Cambridge Jobless Rate Falls to 2.5%

Cambridge’s unemployment rate dropped to 2.5 percent in October—one of the lowest rates in the area and a level some attribute to the jobs created by Harvard and other local universities.

October’s level continues a steady decline in unemployment in Cambridge, which was at 3.1 percent in July, 3.1 percent in August and 2.8 percent in September, according to statistics from the Massachusetts Division of Unemployment Assistance.

Cambridge’s October average is lower than the rates in most of the Boston area. Boston and Everett each had 4.6 percent unemployment while Watertown was at 2.6 percent and Somerville was at 3.1 percent.

The annual Cambridge unemployment rate was at 3.6 percent for the years 2002 and 2003.

According to some economists, universities have a major impact on employment in Cambridge.

Professor of Economics Caroline M. Hoxby ’88 said the universities both attract and create jobs.

“[Cambridge is] now dominated by service sector jobs, especially those that are directly or indirectly related to the universities, their labs, the firms that indirectly service the universities and students,” she wrote in an e-mail.

Ascherman Professor of Economics Richard B. Freeman noted that universities provide white-collar jobs, which are generally more stable than the blue-collar jobs of the manufacturing sector.

“They hire more people than the automobile or steel industries in general,” he said, adding that universities provide some stability because they are relatively unaffected by changes in the overall economy.

Linnea M. Walsh, a spokeswoman for the Massachusetts Departments of Labor and Workforce Development, said that higher education is important to the state’s economy and is one of several sectors that benefit Cambridge economically.

“The Massachusetts economy is very reliant on having vibrant higher education institutions,” she said. She added that the strength of scientific fields like biotechnology has also given the state’s economy a boost.

Walsh also characterized the low unemployment numbers in Cambridge as indicative of a statewide trend of economic improvement.

She said that other segments of the economy besides higher education have pushed Cambridge’s unemployment numbers down. For example, professional scientific and technical services, a sector that is particularly strong in Cambridge, has recently seen growth and an increase in hiring, she said.

Hoxby said that the high employment levels in Cambridge represent the overall state of the job market nationwide.

“Cambridge happens to be at the forefront of a more general movement in the U.S., as our economy because more service and skill-intensive and less manufacturing-intensive,” she wrote.

While economists celebrated the low unemployment as a sign of a stronger economy, Sue Walsh, the director of Cambridge’s Office of Workforce Development, said that this shift away from blue-collar jobs has hurt workers who are not highly skilled or highly educated.

“There are still a lot of folks out there struggling and trying to find work,” she said.

According to Walsh, the unique nature of the Cambridge job market tends to exclude unskilled laborers or those who are not highly educated.

Another downside to economies that rely on universities is that the cost of housing is often high.

“Generally, I think universities are good things for local employment, but they drive up housing prices,” Freeman said.

But he added that “my guess would be that the benefits far outweigh the costs.”

Hoxby said prospective residents and businesses considering Cambridge as a potential location are drawn to the city by the presence of the universities and that their interest causes a general increase in rent.

Hoxby also said that Cambridge’s education industry is a boon to the area. “Most cities in the U.S. would ‘kill’ to have Cambridge’s education industry and the firms that are attracted by it,” she wrote.