Executives anticipate continued moderate growth in 2007
Last year’s Worcester Business Journal Executive Survey predicted a solid year ahead for the local economy. It looks as if the respondents got what they expected.
But along with consistent predictions of moderate growth, the same issues that concerned our respondents last year also take top billing this year as the region’s biggest business challenges. Our more than 190 respondents this year could choose up to three top concerns apiece, and their top three were health care (44 percent), domestic competition (42 percent), and recruiting new employees (26 percent.)
Our survey polled 190 respondents over a period of several weeks, through a variety of media. Some questions allowed three choices; others allowed respondents to skip them if they did not apply, so responses in some cases added up to more than 100 percent, as in the questions about the biggest business challenges facing employers. In other cases, a handful of respondents skipped the question, but not enough to represent a significant falloff in responses.
Last year, 51 percent of respondents cited health care as their leading concern, domestic competition at 35 percent and recruiting new workers at 34 percent. The decline in concern about health care may or may not reflect the enactment of health care reform in Massachusetts this year, and recruitment of new workers may have edged back this year because last year’s respondents were more active in hiring.
Asked what they thought which issues would have the biggest effect on the region’s economic health, 55 percent picked healthcare; 53 percent chose housing costs, and 49 percent said state and local taxes. This compares to 64 percent for health care last year, 58 percent for housing costs and 37 percent for state and local taxes.
Mixed, moderate message
in Massachusetts
One regional benchmark, the Associated Industries of Massachusetts Business Confidence Index, reflects similar moderation. It stood at 59.5 percent in November, down slightly from 59.9 in October. Readings above 50 on the 100-point scale indicate that the state’s employers are optimistic, while readings below 50 reflect pessimism about business conditions.
Within the overall figure, AIM survey respondents’ prognoses differ on state and national outlooks. Employers anticipate no more than a slight softening of national conditions over the next six months, but they’re optimistic about the state business climate.
But when asked about their own companies in November, optimism prevailed, with respondents saying they expected their companies to gain despite a slow economy. Confidence dropped among manufacturers (after a sharp rise in October) and rose in other sectors, but even so, the number of manufacturing respondents calling conditions "good" for their companies was the highest in two years. The sales index stood at 60.7 while the employment index stood at 56.4. Overall, large employers were more confident than small to midsized firms on every survey question, AIM said.
U.S.: Slow but steady growth
in 2007
On a national level is the BusinessWeek Business Outlook for 2007. The big question: Will consumer spending continue to buoy the economy as housing prices cool down? Inflation-adjusted spending growth slowed in 2006 to about 3 percent from four percent in 2004; expectations are that 2007 will be slower still. BW says it expects a slow and steady pace for 2007.
With the national economy growing at an estimated 2 percent in fourth quarter 2006, economists predict the national unemployment rate may rise early next year. The current weakness in the wage sector is, predictably, in residential construction and manufacturing, which have lost 174,000 jobs since June 2006.
BW predicts consumers in 2007 job market will increasingly rely on income growth for their purchases and less on wealth, due in large part to declining home prices. Households may decide to save more of their income next year, curtailing spending even more. On the good side, consumers are in sound financial shape, as measured by low delinquency rates for most types of loans, with the subprime mortgage market being the exception. The prediction: Consumers will keep spending, but at a slower pace in 2007.
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