UMass economist warns business group of uncertain times
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The region’s bustling, innovation-driven economy has so far defied a sour national economic climate, but turmoil overseas and in Washington, D.C., may pose a serious threat, a local business group was warned last week.
The European debt crisis and the looming “fiscal cliff” in Washington could be especially problematic for the many technology and life-sciences companies between Route 128/Interstate 95 and Interstate 495, said Michael Goodman, associate professor and chairman of the public policy department at the University of Massachusetts Dartmouth.
“We live in pretty uncertain times,” Goodman, who is also co-editor of a local economy tracker, MassBenchmarks, told hundreds of area business owners and executives at a Corridor Nine Area Chamber of Commerce gathering last Thursday.
“Our fate is largely in the hands of policy makers and politicians in the US and across the Atlantic. Given the track record of the past few years, that is not a particularly comforting place to be.”
The sophisticated hardware, software, and drugs that area companies specialize in have remained a bright spot in an otherwise gloomy economy.
While companies have been reluctant to hire, they have been investing in technology in a bid to do business more efficiently with fewer hands, Goodman noted.
That has kept the local economy growing at a faster pace than the national economy.
“Productivity-enhancing equipment, computers, software is where people have been parking their money, not in hiring,” Goodman told chamber members at Westborough’s DoubleTree hotel.
“The Commonwealth has been able to disproportionately benefit from this trend, especially in areas like Greater Boston and MetroWest.”
But Massachusetts is especially vulnerable to mounting economic problems in Europe, he said. The state sends 40 percent of its exports across the Atlantic, where some countries are starting to sink into recession amid the sovereign debt crisis, Goodman said.
There are homegrown threats looming as well.
If Congress fails to reach an agreement by Jan. 1 on how to deal with the nation’s looming debt issues, legislation approved last year would trigger hundreds of billions in cuts in government spending, a prospect that has been dubbed the “fiscal cliff.”
Research and defense spending, two key engines of the local economy, would face big reductions, Goodman said.
Signs of a slowdown in the local and state economies are starting to appear, with exports of information technology products from Massachusetts having slowed, according to the latest report from MassBenchmarks.
“Massachusetts can’t manage this pace forever,” Goodman said. “As the national and global economy slows, we are feeling it here in Massachusetts.”
Chamber members at the breakfast meeting said they agreed with the UMass Dartmouth professor’s assessment of the tentative state of the local economy.
Barbara Clifford, president of Corridor Nine, said the organization’s members, 75 percent of whom are small businesses, are responding to the economic uncertainty by keeping down expenses.
“I hear it every day. People are worried — they are holding back. They are nervous about committing to more expenses,” she said.
William Domings, president of McDonald Consulting Group, a Westborough-based human resources consulting firm, said he is seeing the uncertainty at first hand.
His firm offers a series of tests for employees to make sure they are being hired or placed into the right jobs, Domings said. Given how careful companies are about hiring now, it is a service that theoretically would be in high demand.
But while his firm is doing all right, Domings said, adding new business has proven to be more difficult in the current economic climate.
Prospective clients are apt to tell him they need his service, but for now will try to do without it.
Many are concerned what might happen if they hire now and then wind up in a tougher situation next year if the economy takes a turn for the worse, he reported.
“We are only spending money where we absolutely need to spend it,” Domings said he is being told. “Small businesses are concerned about where every dollar is going.”
Scott Van Voorhis can be reached at email@example.com.