Boston Set to Bounce Back After Disruption: Economy
The city known as “America’s Athens” prepared to return to life after a terrorist manhunt that immobilized 1.5 million workers and a major center of technology and finance.
As yesterday dawned with heavily armed police and FBI agents searching for a suspect in the Boston Marathon bombing, authorities shut down public transit and advised businesses to close and residents to lock themselves in their homes. The order was lifted by Massachusetts Governor Deval Patrick early yesterday evening, and shortly before 9 p.m. the suspect, 19-year-old Dzhokar Tsarnaev, was captured in the Boston suburb of Watertown.
The security edict kept Morgan Stanley (MS)’s Boston offices dark, most Fidelity Investments workers at their home computers and diners and ticket-buyers away from downtown restaurants and a visiting circus. The local baseball and hockey teams -- the Red Sox and Bruins -- canceled home games scheduled for last night.
“I’ve been in Boston for my entire life, and it’s a very surreal feeling,” Bill Elcock, chief executive officer of Batterymarch Financial Management, said in a telephone interview yesterday. “Normally, it’s a bustling city on a Friday afternoon, and now it’s virtually empty.”
Batterymarch, which manages $12.8 billion, decided at 6 a.m. to close its 85-employee office. A lone trader remained to execute trades since managers can’t do that at home, Elcock said.
Tsarnaev had been on the loose since a gun battle with police shortly after midnight yesterday left dead the other suspect in the April 15 bombing -- his brother, Tamerlan Tsarnaev, 26.
At the site of the bombing on Bolyston Street that killed three people and injured more than 170 others, the shattered Forum Restaurant remained closed. One of the two explosives the allegedly placed by the brothers detonated on the eatery’s patio, spewing shrapnel at nearby spectators, runners and Forum workers, according to the restaurant’s web site. The site added: “the images of horror and pain that some of us witnessed will be hard to forget.”
Around 4 p.m. yesterday, area roads that normally would be clogged with home-bound commuters were nearly empty and Cambridge’s Fresh Pond Mall, home to stores such as Staples, Radio Shack and T.J. Maxx, was devoid of shoppers.
Patrick gave local residents the go-ahead to leave their homes shortly after 6 p.m. and said the subway network known as “the T” had reopened. Boston Mayor Thomas Menino thanked the business community for cooperating with the authorities’ shutdown request, saying “it’ll be an economic loss to them, but together we’ll get through this.”
For most in Boston’s $1 billion-a-day economy -- larger than Singapore’s -- the damage will probably be short-lived. Passengers and cargo moved normally through the city’s air and seaports.
“The economy doesn’t shut down completely,” said Jim Diffley, chief regional economist at IHS Global Insight in Philadelphia. “A lot of activity that would’ve taken place today takes place tomorrow or Monday.”
That was scant comfort for the Big Apple Circus Ltd., which during its limited engagement next to City Hall saw last night’s performance canceled. “We went from robust ticket sales to trickling ticket sales,” said Lynn Stirrup, executive director of the circus, which is running from March 26 to May 12. “We are expecting a significant impact overall.”
At some businesses, the day’s drama outweighed the disruption.
Several Dunkin’ Donuts stores braved the lockdown so that police and other public safety workers could refuel, according to Karen Raskopf, chief communications officer for Dunkin’ Brands. The company’s twitter feed said its Watertown stores provided free coffee and donuts for police officers who had poured into the community by the hundreds in the search for the younger Tsarnaev.
“From an economic standpoint it has effects similar to that of being a snow day, however, the psychological ramifications of this are impossible to assess,” Ward McCarthy, a Boston native and chief financial economist at Jefferies LLC in New York, said of the overall commercial slowdown.
“They tend to be pretty resilient people up there, but this will be a test of their resolve,” McCarthy said.
Technology enabled many companies to ride out the siege. John Reilly, a spokesman for Boston-based MFS Investment Management, said that though the company was open, it had declared a work-from-home day after learning the transit system was closed.
The MFS office is about four blocks from the site of the marathon blast. It also has some people working from a backup facility in Marlborough, Massachusetts, which can accommodate as many as 250 people.
EMC Corp. (EMC), the world’s biggest maker of storage computers with headquarters in Hopkinton, where the Boston Marathon begins, expects no operational impact. “Everyone has capabilities to work at home and remain productive,” spokesman Dave Farmer said by telephone.
Biogen Idec Inc., the fourth-largest U.S. biotechnology company, closed its offices in Cambridge and Somerville, Massachusetts, said Amanda Galgay, a spokeswoman. The maker of multiple sclerosis medications, including the recently approved Tecfidera, continued manufacturing “with a scaled-down crew,” Galgay said.
“There is no significant disruption or impact to our business,” Galgay said. “Our manufacturing operations are continuing and there’s no concern around ongoing research work.”
Despite an eerie quiet at the heart of the nation’s 10th largest metropolitan area and televised police sweeps in the neighboring communities of Cambridge and Watertown, little lasting economic damage is likely. In February, unemployment in the Boston-Cambridge-Quincy region was 5.4 percent, down from 5.9 percent one year earlier and two percentage points below the national figure.
Yelena Shulyatyeva, an economist at BNP Paribas in New York, said the Boston bombing may temporarily dent consumer confidence.
“But it doesn’t necessarily mean it will affect consumption itself,” she said. “People react to the news, but it’s harder to change their buying patterns.”
Harvard University and MIT closed yesterday, as did other area colleges, including Boston University, Boston College, Simmons College, the Berklee College of Music, University of Massachusetts Boston and Suffolk University. The Boston area includes at least 85 colleges and universities that employ more than 70,000, according to a 2009 report from the Bureau of Labor Statistics.
“If there’s going to be a negative impact, I think it’s actually going to be pretty short-lived,” said John Herrmann, director of U.S. Rate Strategy at Mitsubishi UFJ Securities in New York. “I’ve talked to friends in the area and they said they have no intention of changing their lifestyles. I would expect the area to come back very, very rapidly and probably even stronger than where it is now, because of the attention and because security will be better.”
Some companies sought to make a statement with their response to the threat.
“The point of this kind of terrorism is to generate enough widespread fear and panic that a society freezes up and stops functioning,” Jonathan Bush, chief executive officer of Athenahealth Inc., wrote on the company website. “At Athenahealth, we don’t allow that. We don’t flinch.”
The provider of electronic medical records and billing services for doctors shut down its headquarters in the heart of the manhunt in Watertown, Holly Spring, a company spokeswoman, said in an e-mail. More than 1,000 employees normally work at the sprawling campus of brick-faced office buildings, a former military manufacturing site, which instead became a gathering point for some law enforcement officers, Spring said.
“Certainly we have been affected, but are doing our best to keep things going,” Tom Hughes, chief executive officer of Zafgen Inc., a closely held company developing an obesity drug, wrote in an e-mail. Zafgen is based in Cambridge, Massachusetts, close to MIT where, police say, a campus officer was killed late on April 18 in a confrontation with the Tsarnaev brothers.
Zafgen doesn’t anticipate interruptions to laboratory work as a result of the lockdown, though the company has encountered those difficulties before, Hughes said. During Hurricane Sandy last October, the company had to adjust a study in New Jersey testing toxicity because workers couldn’t be present as much as hoped to evaluate the animals, he said.
“One could see how that would have an impact,” Hughes said. “I can imagine all of the lab-based companies in Cambridge will lose significant numbers of experiments since their people are locked out.”
Elsewhere, Massachusetts General Hospital delayed scheduled patient discharges and rescheduled outpatient treatments, Ann Prestipino, the hospital’s incident commander, said in a statement on its website.
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