THOMAS M. MENINO, Mayor JOHN F. PALMIERI, Director

Alvaro Lima, Director of Research

BOSTON REDEVELOPMENT AUTHORITYRESEARCH DIVISION DOMINIC MODICAMORE

Senior Research Associate/Economist – BRANovember 19, 2008

The Boston & Massachusetts Finance Sector

PRESENTATION OUTLINE

• Overview of Boston and Massachusetts Employment Trends

• Employment Trends in the Finance and Insurance Sector

• Boston Largest Finance and Insurance Sector Employers

Massachusetts Mutual Fund Companies

Global Financial crisis and the impact on Massachusetts

Projected Finance and Insurance Sector Job Losses

Economic and Fiscal Impact of Finance Sector Job Losses

Overview of Employment Trends – City of Boston

City of Boston Employment

673,451

638,585 638,302

658,185

683,214

646,064

658,505

673,924

610,000

620,000

630,000

640,000

650,000

660,000

670,000

680,000

690,000

2000 2001 2002 2003 2004 2005 2006 2007

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Overview of Employment Trends - Massachusetts

Massachusetts Employment

4,257,385

4,206,352

4,124,956

4,096,551 4,054,061

4,064,044

4,021,159

4,114,522

3,900,000

3,950,000

4,000,000

4,050,000

4,100,000

4,150,000

4,200,000

4,250,000

4,300,000

2000 2001 2002 2003 2004 2005 2006 2007

Source: The Bureau of Economic Analysis (BEA).

Overview of Employment Trends – City of BostonCity of Boston Employment by Industry Sector, 2001 and 2007

        Percent of Percent of

Industry (NAICS) 2001 2007 Change Total 2001 Total 2007

Agriculture/Fishing/Mining (11,21) 119 115 -4 0.02% 0.0%

Utilities (22) 2,703 2,139 -564 0.4% 0.3%

Construction (23) 19,641 17,436 -2,205 2.9% 2.6%

Manufacturing (31-33) 18,244 10,450 -7,794 2.7% 1.6%

Wholesale Trade (42) 10,963 10,251 -712 1.6% 1.5%

Retail Trade (excludes food service) (44-45) 31,242 31,974 733 4.6% 4.7%

Transportation and Warehousing (48-49) 24,453 19,695 -4,758 3.6% 2.9%

Information (51) 22,264 16,850 -5,414 3.3% 2.5%

Finance and Insurance (52) 85,522 81,275 -4,247 12.7% 12.1%

Real Estate and Rental and Leasing (53) 18,784 21,392 2,608 2.8% 3.2%

Professional, Scientific, and Technical Services (54) 75,585 74,933 -652 11.2% 11.1%

Management of Companies and Enterprises (55) 10,260 7,294 -2,966 1.5% 1.1%

Admin. & Support and Waste Mgmt and Remediation Ser. (56) 39,482 45,350 5,869 5.9% 6.7%

Educational Services (61) 44,388 50,611 6,224 6.6% 7.5%

Health Care and Social Assistance (62) 97,977 116,748 18,771 14.5% 17.3%

Arts, Entertainment, and Recreation (71) 12,158 13,964 1,806 1.8% 2.1%

Accommodation and Food Services (72) 43,499 46,803 3,304 6.5% 6.9%

Other Services (except public administration) (81) 26,189 29,090 2,901 3.9% 4.3%

Government 89,979 77,553 -12,426 13.4% 11.5%

Total 673,451 673,924 473    

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Overview of Employment Trends - MassachusettsMassachusetts Employment by Industry Sector, 2001 and 2007

        Percent of Percent of

Industry Sector 2001 2007 Change Total 2001 Total 2007

Agriculture/Fishing/Mining 16,004 16,292 288 0.4% 0.4%

Utilities 12,388 10,444 -1,944 0.3% 0.2%

Construction 218,776 243,543 24,767 5.3% 5.7%

Manufacturing 401,126 307,618 -93,508 9.7% 7.2%

Wholesale Trade 151,796 151,946 150 3.7% 3.6%

Retail Trade (excludes food service) 416,841 415,626 -1,215 10.1% 9.8%

Transportation and Warehousing 101,171 98,800 -2,371 2.5% 2.3%

Information 123,109 103,006 -20,103 3.0% 2.4%

Finance and Insurance 234,116 240,169 6,053 5.7% 5.6%

Real Estate and Rental and Leasing 119,848 164,387 44,539 2.9% 3.9%

Professional, Scientific, and Technical Services 372,367 401,389 29,022 9.1% 9.4%

Management of Companies and Enterprises 70,397 62,219 -8,178 1.7% 1.5%

Admin. & Support and Waste Mgmt and Remediation Ser. 211,313 229,757 18,444 5.1% 5.4%

Educational Services 188,017 220,002 31,985 4.6% 5.2%

Health Care and Social Assistance 485,521 548,988 63,467 11.8% 12.9%

Arts, Entertainment, and Recreation 85,429 100,971 15,542 2.1% 2.4%

Accommodation and Food Services 251,812 270,537 18,725 6.1% 6.4%

Other Services (except public administration)* 196,381 223,493 27,112 4.8% 5.2%

Government 458,110 446,851 -11,259 11.1% 10.5%

Total 4,114,522 4,257,385 142,863    

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Employment Trends in Finance & Insurance - Boston

Employment in Finance and Insurance - Boston

82,755

85,522

77,203

75,787

77,809

79,915

81,275

70,000

72,000

74,000

76,000

78,000

80,000

82,000

84,000

86,000

88,000

2001 2002 2003 2004 2005 2006 2007

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Employment Trends in Finance & Insurance - Massachusetts

Employment in Finance and Insurance - Massachusetts

225,965

232,016234,116233,000

229,037

237,959

240,169

215,000

220,000

225,000

230,000

235,000

240,000

245,000

2001 2002 2003 2004 2005 2006 2007

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Employment Trends in Finance & Insurance - Boston

Employment in Finance and Insurance by Sector - City of Boston

16,000

20,000

24,000

28,000

32,000

36,000

40,000

44,000

48,000

52,000

2001 2002 2003 2004 2005 2006 2007

Banking Securities & other Financial Investment Activities Insurance Carriers and related Activities

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Employment Trends in Finance & Insurance - Massachusetts

Employment in Finance and Insurance by Sector - Massachusetts

60,000

64,000

68,000

72,000

76,000

80,000

84,000

88,000

2001 2002 2003 2004 2005 2006 2007

Banking Securities & other Financial Investment Activities Insurance Carriers and related Activities

Source: Boston Redevelopment Authority, using data from the Massachusetts Executive Office of Labor and Workforce Development and the Bureau of Economic Analysis.

Employment Trends 2008 - Massachusetts

Massachusetts Total Payroll Employment - 2008 Monthly (1,000's) - Not Seasonally Adjusted

3,233.20

3,287.10

3,312.10

3,248.90

3,221.90

3,335.70

3,299.703,289.30

3,308.50

3,200.00

3,220.00

3,240.00

3,260.00

3,280.00

3,300.00

3,320.00

3,340.00

3,360.00

Jan Feb  Mar  Apr  May  Jun  Jul  Aug  Sep 

Source: The Massachusetts Executive Office of Labor and Workforce Development

Finance & Insurance Employment Trends 2008 - Massachusetts

Massachusetts Finance and Insurance Payroll Employment - 2008 Monthly (1,000's) - Not Seasonally Adjusted

181.2180.9 180.8

181.2

181.2

181.9

182.3

182

179.7

179

179.5

180

180.5

181

181.5

182

182.5

183

Jan Feb  Mar  Apr  May  Jun  Jul  Aug  Sep 

Source: The Massachusetts Executive Office of Labor and Workforce Development

Finance & Insurance Employment Trends 2008 - Massachusetts

Massachusetts Finance and Insurance Payroll Employment by Sector - 2008 Monthly (1,000's) - Not Seasonally Adjusted

60.461.461.661.761.6 61.4 61.261.361.4

51.8 52.1 52.2 52.1 52.3 52.853.5 53.5 52.9

64.8 64.8 64.9 64.7 64.6 64.8 64.7 64.5 63.9

50

52

54

56

58

60

62

64

66

68

Jan Feb  Mar  Apr  May  Jun  Jul  Aug  Sep 

Banking Securities Insurance

Source: The Massachusetts Executive Office of Labor and Workforce Development

Boston Finance & Insurance Sector EmployersBoston's Largest Finance and Insurance Sector Employers 2004

