New England’s six states came together at last week’s New England Economic Partnership (NEEP) Fall Conference, each represented by one NEEP member, to provide an overview of the economic conditions throughout the region. They were joined by economist Mark Zandi of Moody’s Analytics and keynote speaker Stephanie Pollack, secretary and CEO of MassDOT.
As a backdrop to the discussion, Zandi provided a summary of the nation’s economic state as it continues to emerge from the mire of recession, describing the economy as “performing reasonably well.”
Zandi presented four specific data points to highlight key growth areas in the U.S. economy: employment, wage growth, housing supply and America’s driving role in global economics.
- Although job growth has slowed slightly in recent months, Zandi said, underlying job creation is around 200,000 per month – the best the country has seen since the late 1990s. If this trend continues, he said, the country will reach full employment (that is, a typical level for a healthy economy) by next summer.
- Despite climbing at a “pedestrian” pace throughout the recovery thus far, Zandi said he expects a strong pickup in wage levels in the coming year as unemployment drops and the labor market becomes more competitive.
- As unemployment drops and wages rise, Zandi noted, the U.S. will see a boom in new households being formed, which will reverse the nation’s housing market from being overbuilt to undersupplied. This will lead to new construction, and thus more new jobs.
- Zandi said the U.S. will weather the economic storm occurring overseas, contributing more to global GDP growth than any other nation or region, and shining as “arguably the strongest big economy on the planet,” rivaled only by the likes of India.
Massachusetts’ economic growth reflects the same trends seen on the national level with a current level of payroll employment not seen in over a decade and a half, according to the state overview by NEEP Director Alan Clayton-Matthews, presented by Vice President Ross Gittell. The Bay State leads a slow but steady regional recovery overall, along with Vermont and New Hampshire, while Maine, Rhode Island and especially Connecticut lag behind.
The current expansion of payroll employment in Massachusetts, Gittell said, is 70 percent faster than during the years leading up to the Great Recession, now at 2.6 percent expansion in the last year.
A significant portion of this has been in the “professional business services” sector, which includes technology and engineering-based jobs. This sector has been growing at an annual rate of 6 percent, which Gittell called “phenomenal.”
Gittell said that the state has been aided by population growth that “has exceed expectations in recent years,” growing at nearly the same rate as the U.S. overall, about 0.6 percent.
The state’s transportation infrastructure as it stands is “not great,” Gittell said, but some progress has been made. Over the past few years, the percentage of Massachusetts’ bridges considered structurally deficient has been dropping and now stands at 8.9 percent, about a point less than the national average. However, the percentage of bridges considered functionally obsolete (that is, not dangerous but not ideal to handle modern traffic) is about 43 percent – 30 points higher than the national average.
“We have a lot of work to do in fixing our bridges,” Gittell said, adding, “we have even more in fixing our public transportation system.”
Among Boston’s subway lines, Gittell showed, only the Blue Line has all vehicles within their useful life, with the Red and Green lines coming in at roughly half their vehicles in useful life. The Orange Line currently runs with all of its vehicles past useful life. Significant numbers of buses (77 percent) and commuter rail cars (around 80 percent for both coaches and locomotives) are also past their prime. The average across the entire MBTA is about 70 percent.
As NEEP laid out the clear need for an overhaul of the state’s transportation system, Pollack introduced a new approach to public transit for Massachusetts, which she has been bringing to the Baker administration since she was appointed secretary of MassDOT earlier this year.
Transportation and infrastructure, Pollack said, are not important for what they are, but rather for what they do – “getting people where they need to go, connecting them to opportunities and supporting the economies of communities and regions,” she said.
This is a maxim that Pollack warned must be maintained in order to keep public money working as efficiently as possible, shifting the orientation from “projects to investments.”
“I am not just trying to create a euphemism or rebrand something to make it sound groovier,” Pollack said. “I truly believe there is a fundamental difference between thinking about capital dollars for transportation and other infrastructure as investments as opposed to projects.”
Pollack’s new approach is broken down into four fundamental parts:
- Take inventory of the entire universe of potential investments, perhaps going outside of the comfort zone of the change-averse people of Massachusetts, in order to find the best fits for the current situation going forward, bringing in ideas from a wide variety of sources.
- Set up a screening process for potential investments in order to develop specific criteria for what makes a given investment better than another.
- Create a portfolio of the investments with the highest return based on the screening criteria.
- Once the portfolio is created, find the best method of procuring and delivering the projects, taking into account the options of leveraging private funding against public.
In order to determine the projects that would yield the highest returns, Pollack said that her department will conduct conversations with average citizens as well as businesses and investors, gathering information on where the transportation system needs to reach or where repairs need to happen, in order to be the most useful and expand economic opportunity. In doing so, Pollack aims to take decisions out of the hands of engineers, who have traditionally decided upon which projects go forward depending on a purely statistical basis.
“If we’re not intentional in thinking about the return on our investments in transportation,” Pollack said, “it will be almost an accident if we actually invest in a portfolio that maximizes the return to the commonwealth.”