Cape Business Trends newsletter November 29, 2006
Employment numbers hold up in October; labor force growing modestly
Cape Cod’s unemployment rate continued to be among the healthiest in the state, dropping to 3.6 percent last month, compared with 4.2 percent in September and 3.7 percent in October 2005.
In another positive sign, the number of people seeking jobs across Barnstable County rose modestly from 134,322 a year ago to 134,388 last month, as did the number of people actually holding jobs.
As expected, there was a drop off in both the labor force and employment between September and October as the peak summer season wound down.
The Cape’s 3.6 percent unemployment rate compares very favorably with the statewide average of 4.2 percent and is slightly better than the Boston area’s 3.8 percent.
Planning your health-care costs for 2007
Massachusetts has the fourth highest health-care costs in the nation and it’s increasing faster than in most states, according to a new survey by consulting firm Mercer Health & Benefits.
Average health-care costs for an individual employee, including medical, dental, dependent coverage and worker premium contributions, reached $9,428 this year. Only Alaska, New Hampshire and Wisconsin have higher costs.
This number is 8.2 percent higher than in 2005.
Even as Massachusetts adopts the first universal health insurance law in the country, the consulting firm’s Deborah Wozniak tells the Boston Globe: “Traditionally, health-care costs in Massachusetts have been much higher than other parts of the country, because of all the teaching hospitals in Boston, and because we have such a high standard of health care.”
She also points to a slower adoption rate in Massachusetts of consumer-directed plans that require members to pay sizeable deductibles before benefits kick in.
Health-care costs in Massachusetts have increased by at least 10 percent in each of the past six years. For 2007, the major health insurers are predicting premium increases of between 8 percent and 13 percent, depending on the type of health plan.
Is there an upside to the downturn?
Home prices across the state could fall another 5 percent through next year before leveling off and beginning to climb slowly, according to the New England Economic Partnership.
When the dust settles from this housing downturn, overall home prices could be 7 percent to 10 percent lower than at their peak last year, reports Alan Clayton-Matthews, an associate professor at the John W. McCormack Graduate School of Policy Studies at the University of Massachusetts in Boston.
“If you’re a recent homeowner – particularly if you have little or no equity – this will be a painful process,” Clayton-Matthews said.
While this downturn will hit housing construction and some household wealth, the lower prices should improve the state’s competitiveness by making Massachusetts more affordable for future workers, he emphasized.
Even as housing takes its lumps, overall economic growth has been strong in the last year, with Massachusetts posting its strongest year of growth since the recession began in 2001, according to NEEP. Gross state product growth is estimated to be 3.4 percent between last year’s third quarter and the third quarter of 2006, outpacing the U.S. gross domestic product growth of 2.9 percent over the same period of time.
The current housing drop-off follows a period of robust price appreciation. The median single-family home price in Massachusetts reached $345,000 last year, a 72.5 percent increase from 2000 when the median home price was $200,000, according to The Warren Group.
Home prices have risen so rapidly and steeply that they outpaced income growth. Median single-family home prices as recently as last year were eight to nine times higher than per capita income. But with prices easing, the ratio between prices and incomes could go down to six by the end of 2010 – which is more in line with the nation as whole – according to NEEP.
Will homeowners cut back their remodeling budgets?
National figures suggest that higher interest rates and the drop in housing prices have taken a modest toll when it comes to remodeling, but the Cape and Massachusetts should weather any drop off in this sector better than many other parts of the country.
An estimated $160.5 billion was spent on home improvements and repairs over the past four quarters, representing only a 1.6 percent increase compared to the previous four quarters, according to the Remodeling Activity Indicator devised by Harvard University’s Joint Center for Housing Studies.
“Remodeling, like new-home building, has been prodded on by low interest rates and high rates of home-price appreciation,” said Kermit Baker, director of the Remodeling Futures Program at the Joint Center for Housing Studies.
In contrast, expenditures rose 31 percent from 2003 to 2005, Baker reported.
Locally, firms that serve the high-end market are holding up very well; companies serving the middle and lower priced markets are feeling the pinch more.
Why will this region do better than other sections of the nation? Many homeowners are living in homes built 20 or more years ago and they must maintain their investments. Also, current second-home owners will be remodeling and expanding in anticipation of moving here full time as they reach retirement age.
