The Massachusetts Economy: Downshifting into Second Gear? Alan Clayton-Matthews School of Public Policy and Urban Affairs Northeastern University Presented to MassEcon January 20, 2012
Quarterly Growth at Annual Rates (%) Massachusetts has had a stronger recovery than the U.S., but that may change. 8.0 Growth in Real Product, Massachusetts vs. U.S. Source: U.S., Bureau of Economic Analysis; Massachusetts: MassBenchmarks 6.0 5.3 5.7 4.0 2.0 2.1 1.7 3.8 3.9 3.8 3.0 3.2 3.6 2.5 2.3 1.9 4.2 1.3 3.4 1.8 Projected 3.0 3.2 0.4 0.0-2.0-1.4-0.7-4.0-3.7-6.0-6.7-8.0 2009 2010 2011 2012 Massachusetts U.S.
Growth From Same Month Prior Year (%) Growth rates are converging. 3.0 Massachusetts and U.S. Payroll Employment Growth Source: U.S. Bureau of Labor Statistics 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0-6.0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 MA US
The strength of the recovery depends on where you live. 101% Payroll Employment Relative to March 2008 100% 99% 98% 97% 96% Boston NECTA Division Massachusetts Springfield NECTA U.S. 95% 94% 93% Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
There is a wide disparity in economic health across the Commonwealth. Unemployment Rates for Selected Municipalities, November 2011 Lawrence 14.4 Fall River 11.8 New Bedford 11.7 Springfield 10.4 Attleborough 8.8 Brockton 8.8 Lowell 8.7 Leominster 8.2 Chicopee 8 Marlborough 4.8 Framingham 4.6 Waltham 4.6 Watertown 4.6 Somerville 4.5 Arlington 4.3 Cambridge 4.1 Newton 4.1 Amherst 3.7 Brookline 3.4 Weston 3.3 Mount 3.1 Leyden 3 Whately 3 Dover 2.9
Percent of December 2010 Technology and manufacturing supported the state s economy this year. Employment Growth by Supersector, Massachusetts 106 105 104 103 102 101 100 99 98 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Total Construction Manufacturing Trade Trans Utilities Information Finance Prof Business Serv Education Health Serv Leisure Hospitality Other Services Government
2009=100 Which story is to be believed? 104 Massachusetts Employment 103 102 101 100 99 Jan-08 Jan-09 Jan-10 Jan-11 Payroll-790 UI-202 Resident-CPS
Millions of Dollars at Annual Rates Withholding tax revenues are consistent with strong growth in the first half of 2011, and slowing growth in the second half of 2011. 210,000 Wage and Salary Disbursements, Massachusetts (Derived from Withholding Taxes) 205,000 200,000 195,000 190,000 185,000 180,000 175,000 170,000 07 08 09 10 11
Billions of Current Dollars Consumers stepped up spending at the end of the year. Will it continue? 72.0 Spending on Taxable Regular Sales Items and Motor Vehicles, Massachusetts Source: Massachusetts Dept. of Revenue, Alan Clayton-Matthews 70.0 68.0 66.0 64.0 62.0 60.0 06Q1 07Q1 08Q1 09Q1 10Q1 11Q1
2007=100 Demand in information technology markets has peaked at least temporarily. Semiconductor Billings 150.0 Source: Semiconductor Industry Association, seasonally adjusted 140.0 130.0 120.0 110.0 100.0 90.0 80.0 70.0 60.0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 World Europe Japan Americas Asia Pacific
$ Millions, 3-mo mov. Avg. Semiconductor equipment is an important manufacturing sector for Massachusetts. 3,500.0 Worldwide Semiconductor Equipment Billings and Bookings Source: Semiconductor Equipment and Materials International 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Billings Bookings
Nominal growth from prior quarter at annual rate (%) The third quarter was a dud for investment demand for info tech. U.S. Investment in Information and Processing Equipment and Software 25.0 Source: U.S. Bureau of Economic Analysis, NIPA Accounts 20.0 15.0 10.0 5.0 0.0-5.0-10.0-15.0-9.1-8.9-5.7-1.5 4.3-11.9 5.3 2.5 18.1 12.0-1.9 4.2 5.3 5.45.8 3.93.6 1.6 15.0 1.5 7.9 1.2 16.4 2.1 0.5 10.2 1.7-0.1-8.2-11.0 0.7 14.0 12.4 3.2 8.9 6.2 8.5-1.0 7.1-0.1-16.9-19.2-21.9-20.0-25.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1998=100 A fall in exports to Europe could cut 0.5% to 0.75% from state growth in 2012. Merchandise Exports, Seaonally Adjusted 230.0 Source: WISER, seasonally adjusted by NU. 220.0 210.0 200.0 190.0 180.0 170.0 160.0 150.0 140.0 130.0 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 US MA
Quarterly Growth at Annual Rates Growth will be weak through the first half of 2013. Employment Growth, Massachusetts 4.0 Source: NEEP, Moody's Analytics 2.0 0.0-2.0-4.0-6.0-8.0 07 08 09 10 11 12 13 14 15
2011q2=100 Professional Business Services, Education and Health Services, and Information will have the fastest job growth. 112.0 110.0 108.0 Payroll Employment Trends Over the Forecast, Massachusetts Source: NEEP, Moody's Analytics Professional and Business Services Education & Health Services Information 106.0 104.0 102.0 100.0 98.0 96.0 94.0 11q1 12q1 13q1 14q1 15q1 Leisure and Hospitality Total Payroll Financial Activities Other Services Government Construction Manufacturing Trade, Transportation, Utilities
The slow real estate market has an upside: more affordable housing. Median House Price to Per Capita Income Ratio, Massachusetts 9.0 Sources: Moody's Analytics, National Association of Realtors, NEEP 8.5 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 85q1 87q1 89q1 91q1 93q1 95q1 97q1 99q1 01q1 03q1 05q1 07q1 09q1 11q1 13q1 15q1
Aging Baby Boomers leave a hole that the Millennials may only partially fill. 90.00% Population Growth by Age, Massachusetts, 2007-2030 Source: Census Bureau, Alan Clayton-Matthews 82.6% 70.00% 50.00% 53.9% 30.00% 10.00% 3.9% 2.5% 9.8% 6.6% -10.00% -4.5% -7.4% -30.00% -18.7% <16 16-24 25-34 35-44 45-54 55-64 65-74 75+ Total
Baby Boomers are aging into lower participation rate categories. 90% Employment Rates by Age, Massachsuetts, 2007-2030 Source: Bureau of Labor Statistics, Alan Clayton-Matthews 80% 70% 60% 50% 40% 30% 20% 45-54 35-44 25-34 55-64 16-24 65-74 75+ 10% 0% 2007 2012 2017 2022 2027
2007 = 100 The level of full employment may peak about 2018 and then decline. Is this destiny? 108 Population, Employment, and Employment Rate, Massachusetts, 2007-2030 52% 106 51% 104 50% 102 49% 48% Population (L) Employment (L) Employment Rate (R) 100 47% 98 96 Source: Census Bureau, BLS, Alan Clayton-Matthews 2007 2012 2017 2022 2027 46% 45%