The New England Journal of Higher Education – The New Slow – 11/18/13

by John O. Harney
small turtle

New England will continue to experience a slow jobs recovery through 2017, according to economists speaking last week at the New England Economic Partnership (NEEP) Fall 2013 Economic Outlook Conference in Boston.

The modest job growth from 2013 through 2017 will be strongest, percentage-wise, in the construction industry, fueled partly by a housing rebound, followed by professional and business services, leisure and hospitality, high tech and health and education services (so-called “eds and meds”).

The conference sponsor, the New England Council, posted the Outlook reports here.

The conference theme was “Boston’s Role in the Regional Economic Network,” featuring a keynote by Northeastern University economist Barry Bluestone and a response from former Boston city councilor and mayoral candidate Larry DiCara.

Cris deRitis of Moody’s Analytics presented a U.S. forecast. He noted that while a housing bust took much of the blame for the recent recession, a housing comeback could spark broader economic recovery. Young people will look to move out of proverbial basements, and the region will need to ramp up construction for them—boosting the many small businesses involved in forming a new household and homebuilding.

Confidence has been ebbing and flowing along with debates over the debt ceiling, deRitis said. The debt ceiling will be dealt with again in mid-February before the next election season. The Moody’s economist warned that Round 2 of sequestration in January will be more painful than the current round has been. He noted that Europe is especially crucial to the Northeast and to small businesses, and is less fragile than it was over the past few years. He also said the impact of student debt is an unknown—though some studies contend it is “manageable” for most as long as they earn more after graduation, as higher ed promises.

Stalwart NEEP forecaster Ross Gittell, chancellor of the Community College System of New Hampshire, gave the regional forecast. He pointed to the promise of eds and meds, which are the largest employer in Boston and in five of the six New England states, while second largest in New Hampshire after trade.

On the conference theme of Boston’s role in New England, Gittell noted that more than 8,000 Granite Staters from Rockingham, Hillsborough, Stafford and Merrimack counties commute to Boston for work. More than 4,500 commute to Boston from Providence. Boston accounts for 40% of New England’s GDP.

State-specific forecasts were offered by: Northeastern professor Alan Clayton-Matthews (Massachusetts); Bryant University assistant professor Edinaldo Tebaldi (Rhode Island); New Hampshire Center for Public Policy Studies economist Dennis Delay; University of Southern Maine professor Charles Colgan; Fairfield University professor emeritus Edward Deak (Connecticut); and Vermont economist Jeff Carr.

State forecasts

Unemployment is rising in Massachusetts among people under age 25, minorities and people who did not go to college, said Clayton-Matthews. He showed a graph depicting job growth flattening in 2016 and 2017 due not to recession, but to demography—there won’t be enough people to fill new jobs. In 2017, the unemployment rate in Massachusetts will be 5.2%, compared with 4.6% before the recession. Productivity and productivity-growth in Boston outpace that of the rest of New England.

Clayton-Matthews showed a line chart depicting surprising divergence among U.S. metro areas in educational attainment between 1970 and 2000. The more educated metros got more educated, and the less-educated got less so, with Boston going from highly educated to even more highly educated.

Colgan joked that Poland Springs, Maine, where the New England Council was created, is actually closer geographically to Boston than is Pittsfield, Mass. More somberly, he noted that Maine (and Vermont) trade the dubious distinction of having the oldest median ages in the U.S. Indeed, at the end of the forecast period in 2017, Maine will have more deaths than births.

In the past, economic recovery in New Hampshire also meant a gain of 10,000 to 20,000 new residents each year, most coming from Massachusetts. Not this time, said Delay, because job growth has been faster in the Bay State. He showed several indicators of New Hampshire strength, including high national rankings in homeownership, high school graduation, voter turnout and percentage of workers in STEM fields. But he also showed less glowing rankings in measures such as change in 35- to 44-year-olds as a percentage of the population, and the nation’s highest average student debt.

Notably, the New Hampshire healthcare sector is “retrenching,” Delay reported. He noted that Exeter Hospital announced it would cut 75 positions from its FY 2014 budget, while St. Joseph Hospital in Nashua eliminated 54 positions.

In Connecticut, recent strength in casinos faces new threats from close by, as Massachusetts debates adding its own casinos, Rhode Island expands its betting facilities and New York begins offering sports betting. While Connecticut was spared most deep defense cuts in the first sequestration, Deak said the next one will be different, perhaps threatening the state’s defense industry. Connecticut is not in Boston’s daily orbit, Deak said, but it is in the “Northeast Corridor.” He noted that Amazon considered building a major facility near Bradley Airport precisely because of its strategic position between Boston and New York. And Maine’s Jackson Labs moved hundreds of skilled scientists to Connecticut partly for their proximity to other scientists.

Vermont has the fifth lowest unemployment rate in the U.S., Carr reported. But he noted that Vermont’s largest employer—the “Itty Bitty Machine Company” as he called IBM—last year jettisoned more than 400 employees in a fit of “workforce rebalancing” in IBM parlance. Food manufacturing, represented by Ben & Jerry’s and Cabot Creamery but also farm-to-plate operations, is very successful in Vermont. Also,Vermont hosts significant numbers of second homes: 20% owned by residents of Massachusetts and 25% by residents of Connecticut. Carr also said 16% of University of Vermont students are Massachusetts residents. Now, a Vermont proposal would give students an incentive to stay in the state after graduation.

The “Boston States”

On Boston’s role in the regional economy, Tebaldi noted that Boston-based Fidelity has a major presence at Bryant University, including employing hundreds of interns.

Bluestone said that people go to Boston for college and stay for jobs, but the high cost of housing becomes a problem. Many migrate relatively close by to New Hampshire or perhaps Rhode Island. One consolation, conjectured Bluestone, is that politically Blue-minded residents of Boston migrate to Red-minded states where they will change the culture toward Blue.

He also added that many states have tried to spur economic development, starting with large anchor companies. But actually, a better strategy is to focus on small companies because they will attract the larger companies.

In his response to Bluestone, DiCara, author of Turmoil and Transition in Boston: A Political Memoir from the Busing Era, spoke about a changed Hub. Boston is a young city, he said. When many white families fled Boston during the mid-1970s, the vacuum was filled by people who didn’t care whether their neighbors lived together, or were gay, or went to church. Many of the new residents didn’t own cars. They ate out a lot. And they didn’t want blue laws that kept them from going out at night. The city came alive.

DiCara’s advice to the new Boston mayor: Be bold. Like former Mayor Kevin White was when he evicted the merchants at the old Quincy Market and forged a deal with a Maryland developer to create what is now a huge tourist success and the key to the revitalization of the Charlestown Navy Yard, depression of the Central Artery and other transformative projects that followed.

Bluestone’s Blue-Red conjecture may be moot, as the majority of young people continue to move to the South and West, said DiCara. He noted when former U.S. Congressman Michael Harrington of Massachusetts formed the Northeast-Midwest Institute in the 1970s, the coalition’s 18 member states represented nearly half of the U.S. House of Representatives; now their share has sunk to 38%.

As the conference wound down, one audience member asked a million-dollar question: Why hasn’t Boston’s success had more impact on the rest of New England? Perhaps a topic for the next NEEP conference.

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