BICOASTAL ECONOMY. The Tide Ebbs
With growth slowing on both coasts, the vaunted ``bicoastal economy'' that characterized the 1980s is no more. Still, the West Coast is in relatively good shape, despite a slackening defense industry. On the eastern seaboard, only Florida continues to post above-average growth.
FROM his window high above Atlanta, Lee Whitfield points out three towers that will swell the glut of downtown office space. ``Atlanta's glass is always half full, never half empty,'' he says. As resident manager of Coldwell Banker Commercial, a realty firm downtown, Mr. Whitfield thinks the city will recover - slowly - from its current doldrums.
The outlook is bleaker farther up the eastern seaboard. Housing prices in New York and New Jersey are down as unemployment rises. In Boston, the mood is positively grim.
``I think we are leading the national decline,'' says Paul Harrington, associate director of the Center for Labor Market Studies at Boston's Northeastern University.
What was unthinkable three years ago has happened on the East Coast of the United States. The chain of once-booming state economies from the Bay of Fundy to the Straits of Florida is tarnished and, in places, rusting. The vaunted ``bicoastal economy'' of the 1980s is no more. The most vibrant areas on the East and West coasts are in the Northwest and Florida - a kind of ``catty-corner economy.''
Even here in Atlanta, buoyed by its recent selection to host the 1996 Olympic Games, the immediate outlook is for slow or zero growth.
``It's getting harder and harder to talk about the `bicoastal economy,' '' says Sheila Tschinkel, senior vice president and research director for the Federal Reserve Bank of Atlanta. The once high-flying eastern seaboard has seen the Northeast slip badly and the Southeast slow considerably.
From 1982 - the trough of the last recession - to 1988, all 14 states saw their growth in total personal income outpace the national average. Each enjoyed lower-than-average unemployment virtually throughout the period. Population expanded faster than the US average in nine of the 14 states; employment grew faster in 11 of the 14.
Then in 1989, clouds started to gather in the Sun Belt. In the Northeast, it began to rain. New Jersey and all six coastal states to the north saw personal income growth slow to a crawl and dip below the 4.1 percent national average for the period between the first quarter of 1989 and the first quarter of 1990. Total employment in eight states actually fell between July 1989 and July 1990.
Massachusetts - the economic ``miracle'' of the 1980s - faces perhaps the bleakest outlook on the East Coast. With its construction, defense, and high-tech industries all slowing, the state's unemployment rate hit 6.5 percent in July, a full percentage point higher than the US average. Moreover, Massachusetts lost a net 92,000 workers between July 1989 and July 1990. Housing prices slumped. And the consumer confidence index in New England has reached the lowest level ever observed in a region of the US.
The Iraqi crisis is of particular concern in the Northeast. An outbreak of war might benefit defense manufacturers in Rhode Island and Connecticut, but not so much Massachusetts, whose defense-related industries are more research-oriented. High oil prices hit New England especially hard, because it is a heavy user of home heating oil.
The budget agreement between the President and Congress means further cuts in the defense industry, another blow to the region.
``We can't exactly say we are in recession,'' says James Hughes, professor of planning at Rutgers University. But ``New Jersey and the Northeast region seem to be staring down an economic abyss.'' The financial services sector, which during the 1980s was responsible for one out of every eight new jobs in New Jersey, is in retreat, he says. The construction boom, which had added one out of every nine jobs in the state, has also collapsed. The price of the average single-family house in the New York metropolitan area has dropped 6 percent since July 1989.
Some analysts hope the region's large service sector will pull the region through difficult times. ``Services are not exportable jobs,'' says William McEachern, an economist at the University of Connecticut.
Since services historically have been less susceptible to economic downturns than manufacturing, a big service-sector state like Connecticut may avoid prolonged trouble, Professor McEachern argues. ``About a year from now, you are going to start seeing stories that things will be turning around.''
As one moves south, the economic clouds lift a little. The housing prices that have dropped in the Northeast continue to rise, albeit slowly, in cities like Baltimore, Washington, D.C., Charlotte, N.C., Charleston, S.C., and here in Atlanta.
But even in the Southeast, times are not easy. Altanta's expected $3.7 billion boost from the Summer Games won't really begin to be felt until 1994, says Jeff Humphreys, director of economic forecasting at the University of Georgia. He says there is a 45 percent chance of a near-term recession in Georgia. ``And I'm one of the optimists! ... The consensus is that we are actually in a recession right now.''
With the possible exception of Florida, the region's boom has ended - as has its recession-proof image. The region's rapid growth during the 1980s was unsustainable, says Ms. Tschinkel of the Federal Reserve Bank. From 1982 to 1989, Georgia's population grew twice as fast as the national average; Florida, three times the US rate.
She doesn't expect that kind of in-migration again as the number of new workers shrinks and the Baby Boom generation becomes more settled and less willing to move. Thus, economists expect the region will grow at much the same pace as the rest of the nation.
Of all 14 states that once made up the eastern part of the vibrant ``bicoastal economy,'' only Florida continues to post above-average growth - perhaps 4 percent this year.
``Compared to what we were doing a year and a half ago, there has been some slowing,'' says Stephen Morrell, chief economist of the Southeast Bank, headquartered in Miami. But ``compared to the rest of the nation, Florida remains a growth leader.''