noting that in year one at the Hall of Fame, organizers had booths and tables spread out on each of the shrine’s many levels. Such an arrangement looked good on paper, but didn’t work out as well as hoped, she told BusinessWest, adding that for year 2, the show will be on one level, utilizing the Hall’s Center Court area, the hallway outside it, the food court, and a now vacant Adidas storefront. In the promotional brochure for the event, these areas are called the ‘Front Court,’ ‘Back Court,’ etc., in keeping with the general theme.

Beyond the changes in layout for the show — designed to add convenience while still providing a non-traditional trade show experience — there are some new wrinkles designed to provide more value for exhibitors, said Ransford.
The ‘Star Exhibitor’ designation provides added exposure in several forms, including everything from links on the show’s Web site to mentions in all press releases to passes to the Star Exhibitor luncheon at Pazzo’s. Meanwhile, the so-called Playmakers, get those benefits plus announcements on the loudspeaker system prior to their demonstrations, postings of those demonstration and seminars on the Web site, and even discounts on booth prices.

“Thus far, the new packages are proving to be popular,” said Ransford. “They’re something new, and what we expect will be effective ways for companies to get more exposure and more people to their booths.”

Transition Game

Beyond the many imaginative plays on words now available to those marketing the Commerce Show, its current home provides something else — that different look and feel that organizers have long desired to make their show stand out.

Capitalizing on the venue, but also adding more value whenever and wherever possible is the simple game plan for the ’07 show. Early forecasts project that for this event, exhibitors should expect nothing but net.

George O’Brien can be reached at[email protected]

Departments

Petitions to Foreclose Continue Rise

BOSTON — Petitions to foreclose and auction announcements in Massachusetts rose again in July, the 18th month in a row that announcements have risen compared to year-before numbers, according to The Warren Group, publisher of Banker & Tradesman. There were 2,185 petitions to foreclose filed in Massachusetts Land Court in July, up 66.5% from the 1,312 filed in July 2006. During the first seven months of 2007, 15,130 petitions have been filed, an increase of 66.5% compared to the 9,089 filed at the same time last year. Auction announcements rose 130.2%, from 490 in July 2006 to 1,128 in July 2007. Year-to-date announcements are up 165% from 3,287 during the first seven months of 2006 to 8,711 this year. Petitions to foreclose are the first step in the foreclosure process, and do not always end up in actual foreclosure. Some homeowners eventually sell their homes or refinance.

Enterprise Fund Distributes Loans

GREENFIELD — The Western Mass. Enterprise Fund (WMEF) recently provided loans to the Media Education Foundation Inc. of Northampton and Truck Crane Services Inc. of Westfield. The Media Education Foundation received a loan as part of a refinancing package that included tax-exempt bond financing through Florence Savings Bank. The local organization is a nationally known nonprofit that produces and distributes educational programs and films encouraging people to examine the impact of media on our culture. WMEF also partnered with United Bank to provide a refinancing package that included an infusion of working capital to Truck Crane Services Inc. The company is a locally owned family business and provides demolition, site remediation, excavation, and hauling services. For more information on WMEF programs, visit www.wmef.org.

Businesses Participate In Coats for Kids Project

SPRINGFIELD — This winter, 10,000 children will not go cold in the Pioneer Valley, if sponsors Berkshire Bank and Belmont Laundry, as well as many other area businesses, get their way. The Salvation Army’s “Coats for Kids” initiative is back, and their goal is larger than ever. Along with media sponsors 94.7 WMAS Radio and CBS 3 Springfield, many local companies have teamed up in a mission to help kids stay warm this upcoming winter season. For more information on locations to drop off coats, visit www.marketmentors.net.

Women-owned Businesses ‘Fact Card’ Updated

WASHINGTON — The most widely distributed source of facts on women-owned businesses was recently released by the Center for Women’s Business Research. The pocket-sized fold-out contains the top-line findings from current research by the Center and is expanded this year to also include facts from related research. Key Facts About Women-Owned Businesses — 2007 Update, is underwritten by the Massachusetts Mutual Life Insurance Company (MassMutual), based in Springfield, Mass. To obtain copies of the fact card, email [email protected] or call Christopher Clark at (202) 638-3060, ext. 718. The cost is $70 per packet of 100.

