Massachusetts Export Center

 

South Coast Today

 

Region's economy bumps along
The road ahead is uncertain

By Joe Cohen
Standard-Times staff writer
March 02, 2008

 

There is bad news and good news about the SouthCoast economy.

The bad news has two major parts.

First, the local economy never fully recovered from damage done in the 1980s, especially in industrialized centers such as New Bedford and Fall River. Tens of thousands of manufacturing jobs with decent wages went away most were never replaced.

Second, turmoil in the national economy threatens the area. Elsewhere in the United States, booms in housing and development fueled by cheap credit imploded, causing widespread home foreclosures and other economic problems. Those problems are most evident in California, Nevada and Florida.

But economic problems can flow across state lines. And there are other concerns about the national economy, including:

    Credit crunch and high levels of debt
    High cost of petroleum
    Declining U.S. dollar and
    Risk of inflation
 

But then there is the good news, which also has two major parts.

First, there is a belief that SouthCoast's long-standing economic malaise insulates it to an extent from the economic problems sweeping the country. But should the national situation worsen enough, no amount of "insulation" can protect the area.

Second, some aspects of the regional economy are thriving.

They include parts of the commercial fishing industry, marine technology, and some manufacturing and retail. Pockets of wealth and growth also have resulted from affluent second-home owners, retirees and others who have relocated to the area.

The region's economic picture like most regional economies is a complex portrait that covers cities, suburbs and rural landscapes; rich, middle, working-class and poor; old and young; longtime residents and newly arrived.

It is a picture painted by businessmen, academics and public officials who follow the regional economy by looking back at historical data, and then forward to what might be on the horizon.

No one has a crystal ball. There are different points of view and different potential outcomes as events unfold globally and nationally.

Even experts do not agree.

In early February, Nigel Gault, an economist at Waltham-based Global Insight, said of the national economy, "This is not just a slowdown. It's a recession."

A recession is usually defined as two or more consecutive calendar quarters of negative gross domestic product growth.

The last recession occurred from March 2001 to November 2001, according to the National Bureau of Economic Research, a private nonpartisan research group.

In mid-February, the Bush administration said the economy would not go into recession and unemployment would remain low this year. "I don't think we are in a recession right now, and we are not forecasting a recession," said Edward P. Lazear, chairman of the White House Council of Economic Advisors.

Days later, the Conference Board, a business group, reported leading economic indicators had fallen at a rate not seen since 2001. Ataman Ozyildirim, a Conference Board economist, said, "The (national) conditions are nearing those that historically preceded recessions."

Then the Associated Industries of Massachusetts indicated it believes the U.S. economy is on "the edge of a recession," and Massachusetts may follow. The Warren Group followed by reporting home foreclosures nationwide and in Massachusetts were on the increase, and expected to get worse.

This past Thursday, President Bush said the U.S. economy is not headed for recession. He said the pro-growth package Congress and he put in place this year will kick in soon and produce positive results.

People closer to the SouthCoast economy are paying attention to what everyone is saying and to what they know.

Paul Vigeant, assistant chancellor for economic development at the University of Massachusetts Dartmouth, said that in some ways SouthCoast is in the process of "jumping from the 19th century to the 21st."

He said the area's economy was hard hit decades ago, with a decline in industrial jobs and the mobility of capital favoring the economies of other places inside and outside the U.S.

The area found it could not compete in low-margin, low-wage industries. As a result, jobs flowed out especially from New Bedford and Fall River.

Mr. Vigeant said he and others believe there is at least a partial turnaround under way coming from the "knowledge-based economy."


Mr. Vigeant said SouthCoast is finding success with products that are more technology intensive, especially in the first and second generations of the products' manufacturing cycles.

"There's some sense of the (improving) economy starting to kick in," Mr. Vigeant said. "Our region is closer to the North Carolinas of the world than Boston" in terms of costs and competitiveness.

Tom Davis, executive director of the Greater New Bedford Industrial Foundation, said 2006 and 2007 were very good years for new projects in the industrial park in New Bedford's North End currently one of the most successful in the state.

Among 2007 projects completed was ASE Cable Systems, which developed a new 202,000-square-foot plant, Titleist's expansion by 38,000 square feet, and Symmetry Medical acquiring an 82,000-square-foot plant.

Mr. Davis said the last quarter of 2007 saw a slowdown in interest in the industrial park that spilled over into the beginning of 2008. More recently, he said, there has been an uptick in companies considering SouthCoast.

Peter Muise has two perspectives on the local economy one in his role as executive vice president of First Citizens' Federal Credit Union and another as chairman of the board of the New Bedford Area Chamber of Commerce. First Citizens' is headquartered in Fairhaven.

So far, Mr. Muise says, the area has not been as significantly affected by the current economic situation as places that had sharp spikes in housing prices and other "boom" activities.

But "Southcoast is experiencing its share of the down economy," Mr. Muise said, citing sales of homes and new cars. "People are not buying new."

"Most people who experienced the last recession will be timid" about making major financial commitments, Mr. Muise said. "It can become a self-fulfilling prophecy" when people do not spend. If consumers who in recent years have been the driving force behind the U.S. economy just slow their spending somewhat, "That's OK. The SouthCoast economy can sustain itself if that is as bad as it gets."

There is anecdotal evidence that consumer spending is slowing locally from doughnut shops to malls to car dealers.

Mr. Muise said there may be credence to the belief that the area because of its economic history, lack of recent boom and diversified economy is better positioned to survive tough economic times than other places.

Falling home prices and tighter credit are definitely a factor in the regional economic picture, said Dawn Young of BankFive, headquartered in Fall River.

