ECONOMIC FORECAST: Notes On A Recession | Central Mass. businesses prepare to have their mettle tested
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It's been an intriguing and unpredictable couple of years. And while 2007 and 2008 were spent debating whether we were headed for, or actually in a recession, we can say with certainty that we will begin 2009 in one.
Unfortunately, the current recession comes just as Massachusetts is putting some innovative, ambitious and expensive programs, initiatives and laws into place. It also puts a dark cloud over significant expansion efforts among companies in the state's key business sectors.
Again this year, the Worcester Business Journal has taken a look at what nine important sectors see on the very near horizon in our annual Economic Forecast.
We've asked folks who know in manufacturing, education, health care, banking and finance, retail, energy, biotechnology, real estate and technology what they expect from 2009, and although many of them remain as uncertain as they were as they considered 2008, they all know one thing: The economy is in deep trouble and their mettle is about to be tested.
Change, The Only Constant
Central Massachusetts' bankers say their conservative approach kept them from being dragged down by the sub-prime mortgage market collapse and that approach will help win customers and ensure stability in the coming year.
But if the banking picture for 2009 strikes you as uncertain, take a look at manufacturing.
Once the engine that drove the Central Massachusetts economy, the manufacturing sector has been shedding jobs for decades; and while manufacturers reaped the benefit of a weak dollar this year by ramping up export volumes by 14 percent and 15 percent in the first two quarters of this year, industry experts and manufacturers themselves do not expect the export growth to continue for much of 2009.
Even now, the dollar is beginning to show signs of increasing strength and two of the countries, Germany and Japan, that buy many of the goods exported from Massachusetts, are also in the midst of a deep recession. Industry experts say the sector could be sluggish at best in 2009.
Eyes Of The Law
One sector that will not be sluggish in the coming year is health care, which along with education, is the region's largest industry and top employer. The state's health care reform law is now in full effect and area hospitals are still trying to cope with the law's consequences.
Hospitals are trying to figure out how to convince more people to become primary care physicians, which are in high demand now that nearly all state residents have health insurance. Hospitals are also struggling to bring their budgets into the black and worry that increased insurance coverage in Massachusetts could lead to reduced reimbursement rates and even further budgetary pressure.
Educators, in a sector that provides employment for thousands in Central Massachusetts, are worried about their students' prospects on the job market in the coming year. Schools like Clark University in Worcester, which used to take a single bus trip to a career fair each year, are now providing multiple trips.
Schools are also trying to drive home to students the importance of internships, networking and entry-level jobs as companies scale back and become more selective in their hiring practices.
Savvy students may recognize that the energy industry could very well be hiring in 2009. The region's energy, specifically green energy companies, are predicting growth in 2009 and are waiting anxiously for President Elect Barack Obama to come out with a far-reaching and comprehensive energy policy that is expected to call for increased use of solar, wind and other alternative energy sources.
Those companies also hope the Obama energy plan will include federal subsidies for the use and production of those energy sources. And despite gasoline and home heating oil prices that are presently in freefall, Central Massachusetts' green energy companies say 2008's bout with gas and home heating oil that flirted with $5 per gallon left a lasting impression on businesses and consumers.
Closing The Deal
For retailers, the energy costs that brought about such fear in 2008 have come down just in time for consumer spending to hit its lowest point in decades. Retailers seem to be depending upon one of two strategies when planning for 2009.
Some advocate cutting spending to a minimum and riding out the economic storm. Others are keeping the pressure on. They're buying more products, doing more advertising and holding more special events in an effort to make the absolute most of what promises to be a very challenging year.
Bay Staters certainly aren't buying houses in any significant numbers. And lately, the sinking residential market has begun dragging the commercial real estate market down with it. The situation has brought home sales throughout the entire state to their lowest point since the 1980s, and while real estate agents contend that 2009 will be "a great time to buy," the pitch rings hollow.
Commercial brokers have the word "fear" on their lips. Their potential clients are dominated by it and the brokers themselves feel it as they look ahead to what may be one of the slowest years in memory.
One bright spot, at least for the residential market in Worcester, is the Buy Worcester Now program, which many local bankers are hoping will be successful in convincing people to purchase some of the city's many foreclosed and bank-owned properties.
Growth Opportunities
The biotech sector is one of very few expected to actually grow in the coming year, but the area's biotech executives expect an uphill climb. While established and successful companies like Genzyme can build massive, new facilities, other, earlier-stage biotech companies are reliant upon venture capital investment.
Unfortunately, industry experts predict declines in venture investing on biotech for several quarters and perhaps beyond 2009.
One thing many of the businesses in these sectors have in common is the desire to become more efficient.
And many have found that technology can help that effort in any number of ways, especially through social media. Now that web sites like MySpace, Facebook and Twitter have gained acceptance among businesses, those businesses are finding that social media makes doing business easier.
So, as we turn the calendar to January 2009, remember that you can count on the Worcester Business Journal to track the ups and downs of Central Massachusetts' most important sectors. That is certain.
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