With the Dow Jones Industrial Average tumbling 5 percent since New Year’s and the latest government report indicating the loss of 17,000 jobs last month, the U.S. economy appears to be careening toward a slowdown, if not a recession. Past economic downturns have hit New Haven hard, and the recent closure of the Yankee Doodle may be a grim harbinger of tough times for local businesses. But Michael Morand, Yale’s associate vice president of the Office of New Haven and State Affairs, said there is ample reason to be optimistic. In an interview with the News in his office last week, Morand said he expects New Haven to fare better than the rest of the country through whatever the coming quarters bring.
What are you anticipating that the predictions for possibly an economic slowdown could mean for the pace of development in downtown New Haven?
If the New Haven metro area were a standalone economy, its gross domestic product is about $35 billion. The single largest, but by no means sole, driver of that is New Haven’s hometown university, which has an operating budget in excess of $2 billion and is a relatively recession-proof organization. The growth of Yale as a catalyst is some reason for comfort in the midst of the national and international slowdown — which doesn’t mean New Haven is immune to the slowdown, but I think you’ll see that it is somewhat resistant to the worst aspects.
In the fiscal year 1992, when the last major recession was ending, and it persisted in Connecticut longer, the Yale operating budget was under $700 million. So the University has grown at a substantial pace. And, as you know, the University will actually be increasing its spending significantly above inflation next year with the change in endowment spending. You might say that before Congress and the president offered a national economic stimulus program, Rick Levin and David Swensen provided a major one to the local economy.
So that gives some comfort and confidence, but at same time, the University is not only the driver. But when you look at other drivers of the local economy, they’re also somewhat less susceptible to the worst side of the economic downturn: health care, spending that the hospital is doing on construction projects; and there are a number of public sector projects that are funded and approved, and then the major development of downtown. While we will see probably a slowdown in the metro economy, it won’t be as bad as in some other parts of the country. In the previous recession in [the] late ’80s, New Haven suffered more than most places. I think we’ll see this time that that is the opposite.
Does the real estate crisis have implications for Yale’s real estate interests?
I’ve seen no evidence and heard no evidence that New Haven is suffering worse than the national norm. As it relates to our own University real estate interests, the sub-prime crisis didn’t have substantial impact. And in terms of development downtown, New Haven did not see same level of hyperactive growth as some other markets, so to the extent that the market now is doing some right-sizing and right-pricing, I think again while there’s softness in the residential real estate market, here the acuteness of the downturn is less severe than in other areas.
It seems that a lot of the downtown redevelopment projects have to do with retail, so in a period where we may see consumption decline, how would that be affected?
There has been increasing tightness in small business, but some tightness does not equate to a crisis. While Yale itself is by no means the sum total of the local economy, it’s a major part of it, and its growth is going to continue. And some of the drivers of the local economy include downtown restaurants and retail, people coming to town to visit; and Yale’s art museums are strong and vibrant and seeing their numbers go up. To a certain extent, there may be a bit of a golden lining to some of the dark clouds if people decide for vacations they’re going to travel less of a distance, there’s actually a very attractive and lucrative market for weekend trips and day trips in New Haven in a way now that there wasn’t 20 years ago.