United Way Designates $260,000 Toward Community Impact Funding

SPRINGFIELD — United Way of Pioneer Valley’s Community Impact Committee recently awarded three local agencies with funding totaling $260,000. The allotment was awarded separately from the United Way of Pioneer Valley’s traditional allocation process in which funds are distributed to eligible agencies based on private citizen panel recommendations. The committee identified two primary community impact areas, “promoting successful children and youth” and “promoting strong and sustainable communities,” in choosing its award recipients. Agencies receiving funding were Enlace De Familias de Holyoke for its “One Family At A Time,” program, which assists 454 children and their families in crisis intervention and case management, HAP Inc., for its working capital fund to support and expand its neighborhood revitalization and affordable housing development activities, and The Food Bank of Western Massachusetts for its “Target: Hunger Springfield” program.

Economic Outlook Has Darkened

WASHINGTON — The revised second quarter GDP figures show an economy swinging up in that quarter, ahead of the financial turbulence that erupted in August, according to economists at Global Insight. Economists note the outlook has shifted slightly in the light of the sub-prime mortgage crisis, housing declines and sluggish consumer spending growth. The 4.0% growth rate in the second quarter followed just a 0.6% growth rate in the first. Economists note it is likely that the second-quarter figures overstated the economy’s momentum, while the first quarter figures understated it, so the average rate for the first half of the year (2.3%) better captures the underlying momentum. In the third quarter, the economy is expected to maintain a similar pace to the first half – in the 2% to 3% range – but the outlook is darkening for the fourth quarter and beyond. The tightening mortgage market will send housing construction down further, while tighter credit conditions and falling house prices will restrain consumer spending.

Cover Story
What’s Next for the Pioneer Valley Economy
Cover

Cover

As the calendar turns to 2007, economists see some growth for the Commonwealth, but mostly a continuation of the pattern of unspectacular progress that has defined the past few years. In other words, look for a continuation of the jobless, or nearly jobless, recovery. As for the Pioneer Valley, “it just keeps plugging away,” said one observer, noting that its relative stagnancy is better than some regions have experienced.

It’s been 16 years since a Democrat has been governor of the Bay State, and anyone in business who can clearly remember 1990 and the years that followed … would rather not.

Which is why some apprehension on the part of the business community at the dawn of the Deval Patrick era would be understandable. But there has been little of that to date, according to most observers, who say that, for now at least, Patrick is being given the benefit of the doubt when it comes to business, keeping the costs of conducting it in this state under control, and a host of issues that impact the Commonwealth’s ability to attract and retain jobs.

There are several reasons for this, said Andre Mayer, senior vice president of Communications and Research for the Associated Industries of Mass. (AIM), starting with the fact that the outgoing governor, Republican Mitt Romney, would receive only a mixed report card from many in the business community about containing business costs. There is also the rhetoric Patrick issued during the campaign, especially about education and creating a better-trained workforce — and the promise that it will translate into positive action in the months and years ahead.

“Thus far, I haven’t seen any real alarm about Patrick or a one-party government,” he said, referring to the Democrats’ stranglehold on Beacon Hill. “In fact, the business confidence index rose while Patrick was pulling away in October.

“I think part of the reason he was elected is the feeling that the emphasis will shift from taxes to other issues,” he continued, “and so far, Patrick has been saying all the right things; he doesn’t act like a tax-and-spend Democrat.”

But while Patrick is apparently not a cause of real concern as the calendar turns to 2007 (things may change later), there are some other matters that do warrant apprehension. At the top of the list is the condition of the housing market, especially in the Eastern part of the state. Prices have declined between 10% and 15% over the past year or so, and some analysts say they could fall another 10% before bottom is officially hit.

The falling prices are making the state marginally more affordable for workers, which is good news, said Bob Nakosteen, faculty member of the Isenberg School of Management at UMass and executive editor of Benchmarks, the university’s quarterly report on the state’s economy. But that downturn has certainly impacted consumer spending, while also hurting both the construction sector and the legion of Realtors operating across the Commonwealth.

The broad result is an overall decline in confidence, which is another of the matters to watch closely as the new year unfolds, said Nakosteen, adding that the slow start to the holiday shopping season, a few rough days for the stock market after that first shopping weekend, and talk nationally of inflation and possible interest rate increases to ward it off won’t help boost confidence.

There are other factors to consider, including energy prices — lower for the time being, but always volatile — that have most analysts projecting modest (2.5% to 3%) growth for the year ahead, said Nakosteen.

That would represent a modest decline from recent events, he said, noting that the Massachusetts economy performed better over the past six months (3.6% growth in gross state product) than at any time since the current expansion began in 2003. This growth was prompted by a resurgence in technology markets, especially demand for microchips, he explained, noting quickly that there are signs that things are already slowing down again.

