Economic Forecast: Sizing Up 2008

We break down the Central Mass. economy, one sector at a time

If 2008 is anything like 2007, we're all in for another interesting year.

With a new state health care reform law on the books, long-awaited change in the auto insurance industry finally underway and big business expansions like a $200 million new headquarters planned by Evergreen Solar in Devens, the last 12 months have been action-packed for businesses local and statewide.

Could 2008 be nearly as interesting? Yes, based on our reports on nine key industries in the Central Massachusetts economy.

Once again, the Worcester Business Journal has taken a look down the road and touched base with those in the know on what is coming around the corner in nine industry sectors: manufacturing, education, health care, banking and finance, retail, energy, biotechnology, real estate and technology.

And if there's one consistent message it's that uncertainty is the only certain thing. That's a message reinforced by our annual readers poll which showed that our readers are only cautiously optimistic about the economy next year.

Perhaps the brightest spot in the local economy for 2008, and for several years to come, is in the biotechnology arena. The business headlines for 2008 will no doubt be dominated by the state's $1 billion stem cell initiative and how it plays out. While Gov. Deval Patrick's proposal has yet to pass through the legislature for approval, UMass Medical School is already counting its chickens (or cells). The center for research in Central Massachusetts is gearing up big time for the expected influx of funding.

The outlook in the manufacturing sector isn't as rosy, unfortunately. Problems finding skilled labor are expected to continue in 2008 for area manufacturers. The one positive note is that the weak dollar is projected to stay that way into the new year. That means local manufacturers can count on being cost competitive when shipping their goods overseas.

On the higher education front, local colleges say efforts to retain graduates in the local community will be a priority in 2008. And expect to see more partnerships between local universities and private industry, as educators seek to help fill the dearth of skilled manufacturing labor in Central Massachusetts.

Healthy Transparency

While manufacturing was once the lifeblood of Central Massachusetts, health care has stepped up to fill in. And as a result, the region is particularly poised to experience change in 2008. Local hospitals are expected to continue to feel shockwaves from health care reform. In addition, there are several efforts to increase the transparency of the state's hospital system, which will mean harsher reporting standards. With all that's happening in health care in Massachusetts, the state is expected to be watched closely by the nation in 2008.

Things could be equally as unpredictable in the finance and banking sector locally. While banks largely stayed out the risky subprime lending market, they're feeling the fall out. At the same time, smaller community banks are facing increasing competition from larger banks and credit unions. That means investments in technology - particularly online banking - are going to be increasingly important in '08.

For local independent retailers, 2008 isn't expected to be much different from 2007. Many of the shopowners we interviewed reported that 2007 was a slow year, and expressed concern that 2008 would be much of the same. For boutiques in Central Massachusetts, next year will require a good amount of creativity to continue the fight against Big Box stores, especially with new malls in Natick and Westborough gathering steam after late-2007 openings.

The biggest cause for concern for local retailers - and all businesses for that matter - has to be energy. And unfortunately, energy prices aren't expected to come down anytime soon in '08. The small silver lining in the energy department has to be efforts on a state level to provide incentives for the investment in clean energy, like solar power. That could benefit the bottom line for consumers, and local clean energy companies, like Evergreen Solar in Westborough.

Like biotechnology, the region's technology sector is projected to grow in 2008. More and more companies are expected to jump on the virtualization bandwagon in the coming months. That technology, which allows companies to re-order and better harness the unused and underused computing power of their servers, is expected to surpass $15 billion in the next three years. Other high-tech areas of growth for Central Massachusetts are in the clean energy sector, thanks to companies like the aforementioned Evergreen Solar, as well as Worcester's World Energy Solutions, which provides an online auction house for energy credits.

The biggest question mark for the local and national economy in 2008 has to be real estate. Housing sales in the state have been at historic lows recently, which has put a crimp in many related industries. But as always, there are those that benefit. One local auction house reports an uptick in voluntary home auctions, while a local home remodeler says the slowed housing market has meant more people are fixing up their abodes.

So, 2008 is likely going to be a mixed-bag for businesses. The one certainty is that the Worcester Business Journal will be there keeping score.

Click the links below to view by category

Manufacturing

Education

• Local Higher Ed Aims High

• What Brain Drain?

Health Care

Banking & Finance

• Banks Await Subprime Shakedown

• E-Banking Comes With Rewards And Risks

Retail

Energy