State Economy Grew At 4 Percent Annual Rate in Second Quarter
SEPT. 11, 2023…..The Massachusetts economy keeps driving ahead and that recession out on the horizon doesn’t seem to be getting any closer.
Many businesses, economists and households have been girding for a downturn amid the Federal Reserve’s strategy of continued rate hikes to tamp down on inflation, but state and local analysts in the last week agreed that things are looking better than expected. Even with high interest rates, the Massachusetts economy grew at an annualized rate of 4 percent during the second quarter and the state’s unemployment rate sits at its historic low of 2.5 percent as of July.
Economists with MassBenchmarks, which is published by the University of Massachusetts Amherst Donahue Institute in cooperation with the Federal Reserve Bank of Boston, said last week that real gross domestic product growth in Massachusetts is outpacing the nation, that economic improvements here are “broad based,” and that the Bay State “has become a leading state for net jobs growth.”
“The unexpectedly strong rebound in state and U.S. economic growth has come despite inflation, slowing economic growth in China, the war in Ukraine, and the lingering effects of the pandemic on production and supply chains. Heading into the latter half of 2023, GDP growth is expected to slow, and may be on course towards a soft landing, rather than an economic downturn,” the group said in a summary of its editors’ discussion.
Associated Industries of Massachusetts reported Monday that the latest results from its monthly Business Confidence Index survey suggest much of the same.
The 0-to-100 scale index shed 0.1 percentage points to settle at 52.4 for August, AIM said, which is nearly three percentage points below where it was a year ago. But in responses to its survey, AIM said it found that “employers remained slightly optimistic amid a resilient economy that continues to defy predictions of a recession.”
An advertising executive told AIM, “As a sales manager I have a good insight into the majority of businesses in our region and feel that most continue to be positive … Recruitment continues to be a need for all but specifically in manufacturing, home improvement and health sectors. Product shortage is no longer the primary discussion.”
In its September Beige Book, which draws information from banking and business contacts, the Federal Reserve Bank said that business activity in New England “expanded modestly on balance, as real estate markets continued to lag other sectors of the [regional] economy.”
(The Beige Book also included this nugget related to the chronically limited inventory of residential real estate: “One Massachusetts contact suggested that state legislation eliminating barriers to construction may help to alleviate inventory challenges going forward but cautioned that any effects would likely not appear before next year.”)
The Fed’s contacts also gave voice to the feeling that the economy isn’t faring quite as poorly as many expected it would and that the future seems a bit brighter.
“Contacts across all sectors expected relatively stable activity moving forward, with further easing of pricing pressures, and fewer of them mentioned the possibility of a recession when considering the outlook,” the Fed wrote.
And “[g]iven the largely positive data for Massachusetts and the diminished likelihood of a full-blown recession,” as MassBenchmarks put it, analysts are thinking about what else Massachusetts could do to address some of the persistent issues that weigh the economy down.
“We know AIM members are still struggling with workforce shortages and have challenges hiring qualified candidates. One of the simplest ways to solve this problem is to provide immediate tax incentives to keep workers in Massachusetts — including through increased housing production — and avoid a further drain of our talent pool,” AIM CEO John Regan said.
The MassBenchmarks board said that making investments that could grow the state’s labor force is a unifying theme among its members and could serve as “a rallying point that could guide state policy.”
“For example, providing more affordable housing and childcare, free community colleges, and improving our antiquated transportation infrastructure would help make Massachusetts a more attractive place to live and work,” MassBenchmarks said. “Because immigrants are a primary source of the state’s population growth, the Board also favor policies for helping them get plugged into the labor force by providing in-state tuition regardless of their present documentation status, making sure that underrepresented workers have access to apprenticeships and other work-based training needed to work in emerging sectors like clean energy, and by reviewing occupational licensure requirements to ensure that immigrants (as well as professionals in other states) are not facing unnecessary obstacles to employment.”
The group later added, “Even with slower economic growth expected on the horizon, Massachusetts has the assets to better position itself for the future and should not delay in acting now on measures to grow its labor force.”