For the longer term, analysts are wondering, as they have for the past several years, where the next surge in jobs for the Bay State and the Pioneer Valley will come from. In a recent article written for Benchmarks (see page 37), Nakosteen chronicled 20 years of relative stagnancy for Western Mass., with questions about if, when, and how it might end.

“The region just keeps plugging along,” he said, noting that, while ‘stagnant’ is generally not a positive economic term, in this case it’s better than some areas of the state, which have witnessed dramatic surges, but equally dramatic declines.

Through the Looking Glass

When asked about what to expect from the Deval Patrick administration, Jeff Ciuffreda, vice president of Government Affairs for the Affiliated Chambers of Commerce of Greater Springfield, said he’s not hearing a lot of negative talk.

Like Mayer, he said Patrick’s campaign and its theme, Together We Can, created generally positive vibes, and the business community is, by and large, withholding judgment until the picture is colored in.

“He seems to at least speak the language of business,” said Ciuffreda, noting that Patrick has served on several corporate boards and would seem to appreciate the needs and concerns of business owners. “How that will translate … we don’t know yet.”

To date, Patrick has been short on specifics with many issues ranging from the the fate of the Finance Control Board — the ACCGS would like it to remain in business — to his first budget. He has been outspoken on public higher education, and recently told an audience at UMass that he would push to increase spending on state schools by $400 million over five to seven years.

As for Western Mass., Patrick, like previous candidates and governors, has pledged support for the region. However, some are already alarmed by how few members of his transition team (7%) are from the Pioneer Valley.

“We may need to keep his feet to the fire on Western Mass.,” said Ciuffreda. “We’ll know a lot more in a year or so.”

That statement applies to many issues and concerns, he said, noting that while waiting to see what Patrick and his team members do in their first year, economy watchers will also be monitoring the housing market, energy prices, the war in Iraq, and the strength of the dollar — or lack thereof.

The softening of the housing market is still largely an Eastern Mass. phenomenon, although sales volume has fallen in the Pioneer Valley and prices has remained steady, said Nakosteen. But the impact is felt statewide because of the broad ripple effect. Consumer spending will continue to decline if the trend does not reverse itself, due to a phenomenon known as the ‘wealth factor.’

As Nakosteen explained, many individuals now view their homes as their principle vehicle for investing (savings rates remain low), and when homeowners see the value of their property diminish, they feel less wealthy and are thus less apt to spend.

“That’s why the housing market is the biggest concern for the year ahead,” he said, adding that economic projections for the next several quarters are muddled because of general uncertainty about housing prices and sales. Debate continues on whether bottom has been hit and, if it hasn’t, when that might occur — the consensus is the second or third quarter of next year.

The Big Picture

The sum of the many factors influencing the economy will determine how much of a surge will be seen — in the overall economy and in jobs.

While current conditions wouldn’t be described as a truly ‘jobless economy,’ the phrase that became popular in ’03 and ’04, there haven’t been significant gains in employment statewide or regionally.

“We set a record for merchandise exports this year,” said Mayer. “We’re making the stuff the world wants, but we’re just not employing a lot of people to make it.

“Hiring is still regarded almost as a last resort for some employers,” he continued, “and the availability of good people is one big reason why. Some companies just can’t find people.”

Overall, the state has seen roughly 1% growth in the number of payroll jobs over the past year, said Nakosteen, noting that the state was registering 2% to 2.5% increases during the early years of the decade. Most recent gains have come in professional and business services (7,100 jobs), education and health services (6,800), and financial services (4,200). In addition, 3,900 jobs were added in construction.

This relative stagnancy on the jobs market has contributed to an ongoing out-migration of state residents, the extent of which is still being debated, said Mayer, noting that the exodus, however large it may be, has some economists worried.

And the trend will continue, he said, until the state creates large numbers of new jobs. When and how that will happen are both $64,000 questions.

There are many theories about where the next large wave of jobs will emerge — from renewable energy to biotechnology to medical instruments manufacturing — but no clear indicators, said Mayer, who doubts that any of those sectors will blossom into large-scale jobs centers.

“I’ve heard that renewable energy could be the next big growth area, but I don’t see it,” he told BusinessWest. “How many people does it take to run a windmill?”

Nakosteen agreed, saying that the next big source of jobs probably hasn’t identified itself yet.

“Massachusetts has a long history of reinventing its economy, and it will do so again,” he explained. “But if there’s a new engine out there that’s going to drive us, it’s not at this point identifiable. And one of the reasons we’re going to see very, very minimal, almost stagnant employment growth over the next few years is because we don’t have this new engine out there.”

That same statement can be applied to Western Mass., which has seen some job growth in biotechnology and medical instruments, but, overall, hasn’t found anything to replace the manufacturing jobs that have given the region its identity. This fact, coupled with the region’s minimal but consistent growth, adds up to remarkable resiliency, he said.

“Over the past century, the Pioneer Valley has lost most of its important employers, especially in manufacturing,” he explained. “If you look at other areas of the country, when they lose their major employers and enter a recession, they go into a death spiral; we just keep plugging away.”

Nakosteen attributes this phenomenon to the region’s employment anchors — UMass, MassMutual, Baystate Health, and others, who have maintained their core strength over the years — and also to new small-business development. “This region is much better off than other areas that have lost their manufacturing bases,” he said, “and I think it’s because of those core businesses.”

Identity Crisis

Can the region break free of the stagnancy that has defined it for the past few decades? Possibly, said Nokosteen, but it probably won’t come from companies leaving Boston for the Valley and its lower cost of doing business.

“The prevailing theory is that if business owners are going to leave the Boston area, they’ll go all the way to the Research Triangle,” he explained. “They won’t stop along the way in Springfield.”

Thus, growth will likely be organic, and Nakosteen isn’t sure where it will come from.

“We don’t have an economic identity, and we don’t have an engine of growth; I don’t see anything coming to the fore,” he told BusinessWest. “But it’s not obvious that anything has to come to the fore; we could be like this forever more.”

George O’Brien can be reached at[email protected]

Departments

Open House
Feb. 1: The Western New England College Law and Business Center for Advancing Entrepreneurship will host an open house from 5 to 7 p.m. in the Scibelli Enterprise Center, 1 Federal St., Springfield. The new center was established to provide graduate business and law students with an opportunity to offer practical consultation to entrepreneurs starting new and building existing small businesses in the community. From 4 to 5 p.m. in the Teleconference Room, a panel of intellectual property experts will discuss how entrepreneurs can legally protect creative output and innovations. Also, they will review patents, trademarks, and copyrights of small businesses. To register or for more information, E-mail Aimee Munnings, Director, at [email protected] prior to Jan. 25.

Contractual Liability Seminar
Feb. 6: Geoffrey Smith, senior vice president, TD Banknorth Insurance Group, will be the featured speaker at a free luncheon hosted by TD Banknorth Insurance Agency Inc., from 11:45 a.m. to 1 p.m. at 2077 Roosevelt Ave., Springfield. His presentation during the Lunch & Learn session is titled “Contractual Liability?” and will explore what to look for and what to look out for in the risk-transfer provisions found in everyday contracts. To sign up, E-mail your request to [email protected]. Seating is limited.

Western Mass. Economic Review
Feb. 8: The Regional Technology Corporation will sponsor a presentation on the economic profile of the region from 8:30 to 9:30 a.m. in the TD Banknorth Conference Center, 1441 Main St., Springfield. The profile is based on Western Massachusetts Electric Company’s annual report to its customers titled Western Massachusetts Economic Review. The free presentation will summarize key findings from the 2005 Review and provide a regional economic outlook for 2006. Seating is limited and advance registration is required. For more information, contact April Cloutier at (413) 755-1314 or [email protected].

‘Double Bottom Line’ Lecture
Feb. 9: Lisa Fairfax, an associate professor of Law at the University of Maryland Law School, will present “Achieving the Double Bottom Line: A Framework for Corporations Seeking To Deliver Profits and Public Services” at 5:30 p.m., hosted by the Western New England College Law and Business Center for Advancing Entrepreneurship. The lecture will take place in the S. Prestley Blake Law Center on WNEC’s main campus, 1215 Wilbraham Road, Springfield. The event is free and open to the public. For more information, call (413) 736-8462 or visit www.law.wnec.edu/lawandbusiness.

Outlook 2006
Feb. 10: Howard Fineman, chief political correspondent for Newsweek magazine, will deliver the keynote address for Outlook 2006, hosted by the Affiliated Chambers of Commerce of Greater Springfield. The annual legislative event will be conducted from 11:45 a.m. to 1:30 p.m. at Chez Josef in Agawam. In addition to Fineman’s presentation, Lt. Gov. Kerry Healey will discuss the state outlook, and Northampton Mayor Claire Higgins will present remarks for the region. Higgins is also serving as this year’s president of the Mass Municipal Assoc. Tickets are $40 for Chamber members, $60 for nonmembers. Tables of 10 can be reserved. Deadline for reservations is Feb. 3. For more information, contact Diane Swanson, Events Manager, at (413) 787-1555.

