Economists, Business Leaders Don't Expect Recovery Soon
The good news about the economy is that many local business owners don’t expect conditions to get worse in the near term.
But, they don’t expect them to get much better either.
“We don’t really expect any kind of major turnaround for two or three years,” said Sue Mailman, president and owner of Coghlin Electrical Contractors, a 126-year-old electrical contracting firm based in Worcester with about 250 employees.
As the economy continues to sputter along, there seem to be increasingly dismal assessments of current economic conditions by state, federal and economic groups. Job growth is stagnant with the national unemployment rate unchanged during the past three months.
While the economy has averaged 72,000 new jobs nationwide each month since April, the country was adding jobs at a much higher clip of 161,000 a month in the seven prior months.
Meanwhile, the Gross Domestic Product (GDP) has dropped in five of the past six quarters and consumer confidence has barely budged for the past three months.
There’s an overall feeling that the economy just isn’t recovering the way many people hoped it would, said Andre Mayer, senior vice president of communications and research at the Associated Industries of Massachusetts in Boston.
Mayer recently wrote a Viewpoint column in the Worcester Business Journal in which he expressed optimism about the state’s economic situation, particularly as it related to the nation and other states.
Since then, “the situation has deteriorated,” he said.
“The domestic economy has really slowed down,” he said. “We’re not in a recession, but I can see why some people might think that we are.”
No 'Double Dip'
If there is one thing most economists agree on, it’s that while the economy may feel like it’s in the pits, it’s not in or heading toward another recession, the often-feared “double-dip,” said Northeastern University economist Alan Clayton Matthews. The most important economic indicator that judges a recession—GDP—shows there is still growth in the economy, but it’s slowing down. Even as the economy grows, robust job growth has been absent.
“Demand is the problem,” Clayton-Matthews said, noting that while businesses are willing to hire workers, they won’t unless there’s more demand for their products or services.
Mayer, of AIM, agreed that the economy is not in a recession; but, he said, it could be on the brink.
Europe, because of its debt crisis, has a risk of going into a recession. If that happens, it could deal a serious blow to Massachusetts, Mayer said. The Bay State has many European-owned businesses with operations in the state, including Saint-Gobain in Worcester and Northborough and AstraZeneca in Westborough.
So, he said the United States, and Massachusetts specifically, should keep a close eye on European economic conditions.
Can anything be done about economic conditions in general?
U.S. political leaders actually coming to an agreement on an economic action plan could be a start, Mayer suggested.
“This is not going to be a quick turnaround,” he said. “There is no easy answer here, but one thing we can do is take some confidence-building steps; do some little things that will give people some confidence that things can get better.”
Local business leaders agree that there are some things the government could be doing.
Industry Outlook
Overall, business is slower than it was before the recession struck in late 2007, said Phil Cyr, vice president of business development for R.H. White Cos., an Auburn construction company. Work backlogs have been reduced from nine months to just a fraction of that nowadays. But conditions are not expected to improve any time soon, he said.
But there are areas of growth. One is in infrastructure work related to natural gas deposits that have been discovered in Pennsylvania and upstate New York. That, Cyr said, has caused increased work on behalf of utility companies upgrading natural gas infrastructure around New England. While Cyr expects that segment to continue to be busy in the next five to 10 years, other business segments are slower.
Private construction of water and wastewater treatment plants and systems, which typically coincide with major new housing subdivisions, are practically nonexistent now, he said.
In turn, government work in the public sector has become increasingly competitive, with some businesses sacrificing profit margins just to win jobs, he said.
Public-Private Partnerships
But, there are some solutions. Specifically, some states have allowed privatization of public services, or what Cyr called “robust public-private partnerships.” For example, if a municipality is required because of state or federal regulations to build a new wastewater treatment facility, but the community does not have the resources to do the project, a private company like R.H. White could construct and own the facility, and lease the services of treating the wastewater to the community.
The solution would give private companies work while allowing communities to comply with regulatory mandates, he suggested.
The Pioneer Institute, a Boston-based think tank, has written in the past about how a 1993 law referred to as the Pacheco Law makes such privatization partnerships difficult, however. Specifically, the law requires cost comparisons between the public and private projects, mandated wage and benefit levels for the private bidder, and they open the projects up for review by the state auditor’s office. These factors, the institute argues, have limited privatization of public services in Massachusetts.
Pushing Ahead Slowly
Other businesses are expressing similar feelings of not expecting any more changes in economic conditions any time soon.
“I’m forever an optimist, but even for me things don’t look great for the long term,” said Anthony Gallo, president and owner of Gallo Moving & Storage, a moving company in Milford.
Gallo doesn’t think the economy is in another recession or a “double-dip,” but he’s not confident it will get better anytime soon.
“The next couple years, it’s probably going to be just like the way it’s been,” he said.
So how do businesses manage in a period of economic idling?
Mailman, with Coghlin Electric, said the company has expanded its geographic reach in recent years and is bidding on projects as far west as upstate New York. Cyr, with R.H. White, said the company has consolidated offices in New Hampshire to cut costs while trying to tap into new markets.
For Gallo, it all comes down to customer service.
“It really comes down to doing the right thing every day and taking care of the customers,” he said. “If you do that, they will refer you to friends, neighbors and coworkers. If you do right by the customer, that’s the best thing you can do for your business.”
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