Mass. works to help local business
Officials want to keep in-state firms healthy during downturn
With the stock market collapse and slowing economy prompting financial companies to cut back, Massachusetts officials are playing defense on jobs.
Daniel O'Connell, Governor Deval Patrick's top economic development official, said his agency will spend less energy trying to lure out-of-state businesses to Massachusetts and more time trying to help those already here weather the tough times.
"I think we need to go to our strength in troubled times," O'Connell said in an interview. "So we're staying in closer touch and asking what we can do."
That could be a tall order. The fortunes of financial giants such as Fidelity Investments or State Street Corp. and their combined 24,400 Massachusetts employees rest more on the performance of worldwide investment markets than on business conditions influenced by state government.
So far O'Connell and his second-in-command, Greg Bialecki, say local companies haven't asked for specific help amid the credit crisis, such as tax breaks. This year, however, the state did allow businesses to forgo a $150 million increase in fees to the state's unemployment insurance fund.
The administration is also trying to boost confidence in the financial sector, with state banking and insurance regulators speaking to community groups about the relative strength of local companies in those sectors.
But the slowing economy will put more pressure on Massachusetts to attract and keep jobs. Fidelity has already revealed pending layoffs, as has delivery firm DHL Express and communications equipment maker Nortel Networks.
Based on past trends, Moody's Economy.com estimates Massachusetts could lose 7,200 finance and insurance sector jobs through the end of next year, or 4 percent of the sector's total workforce. Because those jobs tend to pay more than average, their losses could have a ripple effect on the rest of the economy.
Unemployment in Massachusetts stood at 5.3 percent in September, up from 4.1 percent a year ago but still below the national average of 6.1 percent. Other sectors here also face major challenges, such as retailing and construction.
Former governor Mitt Romney was criticized by some Democrats for his efforts on this front. Patrick campaigned on a pledge to improve job growth, but now O'Connell faces many of the same pressures from business groups that want lower taxes, energy prices, and fewer regulations.
Brian Gilmore, executive vice president of the business group Associated Industries of Massachusetts, said O'Connell's new emphasis on local firms is overdue and marks a break with past strategy of wooing young industries such as biotechnology and filmmaking, often by offering special tax benefits.
"There's been more emphasis on picking winners than on helping firms already here," he said.
To date, much of the state's efforts have been to persuade out-of-state companies to put new jobs here.
In 2006, the state promised drug maker Bristol-Myers Squibb Co. $33 million in tax credits for building a $660 million factory at the former Fort Devens in Ayer that will eventually employ 550 workers.
Gilmore said he gives the administration credit for trying to improve public education and speeding permitting of development projects. But he said the business climate here remains difficult, with unemployment insurance costs as well as energy supplies still too expensive, and the continuing imposition of new regulations.
On the plus side, the state's big nonprofit sector of universities and hospitals isn't as tied to the business cycle and should help blunt the effect of a general slowdown on the local economy.
O'Connell said the Moody's analysis wasn't detailed enough to be of much value, and added the worst hit areas of finance, such as hedge funds or investment banking, involve a smaller proportion of jobs here than in New York City.
"I would suggest the impact of the market turbulence will be different here," O'Connell said.
O'Connell said the financial sector's diversity also should protect it from the worst job losses. He said he expects insurance companies to grow, particularly those benefiting from the deregulation of the auto insurance market. Liberty Mutual Insurance Co. said it will build a call center in Springfield that will create 300 jobs, while Progressive Corp. of Ohio added about 100 people in Massachusetts.
On Fidelity in particular, O'Connell said the firm's layoffs likely will be too small in number to have much of an effect on the economy here.
Ross Kerber can be reached at kerber@globe.com. 