Regional President Speech

Remarks by Cathy Minehan at BayBanks Regional (Merrimack & North Regional) - Board Meeting September 26, 1994 Good morning. I want to thank Giles Mosher for inviting me to be here with you this morning. I plan to spend much of my time this morning discussing the Massachusetts economy and putting those charts you have into context. However, there are some other related issues I would like to discuss, on which I am eager to hear your perspectives. I think that meetings such as these are infinitely more interesting -- at least for me -- when I am able to find out what is on people's minds, instead of only listening to myself talk. So I hope we can have a lively exchange a little bit later. I'd like to cover three main things: Who am I and what do I see as important for the Boston Fed What's the general state of the national and local economy as a backdrop for Where do I think I and Boston Fed can add value in the regional community II. I'm a thoroughly experienced policy and management specialist who through dint of hard work and a lot of luck happen to have the best job in the world Diverse responsibilities - 3 legged stool Significant management challenge - employees, landlord -2- Chance to make a difference within region within Federal Reserve System within national/international In fact I believe there is no reason to have the Federal Reserve Bank of Boston unless we as an organization and as individuals add value Strategic Plan policy Fed as a resource to regional community--economic information, publications and as corporate citizen Ill. Now for a couple of minutes I'm going to be a resource for all of you on economic data, because I think it will make you understand some areas of local involvement I have in mind a little better I'll very briefly touch on the national economy -- for contextual purposes, and then get into what's happening in Massachusetts National economy - doing okay - about 4 years or better into an economic recovery - fairly old by historical standards, but also fairly weak. Right now we're on the horns of a dilemma of how to balance things to achieve what you could call economic perfection - nearly full ?_ ) ment, no major inflation evident, economic growth slowing to ft:!: {1).1,i poten ial, capacity utilization high, consumer sentiment high, etc. Sure there ar roblems--the value of the dollar, the status of the U.S. as the largest debtor nation, national budget deficits--but all in all the national scene is looking pretty good. ~ Locally (charts) - Much the same - a solid recovery with some signs of moderation. Charts 1, 2, 3 Here in Massachusetts, the economic situation is quite similar to the nation's - a solid recovery with some signs of moderation emerging. While much harder hit in the recession than most of the rest of the country, Massachusetts been growing at slightly better than the national pace since we began recovering about two years ago. In the last twelve months, the number of payroll jobs has grown 2.8 percent in Massachusetts and 2. 7 percent in the nation. (Employment growth is our basic measure of economic performance at the state level.) Chart 4 Unemployment in Massachusetts, similarly, has been running close to the national rate: In July and August, the unemployment rate in Massachusetts was 5.9 percent as compared with the national rate of 6.1 percent . -4- Charts 5 & 6 Closer to home, the limited data on the Boston-area economy paint a slightly brighter picture: employment in the area grew a little faster than the national pace in the last year (3.0 percent from July 1993 to July 1994), and unemployment is running even lower than in the state, at 5.2 percent in July. These data refer to the Boston "Labor Market Area", a metropolitan-area concept that includes a good deal of eastern Massachusetts. In the city of Boston itself, the unemployment rate was 6. 1 percent in July not seasonally adjusted, which was down from a year earlier and slightly above the unadjusted Massachusetts and U.S. rates in July. Chart 7 The employment gains we're seeing - nationally as well as in the region, the state, and the city of Boston - are concentrated in services industries. Services is a hodgepodge category that runs the gamut from health services, legal services, and education to auto repair; from software to personal and household services; from high value-added consulting to washing windows. Services industries in Massachusetts account for one-third of all jobs, but almost two-thirds of the net job additions in the last 12 months. The fastest-growing services industries in Massachusetts are business services (including software), health services, engineering and management services, and private social services. -5- Aside from services, all the major industry groups other than manufacturing and government have added jobs in Massachusetts in the last year. Construction is growing the fastest, but the wholesale and retail trade industry, being bigger, accounts for more of the new jobs (second only to services). Even manufacturing, after almost a decade of decline, has actually added jobs in the last four months. Other measures of economic activity in the region also show growth. Help wanted advertising, usually a good indicator of business hiring plans, is rising in Boston, June retail sales in Massachusetts were well above a year earlier, as was total personal income and wage and salary income in Massachusetts in the first quarter. With consumer prices in Boston rising more slowly than in the nation, real income gains