New England business shakeout. Layoffs seen as ripples in strong economic current
April 9: Computervision Corporation reports a $15.7 million first-quarter loss and lays off 950 workers in Maine, Massachusetts, New Hampshire, other United States locations, Asia, and Europe. April 29: General Dynamics Corporation announces that its shipyard in Quincy, Mass., will lay off 3,100 employees by the end of the year as a United States Navy shipbuilding contract nears completion with no new work in sight.
Do these and some previous business setbacks in New England indicate that the economic dynamo driven by the high-technology boom may be running out of fuel?
Not really, say regional economic experts.
Lynn Browne, an economist at the Federal Reserve Bank in Boston, says Computervision's situation is a symptom of a fairly widespread slowdown in growth of high-tech companies ``on the computer side.'' Many companies are experiencing declines in orders and earnings, or more-modest growth compared with last year's, she explains, and ``there may be more readjustment.''
The Quincy shipyard's projected layoffs as a Navy contract is completed with no new civil or military work in sight is ``not indicative of anything'' in terms of the overall regional economy, Ms. Browne says. James Howell, chief economist for the Bank of Boston, agrees. He says what is happening in Quincy is normal in the ``cyclical'' defense industry.
Both experts are confident that the diversified New England economy will continue to prosper. In a February interview Mr. Howell said: ``In the next three to five years New England will experience unparalleled prosperity.'' He's not retracting that statement now.
The high-tech slowdown in New England is ``pretty much on schedule,'' Howell says. ``What's beginning to happen is what takes place in most industries -- maturing; selective adaptation of industry to growth.'' The minicomputer industry is a good example, he says: ``There will eventually be fewer products made by fewer firms.''
He adds that ``the picture has been affected by the overvalued dollar, which has hastened the necessity to shift some production abroad.'' He cites Digital Corporation's new facilities in Europe and Data Control's in Singapore.
Browne of the Fed says ``all the ingredients are present'' in New England for continued expansion of high-tech industries, including venture capital and people, both professionals and production workers. ``New startups will continue,'' she adds. At the same time, the economist notes that much of past high-tech growth in New England is attributable to the success of a small number of companies. To some extent this was due to ``luck, or historic accident -- the right ideas in the right place at the right time,'' Browne says.
Howell talks about ``the ability and audacity of the region in going on to exploit the next technology.'' That next technology at this moment, he says, is biotechnology. New England -- Boston, in particular -- has the research facilities, the personnel, the hospitals, and other facilities to be a leader in development of this newest high-tech industry, he asserts. But to reap this economic benefit, he cautions, ``planners, bankers, and other leaders have to posture the region to be able to benefit from the production that grows out of research.''
Not all of the six New England states -- or, indeed, all sections of any one state -- are equally reaping the benefits of high technology, but all have unemployment rates well below the national average of 7.8 percent.
At least half of the high-tech industry in New England, Howell says, is within Interstate 495, Boston's ``outer belt.'' Other high-tech areas are southeastern New Hampshire, the Burlington, Vt., area, and eastern Connecticut (which has a large defense industry).
The unemployment rate in Massachusetts was 3.8 percent in the first quarter of 1985 (compared with 5.8 percent a year ago). Total employment in the state was up by 3.2 percent in the January-to-March quarter over the same period in 1984. Some 159,000 new jobs were created in Massachusetts in 1984 -- 5.9 percent job growth.
All the New England states are enjoying relatively low unemployment. Maine and Rhode Island retain more of the traditional industries -- shoes, paper, jewelry manufacture. And Rhode Island gets some defense subcontracting by way of Connecticut industries. Defense has been and still is an important factor in the New England economy, Browne notes.
``Some of the more traditional industries in New England [such as machine-tool manufacture] are gaining a little now,'' Browne says. ``They've been awfully slow to come around.'' Associated Industries of Massachusetts reports that modernizing of the state's older industries is going on, with planned capital expenditures up by more than 18 percent over last year.
The new high-tech, service-oriented economy involves cultural shifts, the experts point out. There is quite a range of occupations, from low-skill production work to highly trained managers, engineers, and other professionals. Howell is optimistic about people adjusting. He points out that New England has never had many plants that paid production-line workers the hourly rates earned in the Midwest's auto and steel plants. But he adds that the ``two-tiered effect'' could cause tension between lower-range production workers and highly paid managers and professionals. Such tensions, Howell notes, may be behind the 50 percent turnover in high-tech production jobs.