How Massachusetts Gets It Right
In late August, right after the July state job figures came out, I received a call from a TV news reporter in northern California. The Golden State's unemployment rate had come in at 12 percent, compared to 7.6 percent in Massachusetts (9.1 percent nationally), Boston ranked No. 1 among metro areas in job creation. What was our secret? Was it our technology industries?
This seemed like an odd question, especially at a time when California-based Apple had just taken the global lead in market capitalization, while shares in Massachusetts tech companies were staggering. But the truth is that Massachusetts has been doing pretty well. We had a shallower, shorter recession than most states, and our unemployment rate is lower. Our economy is growing much faster, according to the indices from MassBenchmarks, a journal of the state's economy. In AIM's monthly Business Confidence Survey, Bay State employers have consistently rated business conditions here better than those in other states.
Part of the secret of our success is a low bar. Business confidence in Massachusetts (from AIM) is about neutral; but consumer confidence (from Mass Insight) is much worse. We have regained just over half the jobs we lost in 2008 and 2009, and we went into this last recession well below our employment peak of a decade ago. A 7.6 percent unemployment rate is better than California's, but it's still not a good number.
Another part is simply luck. In this recession, unlike the two prior ones, industries concentrated in Massachusetts did not bear the brunt. California, after all, has more high tech and biotech than Massachusetts, but it also has, for example, a large homebuilding sector that's flat on its back.
What did we do right? In the public sector, we educated our people, avoided raising taxes, and managed to deliver reasonable budgets more or less on schedule. In the private sector, we worked hard to diversify our economy, broaden our export markets, control our costs and invest in competitiveness. No secrets, just fundamentals.
These days, we're very aware of risk and uncertainty. For the Massachusetts economy, the greatest uncertainty is what will happen nationally. We may outperform the nation, at least for a while, but ultimately our economic fate is inextricably intertwined with what happens across the country. If a recovery takes hold, we will prosper; if there is slow growth, we'll grow slowly; if there is a double- dip recession, we'll dip.
There are also other risks that could turn our luck from good to bad. A European financial meltdown would hammer some of our top export markets. Prospective federal spending cuts could damage the defense, health care and education sectors, which have been mainstays of our stability.
In the face of such uncertainty, hewing to the fundamentals remains our best strategy. In public policy, that means fiscal restraint and sound administration (we have seen both in recent years), together with continued commitment to education, which is our competitive advantage, and meaningful steps to address our weaknesses, notably by controlling health care costs. In the private sector, the challenge remains to balance opportunities and risks, raise productivity and invest judiciously — in other words, basic management.
It's not a secret, it's not magic, it's certainly not going to lead the six o' clock news — but it's working for us.
André Mayer is senior vice president for communications and research at Associated Industries of Massachusetts.
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