Bay State economy slips while nation makes a gain

But the erosion of the state’s economy was dramatically slower than in the two previous quarters, according to a report released yesterday by the University of Massachusetts.

The state’s economy has probably hit bottom and will resume growing in the current quarter, expanding weakly as the housing market continues to recover and worldwide demand for technology products picks up, UMass projected.

The report showed that the Bay State economy contracted in the third quarter at a 1.1 percent annual rate - meaning that’s how much the state’s production of goods and services would fall if the decline remained steady for a year. In the previous quarter it had contracted twice as fast; in the first quarter, it fell at four times that rate.

The state’s performance was far weaker than the US economy, undermining what earlier had seemed to be a faster recovery in Massachusetts.

The nation’s economy grew at a 3.5 percent annual rate in the third quarter, the US Commerce Department reported yesterday. However, it was lifted by one-time federal stimulus programs such as the recently expired “cash for clunkers’’ rebate for auto buyers and the $8,000 tax credit for first-time home buyers, economists said. The housing credit is set to expire in a month.

Those programs favored states with significant auto manufacturing and severe housing declines, said Michael Goodman, an economic analyst and professor of public policy at the UMass-Dartmouth. But the auto industry plays little role here, and the housing decline was far less severe here than in states such as Florida and Nevada.

“The apparent strong performance of the national economy may be misleading,’’ Goodman said. “While it’s clear that the Massachusetts economy continues to fight its way through this difficult recession, [yesterday’s national economic] report reflects, among other things, the impact of one-time programs.’’

Despite signs of improvement, economic conditions in the state remain mixed.

For example, Columbia Tech, a Worcester contract maker of technology products, has recalled at least 20 laid-off workers as orders rose in each of the past three months, said chief executive Chris Coghlin.

“There appears to be some confidence out there,’’ he said.

But Capone Iron Corp. in Rowley, which makes steel products for commercial construction, is still waiting for business to pick up, said Mike Farley, a company spokesman. Contending with weak demand, low prices, and subsidized foreign competition, Capone has cut its workforce in half over the past year to about 35.

“We’re optimistic that the economy is improving, but we’re not seeing it yet,’’ Farley said.

It appeared the state economy had begun a turnaround this summer as job losses steadily diminished and other indicators, such as a pickup in national and worldwide technology sales, suggested a rebound. But job losses, which had slipped to 700 statewide in August, accelerated to more than 9,000 in September, while the unemployment rate rose to 9.3 percent, the highest level since 1976.

Rising joblessness, meanwhile, is cutting incomes and undermining consumer spending. Wages and salaries paid in Massachusetts declined by nearly 8 percent in the third quarter, while sales taxes, a measure of consumer spending, plunged sharply, said Alan Clayton-Matthews, a Northeastern University economics professor who analyzed data for the UMass report.

Job worries pushed consumer confidence down in Massachusetts in October, the first decline since the beginning of the year, according to Mass Insight, a Boston consulting firm.

Clayton-Matthews said the state, which entered the recession in March 2008, about three months after the downturn began nationally, now appears to be coming out later.

“The story could improve,’’ Clayton-Matthews said. “There are good things happening. The technology markets are up, and we could start seeing a pickup.’’

Robert Gavin can be reached at rgavin@globe.com.