Economists: Mass. growing at best rate since late ‘90s
Massachusetts is experiencing its strongest economic expansion since the late 1990s, but growth remains concentrated in the Greater Boston region, and inadequate housing production is causing home prices to rise and exacerbating longstanding cost-of-living challenges, according to area economists.
The conclusions, included in a journal released last week, summarize the thoughts of members of the MassBenchmarks Editorial Board, which held its quarterly meeting June 25 at the Federal Reserve Bank of Boston. Board members include officials from the Federal Reserve, State Street Bank, the University of Massachusetts and other private universities in the Massachusetts.
"The consensus view is we're now several years into a pretty solid expansion," said Michael Goodman, co-editor of MassBenchmarks and executive director of the Public Policy Center at UMass-Dartmouth. The rate of growth, Goodman said, does not yet match that of the late 1990s.
On the policy front, economists said state leaders can address aging infrastructure and extend educational and economic opportunities to areas outside the Route 495 belt, where conditions, though improving, still lag behind the Greater Boston area. Economists identified the Lowell and Worcester areas as "exceptions to this pattern of imbalanced growth."
The difficulties fostering economic growth in cities and areas outside of Greater Boston have been flagged repeatedly over the years.
"We mention it almost every time because it's an issue," said Katherine Bradbury, MassBenchmarks co-editor and a senior economist at the Federal Reserve Bank of Boston.
Said Goodman, "The rising tide is starting to lift all boats but it's not lifting them anywhere near all equally. That's not new, but it continues to be an issue."
The state's unemployment rate fell to 4.6 percent in May, down from 5.8 percent a year ago and the lowest level since 1977. Bradbury said the state's overall employment data was "quite striking."
After a dismal MBTA performance last winter, lawmakers and Gov. Charlie Baker face pressure to pass legislation aimed at improving the transit system. Six months into the legislative session, a reform bill has yet to emerge from committee for votes in either the House or Senate.
Five mayors and officials representing nearly three dozen Massachusetts business groups sent a letter to state lawmakers last week calling on them to swiftly pass an MBTA reform bill putting the agency under a fiscal control board, making it easier for the T to privatize services, and changing arbitration to address rising labor costs.
"Collectively, we represent 1.5 million individuals who are united in a common quest to Fix Our T," members of the Coalition For a World-Class Public Transit System wrote. "These individuals - workers, customers, patients and students - experienced firsthand the loss of productivity, foregone wages and sales, and missed classes or medical appointments that resulted from the MBTA's collapse. We have joined together to ensure it doesn't happen again."
As lawmakers struggle to come up with omnibus energy legislation, the economists identified high electric prices as putting a brake on economic growth. And they reported that the suspension of new natural gas hookups in Berkshire, Franklin and Hampshire counties is "directly constraining business expansions" in western Massachusetts.
Overall, the economists emphasized positives in the economic indicators they reviewed. The severe winter had a "minor" impact on conditions, gross state product continues to outpace national economic growth, and employment and the labor force are seeing "strong growth," they reported.
As always, the Massachusetts economy remains vulnerable to international and national developments, including the debt crises in Greece and Puerto Rico, issues affecting the nation's trading partners and "relatively slow growth" in the global economy, according to MassBenchmarks. While those issues are beyond the state's control, Goodman said policymakers here should be careful to avoid "unforced local errors" as they address infrastructure and energy price issues.
‘Strong’ growth in software development
Software development employment in Massachusetts is "growing strongly," according to MassBenchmarks, and the economic expansion is also being led by the professional services, computer and consulting services, and other sectors like architectural and engineering that rely on highly educated workers. Less educated workers continue to experience "troublingly high" jobless and underemployment rates.
Goodman said conditions continue to be difficult in the job market in Massachusetts for younger workers, those with less education or people who have been without work for a long time.
"We still have a ways to go before every community in Massachusetts can feel like they're sharing in this prosperity," said Goodman.
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