Northeast States Creep Slowly Out of Recession

Retail, auto sales, consumer confidence all up

WILLIAM WARD, who owns a small contracting business in Attleboro, Mass., a city south of Boston, smiles as he inspects the two single-family homes he is building.

Business is going well. With five projects now under way and 10 completed houses for 1993, Mr. Ward is hopeful about the upturn in residential construction.

``I wouldn't say it's booming, but for a long time it was dead,'' he says. ``You couldn't force anything on anybody.''

Not only is Ward seeing more first-time buyers, he is also seeing more second-time buyers or ``move-up buyers.'' It's quite a difference from three years ago when he built only four houses and had to lay off his five-man work crew.

``The fact that the `move-up buyer' is starting to buy means things are starting to move again,'' he says. ``In 1989, these people dried up. There was nobody around.''

After a prolonged and deep recession, New England's economy is showing signs of improvement, economists say. And due to lower interest rates, the residential construction industry is one sector making slow but steady gains.

In Massachusetts, a bellwether state for the region, more people are buying and building houses. The region's home sales increased 19 percent over sales a year ago, says Yolanda Kodrzycki, an economist at the Federal Reserve Bank of Boston.

In addition to gains in home building, the rest of the region's economic picture is showing scattered signs of improvement. Consumer confidence is increasing while auto and retail sales are rising. Nondefense manufacturing industries, high-tech firms, and managerial consulting firms are growing. Meanwhile, economists expect employment - which reached a low in late 1992 and early 1993 - to increase, although revised statistics are not yet available.

``The nation has been in a recovery for some time and New England is lagging behind,'' Ms. Kodrzycki says. ``But there are signs that things are turning around here, although more slowly than the nation.''

While the recovery may be sluggish, there is reason to be optimistic, says Nicholas Perna, chief economist at Shawmut Bank in Boston. Layoffs may be continuing within larger companies, but smaller high-tech and biotech companies are actually hiring, Dr. Perna says. And restructuring and consolidation in financial, computer, and defense industries are continuing.

``There are changes afoot and these are still, for many, difficult times, but I think we can all breathe a partial sigh of relief that the worst times are behind us,'' says Frederick Breimyer, president of the New England Economic Project, an economic forecasting group.

Over the past four years, New England has seen the worst of the national recession. The economic slump began here in 1989, and since then the region has lost 800,000 jobs. It has endured sharp cutbacks in its defense, computer, and financial industries while state governments faced serious revenue shortfalls and budget crises.

``In terms of its breadth, depth, and duration, I think New England has had a singularly unique experience,'' says Paul Harrington, associate director of the Center for Labor Market Studies at Northeastern University.

Some states will be making faster gains than others. Northern states are seeing the clearest signs of recovery with Maine, New Hampshire, and Vermont experiencing slight employment gains.

The Granite State is seeing some growth in nondefense manufacturing while state revenues and tourism inquiries are up. Tourism is also doing well in Vermont as are auto sales. In Maine, however, cutbacks in the defense industry have taken a toll due to layoffs at Bath Iron Works and the shutdown of Loring Air Force Base in Aroostook County.

Connecticut is lagging behind the other states due to continued cuts in defense and insurance industries. Defense manufacturing firms in particular - those specializing in military hardware, helicopter, tank, and submarine construction - are still cutting back. Thus, while the other New England states have stopped losing jobs, Connecticut's labor force continues to shrink, but at a slower rate. ``The good news for Connecticut is qualified good news,'' Mr. Breimyer says.

Defense and manufacturing cutbacks have also hit Rhode Island hard, although the state's service industry increased modestly in 1992.

New England's sizable health-care industry is an area of concern. For years, it has been an engine of growth but now faces major restructuring. Cutbacks in medical-service industries and hospital consolidations - prompted, in part, by debate over President Clinton's proposed health-care system - will have a negative economic impact in the short run but provide benefits later on, economists predict.

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