Boston’s economy still has enough heat to make tea
Despite the headwinds buffeting the United States economy as it heads into 2009, Boston appears to be in reasonably good health.

This observation is based on the fact that, in July 2008, employment in the metro area increased by 0.8% year over year for the third consecutive month. At the same time, Boston’s 4.8% unemployment rate, while 0.4 percentage points higher than in July 2007, was almost a full percentage point lower than the national average of 5.7%.

Boston’s solid pattern of employment growth is primarily due to the strength of job gains in four key sectors over the past year:

• Education and health services – 13,000 new jobs;
• Government services – 9,100 new jobs;
• Professional and business services – 6,200 new jobs; and
• Leisure and hospitality services – 3,500 new jobs.

In July, the positive sustained pattern of employment growth in those four sectors offset relatively modest employment declines in manufacturing (-3,000 jobs), construction (-2,400) and finance (-1,200).

Although housing demand in Boston has steadily contracted over the past two-and-a-half years, there are signs that demand has started to firm. According to Standard and Poor’s Case-Shiller Home Price Index, June prices in Boston were up 2.3% compared with previous-quarter levels recorded in March. The 2.3% figure is fourth highest among the 20 metro areas surveyed by S&P.

While it is too soon to predict a turnaround in new house construction, the firming in prices suggests that Boston’s housing market may have turned the corner and started the lengthy recovery process.

While Boston’s housing market may be stabilizing, its office market appears to be starting to cool. Over the past year, the rate of growth of office-based employment has steadily slowed, while the office vacancy rate has stalled.

Furthermore, as new supply comes on stream in mid to late 2009 − including Two Financial Centre and One Marina Park Drive − office vacancy rates are likely to start moving higher.

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