Massachusetts workers have been more productive than the national average, helping the state’s economic growth to outpace the country over the first quarter of 2026 despite nearly no increase in employment.
Beacon Hill will get another snapshot of the state’s fiscal health Tuesday, when the Department of Revenue is due to share April tax collection results. The Healey administration is expecting to haul in $6.443 billion this April, which would be $397 million less than was collected last April. Through March, collections were running 3.3% ahead of last year and 2.2% ahead of this year’s expectations.
The latest report from MassBenchmarks, an economic journal published by the University of Massachusetts Amherst Donahue Institute in cooperation with the Federal Reserve Bank of Boston, said state GDP increased at an annual rate of 3.2% in the first quarter, compared to a national rate of 2%. That was despite just a 0.3% annualized increase in payroll employment here.
“Jobless growth is consistent with all or almost all economic growth being driven by productivity gains,” Alan Clayton-Matthews, a MassBenchmarks senior contributing editor and a Northeastern University economist, said. “A rough but good proxy for this is growth in real GDP per payroll worker. For Massachusetts this productivity measure grew 3 percent in 2025, and in recent quarters this measure of productivity growth is trending half a percentage point higher than the corresponding measure for the U.S.”
State officials reported Friday that Massachusetts added 12,700 jobs during the six-month period ending with March, but is still down about 7,500 jobs from employment levels in March 2025. The unemployment rate here is 4.7%, higher than March 2025’s 4.3% reading and higher than the national unemployment rate of 4.3%.
The MassBenchmarks report noted that the war with Iran began at the end of February, “and so had little effect on growth in the first quarter of this year.” But the economists there said they expect the war will ultimately have a negative impact on growth due to supply chain disruptions. Just how disruptive those effects will be “will depend on how long the Strait of Hormuz is closed, which is uncertain,” the report said.
MassBenchmark projected — based on a scenario in which shipments through the strait return to normal quickly — “moderate” growth of state GDP, about 2.1% for the second quarter and 2.5% in the third quarter. But a further continuation of the war and associated energy disruptions “can be expected to result in slower growth than predicted,” the outlet said.
“Even before the war the economy was expected to grow more slowly this year due to a drop in labor force growth related to an aging working-age population and sharp reductions in net international migration,” the report said.
Tuesday also brought an update on the Massachusetts Pension Reserves Investment Management’s main investment fund. The $122.1-billion Pension Reserves Investment Trust (PRIT) fund “held up very well through a series of truly historic market dislocations,” Michael Trotsky, PRIM’s executive director and chief investment officer, reported to the organization’s Investment Committee on Tuesday.
“The PRIT fund was down less than one percent; it was down 0.8% in the quarter, significantly outperforming the markets and a 60/40 mix of stocks and bonds,” he said, attributing the results to “careful diversification.”
Longer-term, Trotsky said the PRIT Fund gained 11.5% net of fees in the 12-month period ending with March, an investment gain of $12.6 billion.
The retirement funds of state employees, teachers and many municipal employees in Massachusetts are invested through PRIM and its PRIT fund. Officials have said there are more than 300,000 beneficiaries of the fund.
Colin Young is the deputy editor for State House News Service and State Affairs Pro Massachusetts. Reach him at colin.young@statehousenews.com.