  Boston Massachusetts World-Wide

  Employment Employment Employment

Fidelity Investments 8,000 11,500 45,500

John Hancock 3,232 4,164  

Mass. Financial Services Co. 3,100    

Scudder Investments 3,000    

American Employers Insurance Co 2,933    

Blue Cross Blue Shield of Mass 2,600 3,878  

Putnam Investments 2,521 2,542  

State Street Bank & Trust Co 2,500 13,900 28,900

Boston Safe Deposit and Tr Co 2,034    

Liberty Mutual 1,870 3,719  

Investors Financial Svcs Corp 1,679    

New England Financial 1,500    

Boston Company Inc 1,300    

Brown Brothers Harriman & Co. 971    

Federal Reserve Bank of Boston 950    

Goodwin Proctor LLP 925    

Linsco/Private Ledger Corp. 825    

Bank of America 822 8,000  

Pioneer Investment Management USA 800    

Evergreen Investments (Wachovia) 750    

Chase Global Funds Services Co 599    

Citizen's Bank (40 branches and 1 office) 567 3,750  

Manulife Financial 550    

Source: Boston Redevelopment Authority and Boston Business Journal

Massachusetts Mutual FundsMassachusetts Mutual Funds Companies 2006

  Assets Under  

Business Name Management City Location

Fidelity Investments $ 1,195,646,000,000 Boston

Columbia Management Group Inc. $ 237,403,000,000 Boston

Wellington Management Co. $ 167,118,000,000 Boston

State Street Global Advisors $ 140,308,000,000 Boston

Putnam Investments $ 103,391,500,000 Boston

MFS Investment Management $ 88,893,000,000 Boston

GMO $ 68,761,000,000 Boston

John Hancock Funds $ 43,686,300,000 Boston

Eaton Vance Corp. $ 38,400,900,000 Boston

Pioneer Investment Management USA Inc. $ 38,037,700,000 Boston

MassMutual Life Insurance Co. $ 24,785,600,000 Springfield

Loomis Sayles & Co. LP $ 13,600,000,000 Boston

NATIXIS Global Associates $ 12,427,000,000 Boston

Capital Growth Management Advisors $ 4,704,800,000 Boston

Investors Bank & Trust Co. $ 3,544,500,000 Boston

Northeast Investors Trust $ 1,546,000,000 Boston

Century Capital Management Inc. $ 1,184,200,000 Boston

Quantitative Advisors Inc. $ 1,113,600,000 Lincoln

Standish Mellon Asset Management $ 907,300,000 Boston

Acadian Asset Management Inc. $ 863,400,000 Boston

Polaris Capital Management Inc. $ 601,500,000 Boston

Robeco Boston Partners $ 578,700,000 Boston

Weston Financial/New Century Portfolios $ 441,700,000 Wellesley

Bogle Investment Management LP $ 359,300,000 Newton

Boston Trust Investment Management $ 301,700,000 Boston

TOTAL ASSETS UNDER MANAGEMENT $ 2,188,604,700,000  Source: Boston Business Journal

Global Financial Crisis and Its Impact on MassachusettsThe collapsing stock market, declining real estate prices, and record amount of foreclosures have caused a global financial crisis.

• The Stock Market has declined 40% from its all-time high in October 2007.

• Home prices are down roughly 20% in Massachusetts since the peak value in 2005 and in some metro areas in the Southwest prices are down 50%.

• Nationwide, foreclosures were up 75% in 2007 over 2006 and have continued to increase in

2008. Mutual Funds and Wealth Management have been the hardest hit sectors in Massachusetts and Boston

• Fidelity, Columbia Management, and Putnam, three of Boston’s largest mutual fund companies, saw assets fall roughly 11% each during the month of September alone.

• Bank of America announced that it will move most of its wealth management operations from

Boston to New York City following its takeover of Merrill Lynch. Boston became Bank of America’s wealth management headquarters after BofA’s takeover of Fleet in 2004.

Projected Finance & Insurance Sector Job Losses

Projected Finance and Insurance Sector Job Losses

• A study by Moody’s Economy.com projected that Massachusetts would lose 7,200 finance sector jobs between now and the end of 2009.

• It was projected that the majority of those jobs be gained back in 2010 as the economy rebounds.

Announced Layoffs with Major Impacts on Massachusetts

• Fidelity Investments – 3,000 jobs (1,300 in 4Q 08 and 1,700 in 1Q 09)

• First Marblehead Corp. – 500 jobs

• Bank of America – Potentially several hundred as wealth management headquarters moves to NYC.

Economic and Fiscal Impact

Economic and Fiscal Impact of Projected Finance Sector Job Losses in Massachusetts (Fixed 2008 $'s)

  2009 2010 2011

Employment -21,230 -11,050 -534

GRP -$3,295,937,000 -$1,740,551,000 -$47,581,020

Real Disposable Income -$1,305,094,000 -$675,149,900 -$53,838,320

Output -$5,411,926,000 -$2,845,156,000 -$46,763,740

Massachusetts Income Tax Revenue -$76,187,000 -$44,344,500 -$5,743,400

Massachusetts Sales Tax Revenue -$14,907,443 -$8,326,723 -$1,076,683