Ms. Young sees home foreclosures picking up something cutting across all home price ranges and ownership income groups.

Depending where property is located, times can be tough for those who need to sell.

David Alves, a New Bedford real estate broker and City Council member, said, "The real estate market is really depressed. Houses are selling below assessed value."

Mr. Alves said, "We've lost jobs in the area ... there is not a lot of construction ... gasoline is going up. I always feel the glass is half full I know (the economy) is going to turn. It's a tough, cold period right now."

Many people may be finding themselves in trouble, according to a leading SouthCoast bankruptcy lawyer.

Roger Stanford, whose office is in New Bedford, said he has seen a clear upturn in bankruptcy filings in the past six months, and it "crosses all types of income groups," including elderly and professionals.

"The economy is not good. People are just not making it," Mr. Stanford said. He said a large number of bankruptcies are related to real estate, some in which people financed virtually the full purchase price and now face declining property values. That can be exacerbated by declining incomes and credit card debt.

Mr. Stanford said bankruptcy filings are back to the rates of 2004, before federal bankruptcy law was tightened to make it more difficult for people to seek relief in bankruptcy court.

That does not surprise those who are looking at all the pieces in the SouthCoast economic picture.

Clyde W. Barrow, director of the Center for Policy Analysis at the University of Massachusetts Dartmouth, says Greater New Bedford has been in a "growth recession" for most of the past six years. Two percent or less growth comprises a "growth recession." SouthCoast also has seen the gap grow between the region's wages and the state average.

Massachusetts is "49th in job creation" and "one of only four states nationally to lose jobs," Mr. Barrow says.

He said there is a difference between Boston and close-in communities inside the I-495 beltway that contrasts with other parts of the state outside I-495. He calls I-495 a "line of demarcation."

Inside the line, Boston and nearby communities are doing relatively well with high-tech, biotech, higher-end financial services and support jobs. Outside the I-495 line, Massachusetts communities never recovered from the collapse of old-line manufacturing 20 years ago, Mr. Barrow said. New Bedford is a "comparable situation" to most other cities outside I-495.


Unemployment numbers bear that out.

In the Bristol County Workforce Investment Area, the unemployment rate is 5.5 percent. New Bedford and Fall River have unemployment rates significantly higher, Mr. Barrow said. State data put New Bedford's unemployment rate at 7.3 percent.

More affluent SouthCoast towns are a different story Mattapoisett has an unemployment rate of 3.4 percent and Lakeville has a rate of 4 percent.

The statewide unemployment rate is 4.5 percent.

Mr. Barrow said analysis of the SouthCoast job situation especially the cities indicates things might be even worse. He says unemployment rates might be artificially low because some people have permanently left the workforce or moved out of the area.

Mr. Barrow said SouthCoast is still struggling to replace the good paying factory jobs lost years ago, and the jobs that have come into the area since are mostly lower paying retail and service industry jobs.

One big obstacle for the region is educational attainment levels, Mr. Barrow said.

SouthCoast has high dropout rates especially in the cities and lower levels of college-educated workers than more competitive regions, including Boston.

Mr. Barrow sees some "flickers of hope," including in the high-tech and marine science areas, along with business and professional services. In addition, there have been indications logistics warehousing, storage and trucking is offering better paying positions.

But the larger economic picture threatens the local good news, as Mr. Barrow sees it.

"The odds are better than 50-50 that if we are not in a recession, we will be by the end of the year," he said. Indicators such as foreclosures, banking problems and falling consumer confidence point to recession.

This recession could be worse than the previous one, he believes.

In the last recession, retail sales and homes sales continued fairly strong, Mr. Barrow said, because people were able and chose to run up debt and drain savings. That included taking money out of homes in the form of refinancings and home equity loans.

Now, Mr. Barrow says, debt is up, there is a negative savings rate and home prices are falling. When it comes to the consumer, there is "exhausted capacity," Mr. Barrow said.

Roy Nascimento, president of the New Bedford Area Chamber of Commerce, said a lot of businesses are concerned about the national economy, including the effects of the Iraq war and rising fuel prices.

Still, he sees reason for optimism, including strong public-private partnerships.

The SouthCoast economy is diverse, he says, including manufacturing, life sciences, marine sciences, fishing, agriculture and retail.

"Exporting is another success story," Mr. Nascimento said.

Paula Murphy of the Massachusetts Export Center agrees about exports.

State exports have been accelerating. In 2006, SouthCoast was part of a region that had a 23 percent year-over-year gain. That trend appears to be continuing, Ms. Murphy said, with 2007 a record-breaking year for Massachusetts exports, and 2008 shaping up well.

"The cheap dollar is making our exports a lot more competitive," Ms. Murphy said. More free-trade agreements have been signed, and for exports that means reduced duty or duty-free sales.

In SouthCoast, the seafood industry and marine technology are two areas where the economy is benefitting from exports. Massachusetts exported $412 million in seafood last year, much of it having been landed and a good part of it processed in New Bedford, Ms. Murphy said. New Bedford continues to lead the nation in the value of the fishing catch landed.

Dan Georgianna is a UMass Dartmouth economics professor who closely follows the fishing industry. He says, "I think we (the fishing industry) are doing well. It is an amazing turnaround ... and people are making money."

"Don't get me wrong, there are huge problems (still) with the multi-species plan and draggers," he said about threats from government regulations and to the groundfish fishermen. But fish stocks are coming back, he said, and "the waterfront looks better than it did 5 to 10 years ago. There is more life down there; more boats; and more boats in better shape."

 

 

 


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