Business Entity & Basic Contracts
Feb. 22: The Mass. Small Business Development Center (MSBDC) Network will present Business Entity & Basic Contracts from 8:30 to 10:30 a.m. at the Scibelli Enterprise Center, 1 Federal St., Springfield. The workshop will look at ways a business can be run, the advantages and disadvantages of corporations, limited liability companies, partnerships and sole proprietorships. In addition, the workshop will look at income tax issues as well as the minimum needed to protect the business owner in writing when they enter into contracts with third parties. The cost of the workshop is $25. For more information or to register, contact Diane Randall at the MSBDC Network, (413) 737-6712.

Running A Successful Restaurant
March 14: The Mass. Small Business Development Center (MSBDC) Network will sponsor Food For Thought: Tips For Running A Successful Restaurant from 9 to 11:30 a.m. at the Berkshire Chamber of Commerce, 75 North St., Suite 360, Pittsfield. The program will discuss the key ingredients of successful restaurants and the pitfalls that can lead to failure, and will offer tips for improving a restaurant operation from the dining room to the kitchen. The cost is $25. For more information or to register, contact Diane Randall at the MSBDC Network, (413) 737-6712.

Features
MassMutual Chairman Robert O’Connell wasn’t sure he needed a large, formal press conference to announce the company’s $40 million expansion.

As he told the large group assembled for the event late last month, MassMutual’s support for, and confidence in, the city of Springfield isn’t exactly news. After all, the company has long been one of the city’s largest employers, and it has shown its support in ways ranging from the creation of Baystate West (now Tower Square) to the purchase of naming rights for the convention center taking shape on Main Street.

But O’Connell figured that a project of this magnitude deserved a ’celebratory moment,’ as he put it, and that residents and business owners might need to be reminded that, at a time when the headlines are dominated by the city’s fiscal woes, crime, and the many effects of poverty, there are some good things happening here.

The Springfield Chamber of Commerce and the Springfield Business Improvement District came to roughly the same conclusion.

The two agencies are splitting the bill for a radio advertising campaign that compares and contrasts Springfield to the rest of the Commonwealth with regard to several economic statistics. The data shows that, since 2001, the number of new businesses in Springfield is up 32%, compared to 9% for the entire state. Likewise, the number of Springfield residents employed increased 2.6% during that period, while the state as a whole, increased just 0.7%.

People can use statistics to say whatever they want, and these numbers certainly reflect how much the state is lagging behind the country in terms of overall recovery. But the numbers do show progress, a message that Russell Denver, president of the Affiliated Chambers of Commerce of Greater Springfield, did not want lost amid all the negative headlines about Springfield’s control board, $30 million deficits, tax delinquents, and squabbles with city unions over concessions.

The ad campaign, which will cost about $15,000, is unprecedented, says Denver, but it is also quite necessary to let people know that in Springfield, it’s not all gloom and doom.

Quite the contrary, actually.

As BusinessWest’s annual economic outlook (which starts on the next page) shows, there are many indications that the recovery, which has been less than spectacular to date, will become more pronounced in the year ahead.

A look at the jobs picture, for example, shows that the volume of job postings in the Greater Springfield area is up, while the number of people looking for work is down — and the numbers have been trending in this fashion for several months. The employment news is especially positive in the manufacturing sector, which has struggled in recent years amid growing foreign competition. Many local manufacturers have begun adding both part-time and full-time employees, and some are confident enough to move forward with major expansions and new construction.

In East Longmeadow, for example, German-owned papermaker Suddekor is building a 100,000-square-foot plant and Maybury Material Handling is moving ahead with a new, 40,000-square-foot facility.

The new construction is not limited to manufacturing. In Chicopee, the Memorial Drive corridor is growing by leaps and bounds, adding both a Home Depot and Wal-mart in just the past year, with Staples and Marshall’s on the way.

The construction activity is an especially positive sign, because while area hospitals and colleges have been building steadily over the past several years, the most high-profile initiatives have instead been publicly funded projects such as the Basketball Hall of Fame, the new federal courthouse on State Street, Union Station, and the new convention center. Private-sector building is always a strong indicator of confidence in a community’s future.

Not all the news in Springfield is positive, to be sure. The control board will reign over the city’s finances for years to come, and the work to take the community out of the red will be very challenging indeed. Meanwhile, the city’s problems with crime and poverty will not be corrected quickly or easily. These are not the best of times.

But O’Connell and Denver are right to say that the city’s fiscal problems and high murder rate should not overshadow the good things that are happening here and in surrounding communities.

The signs point to a more-robust economy in the year ahead, and MassMutual’s expansion is merely one expression of a growing feeling of confidence that will hopefully translate into many more positive business stories.