Downturn isn’t over yet for Bay State
Latest numbers change predictions for Massachusetts
The Massachusetts economy seemed to have begun a turnaround this summer as employment losses in August diminished to just a few hundred statewide. With the national job losses still mounting, it appeared the state would emerge from the recession sooner than the nation as a whole.
September data, however, changed that outlook. Massachusetts shed more than 9,000 jobs that month, the most since April. Other data, such as plunging state tax collections, also suggested the economy was weakening. Meanwhile, Massachusetts wasn’t getting much of a boost from stimulus programs such as “cash for clunkers,’’ which offered owners of old cars and trucks cash toward a new, more fuel-efficient vehicle, because of its minuscule automobile sector.
As a result, it now appears the state will lag behind the national rebound by three or four months, according to a recent forecast by the New England Economic Partnership, a nonprofit research group.
The US economy grew at a 3.5 percent annual rate in the quarter ended Sept. 30, while the state economy shrank at a 1.1 percent rate, according to reports from the US Commerce Department and University of Massachusetts.
“The data was telling a different story this summer,’’ said Michael Goodman, economic analyst and professor of public policy at the University of Massachusetts-Dartmouth. “September seemed to mark a reversal of fortune.’’
The steep job losses in September suggest that employment data reported over the summer may have underestimated the weakness of the labor market, analysts said. Monthly state employment figures are estimates based on a survey of businesses. The data can swing widely from month to month, and are frequently revised as more information is gathered from employers.
When the data are comprehensively revised at the beginning of next year, they are likely to show that job losses over the summer were worse than first reported, said Alan Clayton-Matthews, a Northeastern University economics professor. Declines in payroll withhold ing tax collections suggest more people may have lost jobs than were counted in the monthly employment reports.
Massachusetts entered the recession about four months after the national downturn began in December 2007, in part because the state was less exposed to the housing bust. Massachusetts, which has a relatively small construction sector, did not experience the same level of speculative building seen in states such as Florida, Nevada, and California.
These and other factors suggested the state might rebound sooner than the nation. Improving employment data in the spring and summer seemed to support that view.
But the disappointing September report showed the state’s economy was taking a different path. Having entered the recession later than the nation, it appears the state will emerge later, too. The Massachusetts economy is forecast to begin a turnaround in terms of production this month or next, about four months after the US economy.
“We took the hit later,’’ Clayton-Matthews said, “and we’re lagging on the way up, too.’’
Except for the timing, the state recession will largely mirror the national downturn in depth and duration, each lasting about 20 months and resulting in the loss of about 6 percent of jobs, according to the New England Economic Partnership forecast.
That’s still better than the last two recessions, when the downturn in Massachusetts was longer and job losses greater than the nation’s. The recession that began in 2001, for example, lasted two years in Massachusetts, compared with months nationally, while the state shed more than 6 percent of jobs, compared with about 2 percent nationally. That recession was led by a technology collapse, which hit Massachusetts’ tech-heavy economy particularly hard.
Massachusetts tends to lag behind the nation because its economy relies more on business spending than consumer spending, Clayton-Matthews said. The state has a high concentration of companies that sell equipment and services to other businesses, which typically wait for consumer demand to pick up before investing in technology, software, and other products.
Earlier this summer, it appeared that demand was picking up. Auto and home sales were rising, as were sales of semiconductors, an indicator of growing demand for electronics. In another good sign for Massachusetts, exports were increasing. The state has many companies that sell in foreign markets.
“But just because sales were improving doesn’t mean businesses were hiring,’’ Clayton-Matthews said. “They were still cutting costs and squeezing more productivity from existing employees.’’
Robert Gavin can be reached at rgavin@globe.com. 
