The New England Recovery

By Bradbury, Katharine; Gilligan, Peggy | Journal of Commercial Lending, August 1994 | Go to article overview

The New England Recovery


Bradbury, Katharine, Gilligan, Peggy, Journal of Commercial Lending


Things are looking much better in New England. According to recently revised employment data, the region has shown fairly steady employment growth since the summer of 1992. The current situation represents a marked improvement from conditions prevailing four years ago, when the local downturn was young, and even two years ago, when most indicators were still declining or, at best, holding steady.

Nonetheless, in part because employment statistics have recently been revised, it is difficult to get a clear picture of the regional economy and its current strengths and weaknesses. Compared with boom times of the mid-1980s, times are tough in New England, but the region has turned the comer into what looks to be a period of modest growth.

Recent Economic Trends

Employment

New England's slowdown in the 1990-1991 recession was much longer and deeper than that of any other region in the nation, involving the loss of 1 in 10 jobs over 3 1/2 years. However, since June 1992, New England has been adding jobs at about the national pace.

Massachusetts was the hardest hit New England state, losing 11.5% of its jobs between the end of 1988 and the summer of 1992. Connecticut and Rhode Island were not far behind Massachusetts. Maine and Vermont, by contrast, lost less than 7% of their nonfarm jobs. Employment in New Hampshire declined at about the same pace as Massachusetts but turned around sooner (in mid-1991).

Through April 1994, all six New England states were showing more jobs than a year earlier. For the region as a whole, the total job count in April was 3.3% above its low point and 2% above a year earlier.

The region's unemployment situation has also improved. New England's unemployment rate has been at or below the national average for 14 consecutive months; in May 1994, the region's jobless rate was 5.9%, while the rate for the U.S. was 6%.

All New England's major industries except manufacturing tallied more jobs in April 1994 than a year earlier. Services were the most notable source of employment growth, as was the case during most of the 1980s. Service jobs in the region expanded 4.8% in the past year and now exceed their prerecession peak by 7.4%.

Within the service sector, more detailed data available for Massachusetts indicate that the industries adding jobs are health services, social services, and engineering and management services. Within business services, the gains are greatest in temporary help agencies and software companies.

Jobs in wholesale and retail trade have also begun to grow, and within retail, more detailed Massachusetts data indicate that employment in eating and drinking establishments is growing substantially. Construction is also growing. And in Massachusetts, nonbank credit institutions and securities firms are expanding, while insurance continues to shrink.

Manufacturing as a whole continues to decline, as it has since the end of 1984, but some industries are stabilizing. Employment is growing in New England's printing and publishing industry and in rubber and plastics. In Massachusetts, the declines are concentrated in high-tech industries, where defense contractors, computer makers, and medical instrument suppliers continue downsizing. Manufacturing employment outside high-tech industries has leveled.

Consumer Confidence and Housing

Several other indicators show clear improvement from a year ago, despite some month-to-month ups and downs. Consumer confidence, for example, has trended upward in the past 1 1/2 years in both the nation and New England. Consumers' perceptions of the present situation have improved along with their expectations for the future.

Most housing indicators look stronger as well; the housing market has responded to lower interest rates. Severe weather reduced activity in January and February 1994, but beginning in the second half of 1993, housing permits and residential construction contracts in New England ran well ahead of a year earlier. …

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