Economic Forecast: 11 For 2011
This year, for the first time ever, the Worcester Business Journal editorial team has put together its own set of predictions for the coming year. We tackled the hottest business topics and made educated guesses as to where our economy is headed.
Keep our list of 11 predictions for 2011 handy throughout the next 12 months. We'll review how accurate we were this time next year.
1. Unemployment
PREDICTION
Rate will decrease to 7 percent in Massachusetts
The unemployment rate in Massachusetts hovered around 9 percent for much of 2010. But toward the end of the year, the rate improved, hitting a low point of 8.1 percent during October.
In 2011, we expect the unemployment rate to continue to decline, reaching a low point of 7 percent during the fall months.
Massachusetts will continue to fare better than the nation as a whole when it comes to unemployment. The MetroWest region will fare the best in 2011, reaching an unemployment rate of 6.5 percent next year.
2. Financial Services Sector
PREDICTION:
More consolidation to come
2010 was pretty light in terms of consolidation in the banking sector in Central Massachusetts. There was one bank failure - Marlborough-based Butler Bank - but no mergers or acquisitions. That makes 2010 an anomaly compared to the last few years, where there was a flurry of activity, most notably Worcester-based Commonwealth National Bank's acquisition by West Springfield-based United Bank in 2009.
In 2011 we're sure to see an uptick in activity. With increased regulations driving up costs for banks and credit unions, the smallest institutions in our region - with less than $100 million in assets - will struggle to stay competitive. There is likely to be a number of mergers, or at a minimum strategic partnerships, in the year ahead.
3. Dow Jones Industrial Average
PREDICTION:
The Dow will hit 12,500
Remember the good old days when the stock market just kept going up and up and our 401(k)s just kept growing? Well, we all learned in 2008 that what goes up must come down. And it stayed down for much of 2009. But the stock market has come back in force over the last 12 months.
As of the deadline for this publication, the Dow Jones Industrial Average was at 11,478. That's up nearly 11 percent for the year. We expect the Dow to hit a high of 12,500 next year, which would be an 8-percent increase over 2010.
4. Mobile Technology
PREDICTION:
QR Codes will pick up steam
Smartphones like the iPhone or Android already seem ubiquitous. But the truth is, only 28 percent of Americans own the devices. But that number is only going to grow and pretty soon, your only choice will be to buy a smartphone at the store. As adoption of mobile technology ramps up, we expect QR Codes, also known as 2D barcodes, to flourish. You'll start seeing them popping up in print advertisements and tradeshows with great frequency in 2011.
5. CitySquare
PREDICTION:
Another major office tenant will sign
Worcester has had its fair share of false starts when it comes to downtown development. But we believe strongly in the CitySquare project now that it has the backing of Hanover Insurance of Worcester and Leggatt McCall of Boston. Demolition has already begun on the massive parking garage attached to the former Common Outlets Mall and Unum has signed on as the major office tenant. We fully expect another major office tenant to finalize a deal for the development in the next 12 months.
6. Home Prices
PREDICTION:
Will rise a modest 3%
The housing market has not recovered as quickly as we might have hoped. The median price of a single-family home in Massachusetts reached $289,000 in October 2010, a 3.2-percent increase of the same month a year earlier, according to data from The Warren Group of Boston. At the same time, homes are staying on the market for a prolonged period of time.
With such tepid demand through the end of 2010, we expect growth in the housing market, but not much. Look for an average increase in housing prices of just 3 percent in 2011.
7. Consumer Spending
PREDICTION:
Creeps up by 4%
Americans have been sitting on their money ever since the economic collapse of 2008. Personal spending dropped 0.3 percent in 2008 and 1.2 percent in 2009. In 2010, spending began to recover and increased by nearly 3 percent during the third quarter.
We expect spending to continue its increasing trend line after catching some momentum during the holiday season.
8. Media
PREDICTION:
Online-only news sites will take hold
2010 was the year of the online news site. Several local sites under the CentralMassNews.com umbrella sprung up around Worcester in the last 12 months, while the national chain owned by AOL, Patch.com, entered the MetroWest market with several community-focused news sites. In 2011, look for an increase in traffic to these sites and greater penetration in the local markets. At the same time, established community news publications, including the Worcester Telegram & Gazette, will continue to up its online efforts to stay competitive.
9. Commercial Real Estate
PREDICTION:
Vacancy rates in MetroWest will improve modestly
Drive around the MetroWest/Interstate 495 corridor and you'll likely see a fair number of so-called "see-through buildings." Economic conditions have not been kind to the commercial real estate sector, and we don't expect any major improvements in 2011. There aren't enough companies adding workers to prompt major moves and Massachusetts' tax climate won't make it a major draw for out-of-state firms. But overall improving conditions should help office vacancy rates drop below 20 percent in 2011.
10. Casinos
PREDICTION:
Another gaming proposal will fail
We expect 2011 to feel a bit like Groundhog Day on Beacon Hill. After an effort to allow resort-style gambling failed early in 2010, there was talk by the end of the year of another set of proposals. We fully expect a new proposal for some form of gambling to go before the Legislature, but we are predicting that this effort will once again fall short.
11. Health Care
PREDICTION:
New legislation will address costs
All the stars seem to be in alignment for a renewed focus on controlling health-care costs in Massachusetts. Talk to any business owner and they'll tell you about the unsustainable premium increases. Talk to any hospital executive and they'll tell you about their own frustrations with our current system. With little happening on the federal level to seriously curb costs, the Bay State will take the issue into its own hands and propose changes in 2011 that will take the cost conundrum head-on.
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