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December 24, 2007

Economic Forecast Survey: What's Coming Down The Pike?

By Christina Davis

Things aren't great, but they're not bad

No one has a crystal ball at the Worcester Business Journal. The best thing we've got is a damaged Magic 8 Ball that keeps coming up with "Outlook Unclear," no matter what question we ask.

But what we do have is readers - readers that are willing to tell us what they think.

In the last month or so, more than 120 readers took the WBJ's Economic Forecast 2008 survey to give us a sense of what may be headed our way in the coming months.

And the results?

Well, things aren't looking great, but 2008 shouldn't be the economic disaster predicted by a lot of national media.

Regional Pride


When we asked our readers how they expected the overall economy to fare in 2008, they were cautiously optimistic about local conditions. A combined 55 percent of survey respondents said they expected the Central Massachusetts economy to "improve slightly" or "remain the same" in 2008. About 32.5 percent said they expected the region's economy to "decline slightly." By contrast, the majority of respondents said they expected the statewide economy and the nationwide economy to "decline slightly" or "significantly" in '08.

While those who took our survey seemed to see the local economy in a more favorable light, they also predicted that their own businesses would hold up to any economic pressures. A clear majority - 61.6 percent - said they expected their companies' profits to improve slightly or significantly in the next 12 months. However, our readers also don't expect that profit to translate into job creation - 55.4 percent said they expect staffing levels to remain the same next year.

The road to growth won't be paved with new jobs, but it could come thanks to ad buys. A majority of our readers said that "more aggressive marketing" will be their tact for growth in 2008.

Surprisingly - or perhaps even shockingly -soaring energy prices haven't moved local businesses to take dramatic actions. Oil may be at an all-time high, trading at more than $90 a barrel, but 42.1 percent of survey respondents said they plan to take no steps to conserve energy in 2008. Only 35.5 percent said they plan to install more energy efficient equipment, and only 16.8 percent said they plan to take advantage of energy conservation-based tax incentives.

Status Quo


Health care costs have been a recurring concern for businesses, as premiums increase year over year. But nearly eight out of 10 people that took the WBJ survey said they don't plan to make any adjustments to their benefits packages in the coming 12 months. Only 12.7 percent said they plan to increase copays and a negligible amount said they would begin offering employees 401(k)s, Flexible Spending Accounts or Health Savings Accounts.

Another hot-button issue, housing, continues to concern WBJ readers. Two-thirds said they expect housing prices "will decline slightly" through 2008. Only an optimistic few - 2.8 percent - are betting that prices will increase.

However, the credit crunch that has resulted from the collapse of the subprime lending market hasn't affected local businesses. Eight in 10 said their lending/borrowing tactics have remained the same.

So what sectors are hot in Central Massachusetts? Health care, education and biotechnology are the clear industry leaders in the region, according to our readers, while manufacturing is seen as the weakest sector, according to nearly three-quarters of respondents.

Those results clearly echo statewide data from the U.S. Department of Labor. Manufacturing accounted for 410,000 jobs in the Bay State in 1997. Ten years later, the sector reported only 297,000 jobs, a decrease of 28 percent.

Love It, Or Hate It


While our readers were nearly all on the same page when it came to their perception of the manufacturing sector, they were a bit schizophrenic when it came to the pluses and minuses of doing business in Central Massachusetts. Nearly 30 percent said it's the relatively low cost of living/high quality of life that makes this region a great place to do business. However, more than four out of 10 identified the cost of living as the biggest disadvantage to doing business in the region. An equal number of respondents said the region's close proximity to Boston is both a benefit and an impediment to doing business, showing that our love/hate relationship with the state's capital continues.

Meanwhile, our survey also found that the business roots in Central Massachusetts run deep. Nearly 71 percent said that if growth mandated their businesses move, they'd stay within Central Massachusetts. Another three-quarters said they would remain in the Bay State.

So, will 2008 be the end to the slow economic recovery? No one can tell for sure. But based on the results of our survey, the WBJ is cautiously hopeful that growth in the health care and biotechnology sectors can make up for any pressure on local manufacturers to cut costs. And with housing prices on the decline, perhaps more young people with decent credit reports will be able to buy homes in this region.

The new health care reform law appears to have put minimal pressure on businesses so far. Let's hope it stays that way through 2008. With energy costs at record levels already, oil prices can only go from bad to worse. But maybe that's a good thing for Central Massachusetts. The region is already home to burgeoning alternative energy companies, most notably Evergreen Solar. High energy prices might be enough to drive revenues for that industry, and possibly job creation.  



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