Not So Fast | Economists cast doubt on report that Worcester and Framingham have exited the recession
The greater Worcester and Framingham regions were identified in a recent report as the only two areas in the Bay State that are in full-on economic recovery.
But local economists say you can’t believe everything you read.
The report in question is the latest Adversity Index from Moody’s Economy.com and MSNBC.com, which analyzed 384 metro areas across the country based on employment, manufacturing and housing data as of August. Using the data collected, the index declares that the Cambridge-Newton-Framingham and Worcester regions are in “recovery.”
Alan Clayton-Matthews, a professor of public policy at Northeastern University, doesn’t buy it.
“I think the whole state is still in a recession,” he said. “The index is only as good as the data that it’s built on.”
As Clayton-Matthews explains, the index’s job data is built upon payroll reports, but there are factors — like declining tax revenues and personal income — that suggest that payroll surveys are reporting more jobs than currently exist.
Clayton-Matthews also said that the fact that the index is built on only four factors could allow the results to be easily skewed by inaccurate or incomplete data.
Drill Down
According to an interactive map at MSNBC.com, the Cambridge-Newton-Framingham region reported a 3.47 percent decline in employment, a 5.23 percent decline in single family housing starts and a 10.62 percent decline in industrial production compared to a year ago.
Worcester reported a 2.62 percent decline in employment, an 8.72 percent decline in single family housing starts and a 12.85 percent decline in industrial production.
While the year-over-year stats are overwhelmingly negative, the index itself is actually based on a six-month snapshot.
“When we’re thinking about how good a picture it’s giving us, it’s not going to be super precise,” said Wayne Gray, a professor and chair of the economics department at Clark University.
“They (the numbers) might be a lot worse than they were a year ago, but if they’re better than what they were a month ago, it will look like they’re recovering.”
Gray said that there aren’t many statistics available to track economic progression at a local level and that the index seems to transpose the national numbers onto regions based on the type of businesses that thrive there.
“They just know what kind of industries are around Worcester,” he said. “They don’t know the industrial activity of Worcester.”
Gray also said the index is limited because it’s based on just employment and housing-related statistics.
“That’s not the only thing going on with the economy,” he said.
Looking Ahead
The report points to this past August as the official start of a nationwide recovery, but Gray says we’ll only know if that’s true by the spring of 2010.
“In the early stages of economic growth, unemployment gets worse because it takes firms a while to be convinced that things are improving,” he said. “When you see improvements in unemployment nationally, that’s probably a sign that the recession ended a few months ago.”
Although Clayton-Matthews doesn’t put much stock in the index’s read on the local economy, he does see some reasons to be optimistic – including rising auto sales and increased consumer confidence.
He predicted a turnaround coming in “the next quarter or two."
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