MassBenchmarks Group Notes ‘A Loss in Momentum’
May 23, 2024….The economists at MassBenchmarks are taking a dimmer view of the state’s economy almost halfway through 2024 and said Thursday that a recent slowdown in growth revives questions of whether the economy is headed for a recession or a soft landing.
“The economy is not as strong as first thought and there is a perceptible loss in momentum, notably in jobs and slowing growth in GDP. Economic growth in the state, along with the national economy, likely peaked in the second half of 2023, and slower growth is now anticipated for 2024. The slowdown, in part, may be due to the delayed effects of higher interest rates finally coming home to roost,” 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.
The group previously cautioned that gross state product and job growth both slowed recently, and that 2023’s “fairly robust picture of Massachusetts jobs growth” has been essentially wiped away by data revisions by the U.S. Bureau of Labor Statistics. The MassBenchmarks board highlighted one data point Thursday — a small first-quarter uptick in the number of people who want work but have not looked in the last four weeks — and said it could either represent an increase in the pool of available workers or could “instead be an early sign of a weakening economy.”
The board added, “With the slowdown in growth, the question of whether there will be a recession in coming quarters reemerges (noting that none is currently forecast), or whether instead the state and nation are headed for a ‘soft landing’ phase of slow but stable growth and lower inflation.”
Beacon Hill is still trying to get a handle on the post-pandemic economy and it has been even more difficult than usual to get a read on exactly where things might be heading. Until March, Massachusetts had seen seven straight months of below-expectation tax revenues, a streak during which the governor unilaterally cut spending, revised the revenue outlook and tapped other sources of money. But then a big rebound in April collections pushed year-to-date collections back into the black with two months left in fiscal year 2024.
Administration and Finance Secretary Matthew Gorzkowicz has said that economists have told the administration “We should expect to see a soft landing in this fiscal year and recovery in the latter half of FY 25 into FY 26.”
