The Valley’s economy, like that of the state as a whole, is humming along in what experts describe as a steady, if not “robust,” pace.
But every silver lining comes with a bit of uncertainty, and that’s certainly true in the Valley, say economists and business leaders here.
First, the positive. Unemployment is low, growth from the eastern half of the state is spilling over to the west and significant mixed-use projects are underway in some of Hampshire County’s largest communities. And the region’s diversity of bedrock industries of stability — higher education, health care, technology and government — continue to provide reliable stability, as they have for years.
“Right now, it’s fairly steady, we have a fairly strong economy at the moment,” Amherst Economic Development Director Geoff Kravitz said.
But not all is rosy. There are concerns about whether there will be a sufficiently trained workforce to fill vacant jobs in the future as Baby Boomers retire. And a corresponding challenge is creating enough housing — including affordable places to live for younger workers — for these new workers to live, experts say.
While Boston continues to get most of the buzz, including the Seaport district home to General Electric’s corporate headquarters, the Valley is more than holding its own, just as other parts of the state are, according to observers.
“It seems economic expansion has finally expanded to the outlying cities,” said Robert Nakosteen, a professor of economics at the Isenberg School of Management at the University of Massachusetts, observing that urban areas, and Gateway Cities such as Springfield, are doing well. “The growth in eastern Massachusetts is spreading to the western part of the state.”
Chris Geehern, executive vice president of the Associated Industries of Massachusetts, said that low unemployment and high business confidence are combining to sustain the economy.
“I think you can generally say the state economy is very strong,” said Geehern, noting that the confidence index has risen five months in a row.
Pioneer Valley Planning Commission Executive Director Timothy Brennan agrees with these assessments, calling Massachusetts “undeniably” one of the strongest in the country, though there remains some unevenness.
“I think our region, like most outside of the Boston region, is not as strong,” Brennan said.
Nakosteen said it is a positive that there is no dominant industry in western Massachusetts, but rather a diversity. Even UMass, which has continued to see enrollment increases, is not driving the economy.
“When you bring students in you bring money in, but that’s not a real driver of the economy,” Nakosteen said.
Brennan said attracting and retaining talent for good jobs, including high level machinists, business professionals and teachers, remains a challenge.
While the state has seen a fairly modest population growth, many workers are nearing retirement age. This, in addition to the extraordinarily low unemployment, hovering around 2.8 percent, poses risks.
“There are job openings as we speak, but also people without jobs and underemployed with a skills gap,” Brennan said.
This risk is referenced in the December MassBenchmarks publication, which chronicles the state’s economy and is edited by Nakosteen:
“Economic growth in Massachusetts appears to have decelerated in the fourth quarter to a more pronounced degree than was the case nationally. This may reflect tighter labor force capacity constraints in the state as unemployment rates are very low, indicating very little slack in the labor market which may be making it difficult for some employers to fill open positions.”
This is where the importance of workforce development comes, so people’s skills can get to a point where positions can be filled.
Geehern said there is collaboration for this sort of training between higher education, public agencies and the business community.
“It takes a lot of work to develop the talent pipeline,” Geehern said. “A lot of it is rolling up their sleeves and being involved in training aspects going forward.”
He points to the success of the Manufacturing Advancement Center Workforce Innovation Collaborative in Worcester.
In this area, Greenfield and Holyoke community colleges are two of the leading partners with the Franklin-Hampshire Career Center offering both shorter trainings that get people into jobs more quickly, and longer, credit-based trainings.
Teri Anderson, executive director of the Franklin-Hampshire Career Center, with locations in Northampton, Greenfield and Orange, offers trainings for in-demand jobs, specific to information technology, heath care and manufacturing.
“The problem is if we have high-demand jobs it may be hard to fill those positions,” Anderson said.
While the 2.8 percent unemployment is the published rate, Anderson said the real rate is closer to 7 percent when counting those who are discouraged from seeking employment or are otherwise unattached from the workforce.
Last year, her agency worked with 5,058 people seeking jobs, 761 businesses for employer services and spent $307,487 on training, benefiting 84 people, she said.
Patricia Crosby, executive director of the Franklin-Hampshire Regional Employment Board, said one of the hot areas is health care developments, such as that on Atwood Drive in Northampton, where there are continued opportunities for certified nursing aides, more extended care and medical assistants.
Agriculture, in addition to the jobs provided by private colleges and local professional services, is another place people can turn to for jobs. “Agriculture is thriving in the Pioneer Valley,” Crosby said. “It goes from jobs in the field to the staffing of farm stores.”
