The recession that has plagued the country for the past 12 months overshadows nearly every major business story over that time.
It took all year for the recession to become official. Now, after plaguing the country for 12 months, it overshadows nearly every major business story. The first sector of the economy to feel the heat was the housing market, which had already plunged in the previous year. The fallout from the real estate industry’s downturn extended far beyond what most economists initially anticipated. However, the damage to the home prices – at least here in Massachusetts – was minor compared with the devastation that investors suffered in the stock market this fall after the ripple effects from the credit crisis reached the broader economy.
Many consumers began to curtail their spending habits and started living within their means for the first times in years. It may have been financially smart, but the reversal in consumers’ attitudes wreaked havoc with the retail industry.
It’s hard to narrow down the top business stories of the year to just 10 in a normal year – let alone one when Congress approves a $700 billion banking bailout, investment icon Lehman Brothers disappears and Wall Street wizard Bernie Madoff allegedly blows as much as $50 billion in a Ponzi scheme. But the following list provides a glimpse of some the stories that have an enduring impact in Massachusetts.
1. JOB LOSSES SPREAD EVERYWHERE
As this winter began, virtually no industry or region in the country was untouched by the recession’s icy grip. Local economists and politicians once had believed that this state could be relatively insulated from the broader economic forces at work across the country. The national economy started to bleed jobs at the start of the year while this state was still adding jobs. But by fall, Massachusetts was starting to catch up, with an estimated loss of 16,000 jobs in October and November. And those figures don’t include most of the recent layoff announcements at the big Boston fund firms like State Street and Fidelity Investments, which will likely continue the trend into 2009.
2. HOUSING WOES SPUR CREDIT CRISIS
The phrase “credit crunch” became ubiquitous this year for one reason: nearly everyone was affected by it. First-time home buyers found it harder to get a mortgage. Real estate developers had a tough time getting commercial loans. College scholarships became more difficult to find. Several major projects in the Boston area were put on hold – including the redevelopment of the Filene’s block in Boston’s Downtown Crossing. The main cause of the credit crisis? The subprime mortgage disaster. As defaults and foreclosures skyrocketed among homeowners who were given loans they never should have had, the ripple effects hammered investors, lenders and insurers.
3. THE STOCK MARKET MUTINY
At first, investors hoped that the fallout from the credit crisis would be limited to stocks in companies that were linked to the mortgage meltdown. But soon it became clear that the doors to credit could be shutting for just about everyone. That prompted a panic on Wall Street this fall, capping off what was already an unhappy run for stock investors. Some market watchers say that stocks have hit bottom: The Standard & Poor’s 500 index has climbed about 20 percent from its levels in November. But it’s still down 40 percent for the year.
4. MERGER MANIA CONTINUES FOR BANKS
Cheap valuations drove stronger banks to swallow troubled financial firms. Bank of America inked a deal to buy Merrill Lynch, and Wells Fargo won the right to buy Wachovia, leaving Citigroup out in the cold. Even some small banks got in on the act: Rockland Trust and Middlesex Savings Bank took advantage of relatively cheap prices to buy community banks and expand their territories.
5. RETAIL ICONS DISAPPEAR
An increasing number of big retail chains entered the remainder bins of history, including Massachusetts icons Tweeter and KB Toys. Canton’s Tweeter closed abruptly earlier this month after several years of struggling with larger big box stores over the flat-panel TV market. KB Toys also surrendered in the big box battle: The Pittsfield chain’s effort to cut the prices on many of its toys in time for Christmas apparently did little to attract more shoppers, so the company decided to liquidate its stores over the next several weeks.
6. THE TALBOTS-J. JILL MARRIAGE COMES APART
Two major retailers on the South Shore joined forces in 2006, with Talbots acting as a benevolent buyer to shield J. Jill from an unwanted takeover bid. But the retailing road has been a rocky one since, and few retailers have felt the bumps as acutely as the Talbots and J. Jill chains have. So Talbots and Aeon Co., the Japanese conglomerate that is Talbots’ largest shareholder, decided to sell the J. Jill chain in November. No buyer has been made public yet, but hopefully J. Jill won’t follow the route that Tweeter and KB Toys took.
7. FRANK TALK IN WASHINGTON
As the federal government moved to shore up industries ranging from banking to auto manufacturing, few individuals played a bigger role in the Washington “bailouts” than U.S. Rep. Barney Frank. The Newton Democrat found himself in the center of the storm this year as the chairman of the House Financial Services Committee. Frank proved to be an able diplomat between the Democrat-controlled Congress and the Bush administration as both arms of government struggled to prevent further erosion in the national economy.
8. THE LOVE AFFAIR WITH LIFE SCIENCES
The Massachusetts Legislature took a bold and expensive step toward ensuring this state remains a hub for the life sciences industry: Lawmakers finally passed a plan to spend $1 billion over a 10-year period on helping medical device companies, biotech firms and research institutions. Some fiscal monitors grumbled about the billion-dollar price tag, especially as the state tax revenues began to head south – and representatives for other industries criticized the package because it focused too much attention on one sector of the state’s economy.
9. DOG RACING HEADS FOR THE FINISH LINE
Meanwhile, another industry was dealt a fatal blow. Voters approved a state ban on greyhound racing with a ballot question in November that will take effect in 2010. That will mean job losses for the hundreds of people who work at Raynham Park and Wonderland Greyhound Park in Revere. Anti-racing activists returned to the scene this year to finish what they started with a similar ballot question in 2000 that narrowly failed at the time. Track owners are placing their bets on a long-shot proposal on Beacon Hill that would allow the two tracks, along with the state’s two horse tracks, to offer slot machines on their grounds.
10. GAS PRICE STICKER SHOCK, RELIEF
Few people expected gas prices around here would rise past $4 a gallon by the middle of the summer – and even fewer people would have guessed that gas prices would have plummeted well below $2 a gallon by the end of the year. The unprecedented volatility was largely driven by the crude oil markets. Demand for oil dropped precipitously as recessionary conditions spread across the globe. That, in turn, caused prices to plunge at the pumps this fall and leave consumers with at least one beneficial byproduct of the recession.