Economic Forecast 2006
By christina p. o’neill
As the region’s economy strengthened in 2005, we saw a mix of good and bad fundamental omens. On the good side: Job growth, rising home values, and innovative health care technologies, many of them developed in Massachusetts. On the bad side: Job openings that employers worry about filling, a shortage of affordable housing, and sharp increases in energy and health-care costs.
Add to all this a marked increase in biomedical jobs in both R&D and manufacturing. And throw in an ambitious one-term governor who’s seeking to spearhead job creation efforts and health-care reform.Taking our sectors in the order in which they appear in the forecast section, the widely-varied technology sector seems to be back in full swing. Among the desirable technologies supplied by our local firms: better, lighter, faster equipment for military personnel; energy conserving electrical power systems; lasers and telecom electronics that run faster and cooler; improved data backup systems; and web services that can let customers maintain more of their own websites without outside help.
In health care, 2006 will be a benchmark year as Massachusetts drafts legislation that would make it the first state in the country to provide some sort of insurance coverage for all — whether through private plans, Medicaid products, or Medicare. In the meantime, health care providers are rapidly establishing electronic medical records. They’re also issuing quality and performance data on hospitals and physicians to help consumers make better medical decisions. And insurers are seeing a slow but inexorable adoption of high-deductible health care plans and accompanying pretax medical accounts as employers struggle to control health-care costs.
On the biomedical front, Central Massachusetts will probably see the debut of some significant products in 2006, many of them developed in local labs and R&D sites. The University of Massachusetts Medical School is turning into a technology transfer hub that has topped other institutions in the state in revenue garnered from technology transfer, and it’s energizing private employers as well.
Companies are adding jobs as new drugs come to market and revenues grow. Great news, if they all weren’t so worried about finding people to hire. Ten and 20 years ago, the state dreamed of creating a cadre of "clean industry" biomedical jobs to replace vanishing heavy-industrial jobs. Now that the biomedical industry can provide jobs for many high-school and two year college grads, employers worry that the 19- to 24-year-old workforce is being driven out of the state by housing costs.
The banking sector grew with the economy during 2005. Many bankers expect more of the same in 2006, but they also hope for a boost in long-term yield rates that would increase their profits on the type of long-term investment that produces permanent growth. Competition for commercial business was intense in 2005 and will stay that way. Several banks, both big and small, took on active economic-development roles by investing in regional job-creation and/or housing programs.
Commercial real estate got a boost from companies growing internally or expanding into the region. Demand for Class A and Class B office space increased. Retail space burgeoned, with projects such as the Natick Mall expansion and the debut of the Shoppes at Blackstone Valley, a mega-mall that recognized its first full year of operation in 2005.
Industry worried about the education of the state’s workforce in 2005, particularly in the area of science and math. A national report forecast a 24,000-person shortfall of workers skilled in science, technology, engineering and math by 2009 — a scant three years away. It’s a problem that the region’s schools and universities must tackle. Schools are expanding their online offerings and adult basic education programs, targeting non-traditional learners with online programs and supportive tutoring services.
For the region’s manufacturers, the watchword is becoming biomedical. More light manufacturers are making either the machinery to make medical devices, or the devices themselves. In 2005, we’ve watched the growth trajectory of biomed-focused manufacturers — something the state had in mind when it launched the first biotech initiatives in the early 1980s.
In retail, there are more choices than ever. Niche marketers are filling in the gaps that big-box retailers cannot, aided and abetted by online retailing (see "Niche marketers reap the benefits as online sales soar," page 3, this issue). Furniture, appliance and auto sellers will offer customers strong sales incentives in 2006. In the hospitality trade, more diners and guests will increase sales, while higher energy costs will decrease margins.
Overall, things are changing in ways we never dreamed of 10 years ago. As the economy diversifies, more and more opportunities are opening up. But the shock of the new is creating intense pressure on some of the old, stabilizing forces we have taken for granted. Within these eight sectors you’ll see a glimpse of the region’s future — both opportunities and challenges.
WBJ Web Partners
Most Recent
Most Recent
0 Comments