Economists: State economic growth exceeded expectations last quarter
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On a day when the global financial markets took a sharp turn downward on signs of a U.S. economy slowdown, the economists at MassBenchmarks reported the "pleasant surprise" that state economic growth exceeded expectations in the second quarter.
Massachusetts real gross state product increased at an annual rate of 3.3 percent during the second quarter of 2024, according to MassBenchmarks, while U.S. GDP increased at an annual rate of 2.8 percent, per the U.S. Bureau of Economic Analysis. Both represent improvement over the first quarter -- Massachusetts GDP grew at an annual rate of 1 percent while U.S. GDP grew at a 1.4 percent rate during the first three months of the year.
"The higher-than expected boost in second quarter growth came as a pleasant surprise following the more modest growth experienced during the first quarter. In Massachusetts, this increase in growth was supported by moderate payroll employment growth, high withholding and sales tax receipts — which imply high wage and salary income and spending growth, low unemployment rates, and a growing labor force," the latest notes from the MassBenchmarks board, published by the University of Massachusetts Amherst Donahue Institute in cooperation with the Federal Reserve Bank of Boston, said. "Labor market indicators, while giving mixed signals, were mostly positive in the second quarter. Payroll employment growth slowed but remained positive, expanding at a 0.6 percent annual rate in Massachusetts in the second quarter as compared to 1.5 percent for the U.S."
Compared to the second quarter of 2023, employment was up 0.7 percent in Massachusetts and 1.7 percent in the U.S. during the second quarter. But MassBenchmarks cautioned that the moderate employment growth estimate "may, however, be overstating job growth in Massachusetts."
A pickup of 19,000 employees in June helped to boost the state's second-quarter employment growth numbers, but state government accounted for 8,700 of those gained jobs, MassBenchmarks said. The group said that June numbers are "subject to large seasonal-adjustment errors depending on when many state employees in educational settings finish the school year, so the actual employment gain in June may have been closer to 10,000."
Over the last 12 months, Massachusetts has averaged a gain of 3,350 jobs per month, MassBenchmarks said.
MassBenchmarks Senior Contributing Editor Alan Clayton-Matthews flagged in his write-up that "Massachusetts continues to have a cost-of-living problem." The consumer price index for the Boston metro area climbed at an annual rate of 7.3 percent in the second quarter, compared to 2.8 percent for the U.S. as a whole, according to the Bureau of Labor Statistics.
"Rising rents and housing costs help to explain the higher inflation readings for the Boston area," Clayton-Matthews said.
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