are even greater in relative terms. Housing market activity in the region continues to expand, despite this year's rise in interest rates. The commercial real estate market is also recovering. Vacancy rates in the Boston office market have fallen from almost 18 percent to 12 percent in less than three years. Thus, the current situation seems remarkably upbeat for a region and a state that just over two years ago was at the low point of a downturn that was arguably the worst (here) since the Great Depression. Looking forward, there are some definite clouds on the horizon (indeed overhead), but the basic outlook is for a slightly slower version of the current pace - not a return to the boom times of the 1980s and not a return to the bust of the early 1990s. -6- The clouds I'm referring to are sectoral problems - ongoing cutbacks in defense spending and a potential slowing of growth in health services as a result of health care reform. Both the defense industry and health services account for a higher share of jobs here than is typical nationally. As a result, our economy is more vulnerable than many other regions to policy changes in these two areas. Chart 8 Even taking account of these two negatives, the New England Economic Project, a local forecasting group, expects Massachusetts to grow at about the national pace in the next few years [chart]. Services will continue to be the main area of projected job growth, and NEEP sees manufacturing employment continuing to decline, partly because of defense cutbacks and restructuring and downsizing at computer firms. Despite this enerally positive outlook, many people are not fully participating in the r overy. A six percent unemployment rate means that 8 million people are unem oyed in the United States, and 190 thousand are unemployed in Massachuse s. Nationally, an additional half million people are discouraged workers - people o are not counted as unemployed because they've given up looking for work because ey do not believe the jobs are there. A further 4 million people are working at part-ti jobs who would prefer full-time work. So even when the economy's in pretty good ape, a fairly large pool of people would like to be working, or working more, but aren -7- To further compound the problem, being out of work is not an affliction borne proportiona ly by all groups. nemployment rate for those age 16 to 19 was more than three times the adult (20 ) rate - 17 .5 percent in August . While the teenage rate is coming down as the verall rate declines, the recession's impact has lasted much longer for teenagers th n for most workers, partly because the 1990-91 recession hit retail trade - the maj r employer of teenagers - harder than is typical of most recessions, and partly be ause the more general downsizing of firms and conservative hiring practic of the early 1990s reduced employment opportunities for young, inexperienced wo kers. In addition, unemploym nt rates for minority workers are considerably higher than for whites. The unemplo ent rate was more than twice as high in August for blacks as for whites - 11.5 p rcent as compared with 5.3 percent [chart], and the black teenage unemployment r te was 36.8 percent. For both teenagers and black unemployment rates were much lower in Massachusetts than in the United Sta es during the 1980s boom, but then the state's much deeper and longer recessi n pushed their rates above the corresponding national averages in 1991 nd 1992 . In 1993, unemployment rates for teenagers and for blacks were sim" arly high in Massachusetts and the nation. -8- Thus firms re hiring, but not everyone has benefited. Some individuals lack the experience, education, skills, or training being sought, or they live far from expanding job sites. ndeed, these problems have worsened in recent years because the importanc of education in determining an individual's success in the labor market has increa d. It used to be that high school graduates with work experience could earn as uch as a college graduate. That is no longer true nationally, and it is not tru in New England. With the steep decline in the number of high-paying manufacturin jobs here, combined with services job growth (which can be either very high wage r very low wage), we run the risk of widening the gulf between the highly educat d and highly paid minority and the working but .. -~~A poor majority. ~•i-1'~-~~v\ f" '7~ ~ _;\ ~ i,v: School o Work C,.., Boston - 1.2 million/5 objectives - 5 schools, expand Protech, work with y schools, revise curriculum, coordinate all programs involving Piedad Rob rtson/Spring -9- Boston 3 others - artford, Providence, Bridgeport 17 Empowe ment Communities Lot of planning - sha e to see it wasted if don't win grant - money largely for social services - ec nomic development part coming from local Bank contributions and small siness growth within the zone I'd like to see us leverage e plan regardless of what happens into a roadmap for collaboration be ween business and the city on economic development in Boston Ask them questions -- 'H I lave a-re.gio.nal erople'(me,,t beerd? 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Cathy E. Minehan (1994, September 25). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19940926_cathy_e_minehan

@misc{wtfs_regional_speeche_19940926_cathy_e_minehan,
  author = {Cathy E. Minehan},
  title = {Regional President Speech},
  year = {1994},
  month = {Sep},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19940926_cathy_e_minehan},
  note = {Retrieved via When the Fed Speaks corpus}
}