Cape Business will be exploring the remodeling industry on Cape Cod as part of its Real Estate 2007 edition in January. To learn more about this edition – which also will be mailed to 20,000 high-income residents across the Cape – please contact Bob Viamari at (508) 385-3811 or bob@capebusiness.net.
Looking beyond housing, the news is pretty good
“The state economy is doing quite well and [has] been going at a pace above the nation,” said Michael Goodman, director of the Donahue Institute at the University of Massachusetts. “The Cape continues to see growth in the areas of health care, hospitality and leisure services, education, and professional services such as banking and wealth management. The marine technology industry is a niche market on the Cape that continues to grow,” he told Cape Business Connect attendees on Nov. 17.
Goodman joined Lynn Browne, executive vice president of the Federal Reserve Bank of Boston, in identifying housing as a challenge over the next year. However, Browne emphasized that the downturn has not affected other parts of the economy, and that while home sales volume is down substantially, housing prices have resisted steep declines experienced in other parts of the country, such as California, Nevada and Florida.
“The really good news for Massachusetts is income growth," she said, noting that incomes on the Cape and Islands appear to be moving toward the state average.
Governor-elect Patrick and renewable energy
The Patrick-Murray administration will look to raise the profile of the renewable energy industry up to the level of the biotech and life sciences sectors, Lieutenant Governor-elect Timothy Murray said.
The new administration, headed by Governor-elect Deval Patrick, will be “doing everything we can” to bring “brainpower” to help the renewable energy industry and its role in the state’s economy, Murray insisted.
“You will see a number of initiatives coming out of the new administration, hopefully from Day 1, that will look to accentuate that, grow that, but we’re going to need your good ideas, your continued good work, working collaboratively with us, so that we can create a lot more victories.”
In January, Patrick, noting that his own electric bill had doubled, vowed that if elected, he would “take immediate steps to prevent possible rolling blackouts, and protect citizens from sudden spikes in heating and electric costs.” He expressed support for “well-designed renewable energy projects-both large and small-that pass strict environmental and ecological scrutiny” and promised to “replace our state fleet with hybrids or other fuel-efficient vehicles, wherever practicable.”
The new administration supports Cape Wind, the controversial plan to place 130 wind turbines in Nantucket Sound, but it isn’t the only part of their renewable energy focus.
Getting municipalities, like Hull has, to expand into renewable energy and take greater control of their electric utilities, will be a priority.
More businesses and agencies are applying for grants for such items as wind turbines and solar panels, with demand outpacing available funding by a 3-1 margin.
House leaders say a comprehensive energy bill is a priority for 2007.
Planning for disaster
It’s nearly a year since a sudden and powerful wind storm devastated the Cape. Beyond immediate damage to structures, it took three or more days for electricity to be restored to some parts of the Cape.
With that in mind – and winter around the corner – Cape Business asked Dowling & O’Neil Insurance Agency for its top 10 disaster planning tips:
• Assess your risk – both internally and externally.
• Assess your critical business functions.
• Plan for an alternative site.
• Consider supply-chain preparedness.
• Appoint a crisis manager and develop an emergency management plan.
• Back up your data.
• Create an employee, vendor and key client communication plan.
• Assemble an emergency kit.
• Take a look at your insurance coverage.
• Test your plan.
For more details on each of these tips, please go to http://www.capebusiness.net/article/797.132.
Around the Cape
Route 28 in West Chatham can be improved by narrowing roadways, fixing intersections and improving landscaping to create a more attractive thoroughfare with room for pedestrians and cyclists – while revitalizing that business district. That relatively inexpensive approach was presented to Chatham by Community Design Partnership as part of a $25,000 West Chatham/Route 28 Local Comprehensive Plan study funded by the Cape Cod Commission. The plan recommends relatively inexpensive improvements to slow down traffic on Route 28 and ease traffic congestion at the intersections of George Ryder, Barn Hill and Seaquanset roads.
Verizon’s call center on North Street in Hyannis is slated to close with employees relocated to Taunton. The move would affect 51 workers.
Upcoming events
It's that time of year - holiday events are starting to pile up. On December 6 alone, there is the Cape Cod Technology Council Holiday Social, the Cape Cod Chamber of Commerce holiday member-to-member networking event, and the Harwich Chamber of Commerce Holiday Dinner.
To keep track of these and other business events on Cape Cod, check the Cape Business Calendar – it’s updated daily!
To submit events, send information to news@capebusiness.net.
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