The Northeast Corridor – Money is the “M” in Megalopolis

NEC. Everyday thousands of travelers crowd to board passenger trains in stations like Boston’s South Station, New York City’s Penn Station (with the new Moynihan Train Hall across the street), Newark’s Penn Station, Philadelphia’s William H. Gray III 30th Street Station, Baltimore’s Penn Station and Washington DC’s Union Station. The 460-mile long eight state and District of Columbia route is named the NEC or Northeast Corridor. The NEC is also traversed by Amtrak’s Acela trains, the fastest passenger trains in the U.S. at a 150 mph, which ironically travel over some of the oldest track bed in the country – sections of the route were carved by hand through rocky shoreline slopes in the middle 1830s. Age notwithstanding, today the NEC is one of the heaviest traveled rail routes, not just in the United States but in the world – 260 million passengers annually pass through the network. The reason for this immense ridership is simple. As Amtrak writes in its promotion, “The NEC: Supporting a $2.6 Trillion Economy.” Of course, the only argument with the assertion is Amtrak has significantly understated the economic impact of the corridor.

The Megalopolis and the Economy

The NEC, or as French-Ukraine geographer Jean Gottmann dubbed the Northeast Atlantic coast region in his 1961 study “The Megalopolis”, is one of the world’s greatest economic zones. The population, depending on what is included, is roughly 50-56 million or about 17% of the US population. What is unique is the density of the NEC — approximately 1,242 people per sq/mi, compared to the US average of 93 per sq/mi. And the dense population keys a long urban corridor of consumers unlike any other in the country.

These days it is a little unfair to say the NEC is solely a U.S. corridor as the Canadian cities of Montreal, Quebec and Halifax, Nova Scotia (see Leo Ryan story Ports in Eastern Canada maintain expansion plans amidst challenging times) also loosely fall within the orbit of the Northeast megalopolis – economic rivulets contributing to the greater economic stream.

Nonetheless, the I-95/NEC route cuts a north-south swath through the heart of the NEC. The region’s GDP is around $5.8 trillion, split roughly $1.32 trillion for New England and $4.48 trillion for the “Mideast” (Washington DC to New York segment), according to the 2022 3rd quarter figures. This represents about 22.6% of the entire GDP of the US. It is truly a global scale economic presence. If the NEC was a country, it would rank third in the world behind the US and China in GDP. Japan, the currently 3rd ranked economy, has a GDP of $5.06 trillion while European powers like Germany at $3.85 trillion, the United Kingdom at $2.67 trillion, and France at $2.63 trillion would rank far behind the NEC.

The economic power of the region is also a magnet for global corporations. There are around a thousand corporate headquarters in metropolitan New York area alone, including over fifty Fortune 500 companies – the most for any city globally.

But it isn’t just metro New York City, the entire region is a daisy chain of affluent cities with high GDPs. The #1 ranked New York metro region alone has a $2 trillion GDP while the #5 Washington DC-Arlington-Alexandria region is $608 billion, #7 Boston $532 billion, and #10 Philadelphia $478 billion [2021 current dollars]. These four NEC economic hubs alone account for about 17.2% of the GDP of all the US metropolitan regions.

Of course, it is also more than just the financial weight that the NEC brings to bear on an economy. With the Washington DC beltway only a 3 hour and 30 minute train ride from metro New York, the strip is perhaps representing the greatest combination of both monetary and political power concentrated in such a small area.

And politics and money are connected like entangled quantum particles.

According to a recent Federal Reserve Bank New England Public Policy Center (NEPPC) brief, “The New England states are receiving disproportionate shares of funding under the Bipartisan Infrastructure Act of November 2021, and the more recent nonbuilding contracts data might be reflecting those dollars at work… The above-average growth in construction employment in the [New England] region in the past year is also consistent with the possibility that infrastructure projects are helping to offset weaker demand for residential construction…”

Follow the Money: The Shift East

Remarkably, this $5.8 trillion GDP is generated in just over 2% of the U.S. land area. This concentration of wealth in such a confined region makes the NEC the largest high-end “consumer” market in the US.

The NEC region’s high-end consumer goods demand has largely been satisfied by Asian exports through West Coast ports. But that may be changing (see Peter Buxbaum — The Port of New York and New Jersey: Can it make it to number one?) as the shift of Asian manufacturing from China to Southeast Asia and South Asia, makes East Coast ports more attractive to containership calls.

This has happened before when there were West Coast labor disputes (like the current ILWU-PMA contract standoff) or port congestion in the San Pedro ports of Los Angeles and Long Beach. In previous cases, the diverted business, for the most part, returned to the Southern Californian ports. But the current boost to East Coast ports might have staying power as supply chain infrastructure shifts.

Peter Friedmann, a DC based consultant for both the Agriculture Transportation Coalition (AgTC) and the Coalition of New England Companies for Trade (CONECT) in an AJOT post written by Stas Margaronis, [AGTC’s Friedmann Says Lack of ILWU-PMA Contract Could Be “Dangerous, Permanent”] opined, “For example, transload facilities that might have been built to serve a West Coast gateway are being built to serve cargo through East Coast gateways. The same for warehouses, cold storage facilities, etc. Once those are built, the millions of dollars spent will not be abandoned – the cargo will continue to move through those facilities for years, even decades, to come. This makes it even more challenging for the West Coast gateways to claw back lost import container market share.”

Chris Jones, EVP of industry and services at Descartes in answering an AJOT email query on the shift to East Coast ports, offered this insight: The share of container traffic began to shift away from West Coast ports in favor of their East and Gulf Coast counterparts from about May last year. The gap has been widening ever since…While there were no work stoppages [Editor’s note: that somewhat changed with the Good Friday ILWU no-shows] and with recent declining volumes reducing port transit delays below 10 days – a significant improvement compared with 15+ days last year, but still way off the low single digits of the pre-pandemic years – observers might have speculated that business would ebb back into West Coast ports. Latest figures, however, tell a different story. Share of container volume for the top five East and Gulf Coast ports rose 1.6% to 46.8% in February 2023, compared with the month before. In contrast, the figure for the top five West Coast ports retreated 2.8% to 36%.” [See Descartes’ Chris Jones explains what’s behind the numbers for full interview with Jones].

While Jones’ comments include the Southeast and Gulf ports as well, the NEC’s ports are from Maryland to Maine, count among their number major container ports like the aforementioned New York /New Jersey, Norfolk Virginia, Philadelphia, Baltimore, and Boston — all of which are adding infrastructure for an anticipated surge in boxship traffic. Given the current uncertain economic outlook, when this influx of cargo will happen is a global sized question mark but as the box numbers already suggest, a greater share of the freight will end up coming through NEC ports and into the hands of Northeast consumers.