Regional Report: Northeast 2016

Connecticut-compressorGE broke tradition last spring when it condemned legislative plans for a $1.5 billion tax increase, including about $700 million aimed at businesses. In January, the corporation announced it was relocating to Massachusetts, lured by at least $120 million in grants, tax abatements and other subsidies. Insurance giants Aetna and Travelers also joined the anti-tax hike chorus. When the hikes were slimmed down then signed into law, disgruntled state legislator Themis Klarides likened the expanded tax bite to “holding up a sign at the border (telling) businesses… to get out.” Gov. Dannel P. Malloy justified the increase as funding infrastructure improvements.

To ensure those improvements materialize, a transportation lock-box plan was floated this winter by the MetroHartford Alliance. Despite governmental stumbling, New Haven economist Donald Klepper-Smith forecasts 1% growth this year. Still recovering from the Great Recession are the Hartford and Norwich-New London areas. The Hartford-centered insurance industry, the state’s biggest cluster, is rebuilding. In December, Serta-Simmons agreed to hop the border and relocate 15 miles away to Windsor Locks. Norwich-New London, the state’s largest MSA, remains recession-mired, down 11,000 jobs since 2008. Greater New Haven is doing better, having recovered jobs lost in the downturn.

Maine’s real GDP inched forward between 2013 to 2014 at a glacial 0.2% pace. That reed-thin expansion was enough for Pine Tree State economists to sigh with relief; calming fears of negative growth. Personal income in the state grew 2.7% from 2014 to 2015. A tight labor market vexes employers, who want the state to do more to rejuvenate its graying work force. Maine’s low rate of inbound migration remains “the primary source of concern” for the Consensus Economic Forecasting Commission, a quasi-governmental group. Portland is experiencing the largest boom it has seen in years, much of it centered on the Eastern Waterfront district. The Arts District is thriving too. Several municipal programs are fueling the state’s biotech and marine sciences cluster through R&D grants and commercialization initiatives.

Maryland-compressorMaryland, which lagged the U.S. in GDP growth in 2014, revved up considerably in 2015, overcoming fears of federal shutdown and government spending restrictions. But signs of weakness remain: wages are stagnant, the housing market is soft and labor participation rates sag.

Towson University economist Daraius Irani projects the labor market will grow under 2% this year and then fall below 1% in 2018. Anirban Basu, an economist with the Sage Policy Group in Baltimore, projects 25 GNP growth this year. Both see the state economy retrenching within several years.

Times have been tight in California-Lexington Park, the state’s largest MSA. Unemployment rose to 6.3% last year, from 4.8% the year before; job growth was 1.2%. Job growth in the Baltimore market picked up but continues to lag the nation, with payroll remaining static last year after growth in the beginning of 2014. The city’s reliance on federal employment and government spending—and weak positioning in high-tech and other cyclical industries—dulls growth prospects short-term.

Massachusetts-compressorMassachusetts is experiencing a “burst of economic growth reminiscent of the 1990s,” asserts Alan Clayton-Matthews, economics professor at Northeast University and lead author of the New England Economic Partnership’s annual forecast.

The Bay State economy is expected to add 200,000 jobs from 2015 to 2018. Fastest-growing clusters are technology, business and professional services, leisure and hospitality, education and healthcare.

Increasingly Boston and Cambridge compete to recruit fast-growth biotechs, pharmaceuticals and other high-tech employers. New waterfront construction in Beantown draws heavily from Cambridge; Cambridge continues generating entrepreneurs pursuing their life science dreams.