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The Pioneer Valley is defined by the Connecticut River, running from Canada along the Vermont– New Hampshire border, through western Massachusetts and central Connecticut, then to the sea. The valley's Massachusetts portion includes Franklin, Hampshire, and Hampden Counties, stacked north to south.¹ The valley is in many ways a cohesive economic unit with a long history of precision metalworking and insurance expertise. These industries still form the backbone of the region's export base.

In Massachusetts, the Springfield metropolitan area is the economic center of the Pioneer Valley. The city sits at the crossroads of the Massachusetts Turnpike and Interstate 91, which runs the length of the valley from north to south. The region's economy flows primarily north and south, as well; it has relatively few business-to-business dealings with its neighbors to the east and west.

Springfield is located very near the Connecticut border, close to Hartford and the large complex of economic activity to the south. The city's numerous small-machine shops supply large, high-tech manufacturing firms located throughout the valley. Firms manufacture jet engines, aerospace components, military equipment, and other high-value products. These industries serve national and international markets using a well-developed road and rail transportation network, as well as Bradley International Airport in northern Connecticut.

The Massachusetts Mutual Life Insurance Company (MassMutual), headquartered in Springfield, is part of an insurance cluster that includes major carriers in Hartford. Along with its many colleges, its university, and two significant medical centers, the region boasts one of the largest retail malls and the biggest amusement park in New England. With a mix of city, small town, and rural communities and a low cost of living, the Pioneer Valley provides an attractive quality of life.

The 1990s was a difficult decade for the valley, which found itself in the midst of a long-term economic transition. The region was hit hard by the recession of the early 1990s, the defense industry restructuring that followed the end of the Cold War, and a prolonged slump in the insurance industry. Many of its manufacturing and financial services industries, however, have good prospects for growth in national and global markets in the twenty-first century.

The tasks at hand are to diversify the region's export base away from its traditional Industrial Revolution roots and to reorient its traditional clusters toward a more competitive structure that can thrive in the new century. There are signs that this reorientation is already under way. While employment remains below levels seen at the end of the 1980s, the job count has increased steadily since the middle of the decade. We find supporting evidence among "old-line" manufacturing industries—often referred to euphemistically as "mature"—of a transformation toward a high-tech way of doing business.

The valley is in many ways a cohesive economic unit with a long history of precision metalworking and insurance expertise. These industries still form the backbone of the region's export base.

Employment Trends
Employment in the Pioneer Valley Region posted its highest-ever level (just under 335,000 workers) in 1989. Not surprisingly, the regional unemployment rate was also quite low, at 3.9 percent, one-tenth of a point better than the statewide rate. But economic conditions then deteriorated. By 1992, employment had fallen more than 7 percent, to 310,050, and joblessness hit 9.5 percent. Employment in the Commonwealth fell by 200,000 between 1989 and 1991, a 6.4 percent decline, and unemployment peaked at 9.1 percent.

The region's unemployment rate fell steadily, if somewhat slowly, to 3 percent in the year 2000. The Commonwealth's jobless rate that year reached 2.6 percent. While falling unemployment was certainly good news, the major factor was not a rise in employment but in outmigration and a decline in the region's workforce—an ongoing phenomenon in the Pioneer Valley through much of the decade. Employment has grown steadily since 1992 and is now approaching levels seen in the late 1980s. There has been virtually no growth in the region's labor force, however, and its level was slightly less in 2001 than in 1992.

Just as recession has gripped the eastern part of the state, the Pioneer Valley experienced a dip in employment, followed by a resumption of modest growth. At the same time, the labor force experienced a similar dip in size, followed by an increase. The unemployment rate has inched up from its low of 3.0 percent to 3.7 percent in 2001 and 4.6 percent in 2002.

Sectoral Analysis
At the major-industry level of detail, the Pioneer Valley's economy in 2000 closely resembled that of the state: services was the largest sector, at 40 percent of total employment; and wholesale and retail trade accounted for about 24 percent of total employment. In fact, these key divisions accounted for nearly two out of three jobs in the region. Manufacturing, which in so many ways defines the heritage of the Pioneer Valley, represented 16 percent of all employment. Overall, employment growth over the expansion (from 1993 to 2000) exceeded 15 percent; the number of manufacturing jobs, by contrast, grew less than 1 percent.

As the region emerged from recession, the agriculture sector was the fastest growing in terms of employment. This reflects a large rate of change from a small base, as this sector accounted for less than 1 percent of employment in 2000. Construction, wholesale trade, and services all grew by more than 20 percent during the expansion. Transportation and public utilities, retail trade, and the government sector all grew between 10 percent and 20 percent over the same period, while manufacturing exhibited virtually no change in employment.

Only finance, insurance, and real estate (FIRE) experienced a decline in employment. The employment decline in this cluster masks a significant shift in the industry mix in regional financial services. While both insurance carriers and banking and savings institutions have lost employment since 1993, the number of jobs in securities and exchange services increased by nearly 70 percent.

Population
Between 1990 and 2000, the Pioneer Valley Region saw its population grow 1 percent, compared to 5.5 percent for the Commonwealth. There was a noteworthy shift in age distribution during the period. Most significant was the drop in both the proportion and the number of individuals between 25 and 44 years old. The decline is due in part to outmigration, historically common for the region in this age group. Aging has also reduced the proportion of individuals between 25 and 44; the Pioneer Valley saw an increase of more than 30,000 individuals in the 45- to 64-year-old age group.

The primary challenge to the Pioneer Valley is to diversify its economic base to provide multiple sources of economic growth.

The median age of the population increased from 33.1 to 36.2 years. Though the non-Hispanic White population fell 4.3 percent in the ten years between censuses, it accounted for more than 85 percent of the population in 2000. A small increase in the overall population was due to a growing number of Black and Asian residents. The Black population increased by 8.7 percent, while the Asian population jumped by approximately one third. Despite rapid growth, the Asian population remains small in absolute terms.

Perhaps the most dramatic demographic change in the 1990s was the increase in the Hispanic population. Those identifying themselves as Hispanic soared from 50,630 in 1990 to 76,090 in 2000, a gain of over 50 percent.² Self-identified Hispanics now account for 11 percent of Pioneer Valley residents.

Outlook
The primary challenge to the Pioneer Valley is to diversify its economic base to provide multiple sources of economic growth. The region's manufacturing sector, while the foundation of the region's past and still a productive sector, cannot be the primary employment growth engine in the future. It remains to be seen what industries will emerge to drive future economic development.

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