Mass. economy shrinks again
Economic activity in Massachusetts declined for the sixth consecutive quarter at the end of last year as holiday shoppers spent cautiously and the unemployment rate spiked, the University of Massachusetts reported.
The state's economy shrank at a 0.2 percent annual rate in the final three months of the year, following declines of 0.6 percent in the third quarter; 1.9 percent in the second; and 4.3 in the first, UMass reported in its MassBenchmarks bulletin.
In contrast, the US economy grew at a 5.7 percent annual rate in the fourth quarter, after expanding at 2.2 percent rate in previous three months, the US Commerce Department reported.
The state economy, however, is probably not lagging the nation's as badly as it appears, largely due to technical issues affecting the UMass estimates. For example, unlike the Commerce Department, UMass's doesn't capture the large gains in productivity over the past few months, as companies produced more with the same or fewer workers.
"The result is the difference between US and Massachusetts growth rates in this report are likely to be overstated,'' said Alan Clatyon-Matthews, a Northeastern University professor who analyzes economic data for the UMass report.
Analysts, however, said the end-of-the year setbacks in Massachusetts were likely temporary, and the state is poised to grow slowly over the next six months.
Despite the surge in the unemployment rate to 9.4 percent in December, and weaker than usual holiday spending, several other indicators point to a rebound. Exports and technology product sales are increasing, Clayton-Matthews said.
Home sales and prices are rising. The pace of layoffs is slowing, and key employment sectors, such as education and health care, and professional, technical, and scientific services, are adding jobs.
"The point is that the state's economy is stronger than the December and the fourth quarter indicate,'' Clayton-Matthews said.
Still, the economy is far from robust. More than 300,000 residents remain unemployed, and tens of thousands more are working part-time because they can't find full times work. