What Metro Boston lacks in oil, coal, and corn, it makes up for in the intellectual and financial capital that fuels innovation — the key to the region’s past success and future prosperity.

OVERVIEW

The driver of the Massachusetts economy, Boston is also is the financial, institutional and cultural capital of New England.  Boston’s economy peaked in 1999 – 2000 with commercial vacancy and unemployment rates at historic lows. Boston’s key industry clusters — higher education, health care, financial services, professional and business services, and tourism-hospitality — were all on the upswing.

The boom years initiated a new era of city building, with investment in the city’s parks and schools, community technology centers, revitalized neighborhood business districts and plans for the South Boston waterfront.  The Big Dig, the largest infrastructure project in the world, opened up visionary possibilities at the heart of the old city, positioning Boston and the region for growth well into the 21st century. Likewise, completion of the Boston Harbor cleanup in 2000 set the stage for new open space access, housing and commerce at the water’s edge. And the city’s network of community development corporations and organizations initiated sophisticated projects integrating housing, transportation, open space, cultural programming, technology access and commercial development.

The face of Boston changed with major new development projects such as the sleek Millennium residential and hotel complex, restoration of the Landmark Building in the Fens and the new Grove Hall Mecca in Roxbury. The groundbreaking for the long-awaited Crosstown Center development within Boston’s Empowerment Zone and a new biosciences research cluster in the South End laid the foundation for increased economic vitality throughout the city.

In 2000, Boston had one of the strongest economies in the nation, having made the successful transition from a manufacturing economy to a knowledge-based one, with strength across diverse sectors – real estate, high tech, bio-tech, health care, and education. But by 2002, in response to a national recession made worse by the tragic events of 9/11, Boston had experienced severe job losses in sectors that previously had been its primary economic drivers.

But Boston is home to a number of “recession resistant” sectors. Its institutions of higher education — 36 in the city and 74 in the region — together enroll about 265,000 students each year, contributing billions of dollars in purchases of goods and services and thousands of jobs. In addition, Boston contains 22 hospitals, 16 of them teaching hospitals. Despite the economic contraction, these sectors continued to show strength.

Boston also contains a network of community health care centers and community development corporations, the headquarters of major national and international non-profit organizations, major cultural institutions and museums, and a wealth of community-based non-profit organizations. Boston’s highly developed and diverse non-profit sector accounts for about 27% of Boston’s jobs. 

Boston has one of most well educated workforces in the world. About 36% of its residents hold at least a bachelor’s degree, and, historically, students attracted to the region have stayed on to start companies, organizations and families. While only about 9 % of MIT graduates grew up in the Bay State, more than 45 % of the software, biotech and electronics companies founded by MIT graduates are located in Massachusetts.

Immigrants continue to play a major role in the revitalization of the region’s cities and the growth of the region’s workforce. According to the Center for Labor Market Studies at Northeastern University, one of every five labor force participants between the ages of 20-35 was a foreign immigrant in Massachusetts in 2000.  This new diversity connects Boston to ideas and regions across the world — an asset in the global economy.

More than half of Boston’s residents are people of color, according to the 2000 Census. The diversity of the city and vitality of its institutions and organizations help to attract and retain the knowledge workers, researchers,  entrepreneurs, venture capitalists and other drivers of the innovation economy. As a result, Boston ranked third on the Creativity Index, a complex measure used to determine a region’s long-term economic potential. Metro Boston, likewise, ranked as one of only 42 major high-tech centers around the globe. Boston is also linked economically to secondary cities in the region — creating a regional economic and cultural synergy built on mutually reinforcing strengths.

But today, like many cities around the nation, Boston is facing difficult times. Vulnerable to global geopolitical and economic uncertainties, it must respond to the impact of a state fiscal crisis and to growing competition from other cities and regions around the nation and around the world.

WHAT HAS CHANGED SINCE 2000?

The economic contraction combined with a sharp downturn in the stock market triggered declining state revenues.   Massachusetts’ tax revenues fell 26% in the spring 2002 quarter alone, the steepest decline of any state in the nation, according to the Boston Globe. Cuts in the state’s budget are affecting all sectors — particularly education reform, public health and the arts. The cuts are having an impact on the quality of services and programs, particularly for low-income and vulnerable populations, as well as important employment sectors in Boston.

Boston’s office vacancy rate climbed from its historic low of about 2% in 2000 to 4% in 2001 to more than 9% in 2002.  Hotels are seeing similar trends as tourism and business travel are both down — with domestic visitors balancing a decline in international visitors.

Health care and higher education showed gains in 2002, with health care adding 3,600 jobs and higher education adding 3,500 jobs, while financial services lost 1,400 jobs. Employment in technology declined, with the loss of 15,000 jobs in Greater Boston, wiping out the gains in the other industry sectors, according to the Greater Boston Chamber of Commerce’s Leading Industries Index. The visitor industry showed gains, increasing by 4% in 2002 and outperforming the industry nationally.

Massachusetts’ Technology Fast 500 firms dropped from 57 to 31 between 1997 and 2001 while California gained two and New York gained 21, according to t