Even in a good economy, though, there are outside threats, such as the global economy being stagnant and China’s growth slowing down, Nakosteen said.
One industry to watch is the under-construction casino in Springfield, which is currently providing employment for the construction industry, but could have long-term struggles in its operation phase.
“One of the problems with casinos is that they don’t spread out economic activity, they suck it all in,” Nakosteen said.
Not only that, but Brennan said the casino may compete with existing businesses for customers, and create a war for talent.
It’s also anyone’s guess what a Trump administration will mean for business, though Nakosteen said there is positive potential if infrastructure projects occur and military spending goes up.
On the flip side, the possible repeal and uncertain replacement of the Affordable Care Act, or Obamacare, could affect the medical and other industries.
The talk about more minimum wage increases is a constant worry. Geehern said it has been manageable so far, going from $9 to $11 per hour this year, though if it went immediately to $15 per hour, that could cause trouble.
Increases in interest rates by the Federal Reserve may be an issue, as well.
“A steady, but modest, increase in interest rates, I don’t think that will have a major effect,” Nakosteen said.
Still, Nakosteen said it could have an impact on housing construction and real estate. There had for many years been an even balance between housing construction inside Boston and out over the past decade. Now, new home construction is falling everywhere but metro Boston, to the detriment of people seeking to fill the jobs in demand. With limited housing, and the stock increasingly expensive for young adults, growing the labor force isn’t easy. Brennan said housing is the bedrock of the economy.
Amherst Area Chamber of Commerce Executive Director Tim O’Brien agrees that there is a “clear and present need” for more places for people to live.
Fortunately, in Amherst, two mixed-use projects will provide housing, One East Pleasant, with 135 apartments in downtown, has broken ground, and North Square at the Mill District, with 130 apartments, is planned for North Amherst.
In Northampton, Wright Builders is finishing the Upper Ridge townhouses at Village Hill, and will be starting an eight-unit, net-zero energy duplex project on Hinckley Street in Florence.
Wright Builders President Mark Ledwell said it is rare when large housing developments occur, noting that the housing stock in the region tends to be old and that building is not cheap, or easy.
“In the Valley and western Massachusetts, we generally don’t have great peaks and valleys, we generally float in the middle,” Ledwell said.
But with UMass and the colleges, along with hospitals and a burgeoning medical industry, stability is maintained, Ledwell said.
Other housing planned or under construction in Northampton includes 70 units to be known as Live 155, at 155 Pleasant St., and 55 units of affordable housing a short distance away on the site of the former Northampton Lumber at 256 Pleasant St.
An economic indicators report in Northampton, put together by city Economic Development Director Terry Masterson, shows that the city is holding its own, with comparable commercial vacancies in 2016 to 2015, and only being down marginally in hotel taxes from $667,090 to $636,895, while meals taxes went up from $703,172 to $709,901.
Northampton Mayor David Narkewicz said the outlook for 2017 is positive, with a stable core of employers, several residential developments to provide housing and remaining a destination for visitors.
“Northampton continues to be a place people want to move to,” Narkewicz said.
Even without significant new housing, Brennan said that the region is far more affordable for young workers, and this is one of the reasons he sees continuing development of high-speed rail connections and investment in startups as vital.
There will be 12 runs a day between Springfield and Connecticut starting 2018, and PVPC is focused on conversations with the Franklin Regional Council of Governments for extending runs in Hampshire and Franklin counties.
In the startup world, Valley Venture Mentors in Springfield and the Kayon Accelerator in Amherst are two local efforts at helping the start-up economy.
“It always helps to lower the cost and increase the competency of companies trying to start up businesses,” Nakosteen said.
Kravitz, Amherst’s economic development director, said he’s anxious to see what businesses get spun out of Kayon, and then if the town can help them both grow and remain in Amherst. But he hopes such companies will at least stay in the state.
“I’d rather have them in the Boston area than not in Massachusetts,” Kravitz said.
Brennan said with the extraordinary higher education institutions in western Massachusetts, spinoffs are a logical extension. “We have to retain more of those,” Brennan said.
Restaurants are continuing to do well, even as retail faces shifts. O’Brien said those with more specialized, niche products are better able to compete.
Adam Lussier, who owns Zanna in Amherst, said local politics pose threats, with Town Meeting being against many forms of economic development, but he also worries about national affairs.
“National politics has created a high level of fear and uncertainly among Valley residents as to what could happen on any given day, which I believe has left many people in a holding pattern regarding their shopping habits,” Lussier said.
Scott Merzbach can be reached at smerzbach@gazettenet.com.
