Tech sector proves torchbearer for Mass.
Growth in Bay State still outpacing nation
The Massachusetts economy, spurred by business spending on technology, grew faster than the nation’s through the first half of this year, continuing a yearlong trend of strong growth.
The University of Massachusetts said yesterday that the state’s economy grew at an annual rate of 4.3 percent in three months from April to June, more than three times faster than the national growth rate. The US economy expanded at just 1.3 percent during that three-month period, the Commerce Department reported yesterday.
Relatively flat consumer spending has stymied growth nationally, yet businesses experiencing increased profits are investing in technology instead of hiring. That has been good for Massachusetts, which has a high concentration of firms that sell equipment to other businesses, said Michael D. Goodman, a public policy professor at the University of Massachusetts Dartmouth and one of the authors of the report.
“We’re less dependent on the consumer sector and more dependent on the business sector,’’ Goodman said. “So we can disproportionately benefit in the way the economy has been growing.’’
While the state’s economy has outperformed the nation’s, Massachusetts is not immune to the effects of a national slowdown. Massachusetts businesses rely on sales to a national market as well as sales in Europe, which is in the midst of its own economic crisis.
The US economy’s slow rate of growth is further imperiled by the escalating political crisis over the nation’s debt ceiling. If Congress fails to raise the borrowing limit by Tuesday, leading to a technical default by the federal government, interest rates could climb - increasing borrowing costs for consumers and businesses - and throw an already troubled economy into crisis. Some economists say damage has already been done.
“Even if the debt standoff is resolved quickly [next] week, the extreme uncertainty will surely have damaged third quarter growth by hurting consumer and business willingness to hire and spend,’’ wrote Nigel Gault, IHS Global Insight chief economist, in his economic outlook yesterday.
The UMass report showed that Massachusetts added 41,300 jobs in the first half of 2011. The state’s unemployment rate fell in June to 7.6 percent, down from 8.3 percent late last year.
Northeastern University economist Alan Clayton-Matthews, also one of the report’s authors, said Massachusetts’ growth could be considered “spectacular’’ but cautioned that federal data used to calculate the rate may overstate the strength of the job market and is subject to revision as more data becomes available. Last year, federal officials significantly revised the state’s initial job growth estimates, to 20,000 job gains in the first half of 2010 from an originally reported 60,000, Clayton-Matthews said.
Yet even if Massachusetts’ growth is less than reported and revised downward by as much as 1 percent, the state’s economy remains strong at a time of economic uncertainty.
“We’d still have a 3 percent rate of growth,’’ Clayton-Matthews said. “And that’s still much stronger than the nation.’’
The report, published by the UMass Donahue Institute in collaboration with the Federal Reserve Bank of Boston, predicted the state’s economy would continue to its solid recovery and grow 4.7 percent in the third quarter and 4.3 percent in the fourth.
Both economists attributed Massachusetts’ relative strength to its tech and science-based business sector, including companies like Intel Corp., the California semiconductor maker that operates a factory in Hudson, and Teradyne Inc. of North Reading, which makes semiconductor test equipment machinery.
Clayton-Matthews said engineering and scientific research and development, as well as growth in management and other types of consulting have also bolstered the state’s growth. Employment in consulting showed a “stunning’’ 6 percent rate of annual growth in Massachusetts during the first half of this year, he said.
Still, Goodman said, many Massachusetts residents are not benefiting from this economic growth. Residents of Western Massachusetts, for example, are not seeing the job gains associated with a high-tech sector largely situated in Greater Boston. Skilled high-tech workers also earn more, adding to statewide economic disparity, he said.
“There was income growth,’’ Goodman said, “but it was very concentrated at the high end.’’
While the state’s overall recovery has been faster than the nation’s, Massachusetts lost more than 4 percent of its jobs in the recession and has so far recovered about one-third of them. There are about 260,000 unemployed state residents, and Massachusetts is not expected to regain all the jobs it lost in the recession until early 2014.
Megan Woolhouse can be reached at mwoolhouse@globe.com. ![]()




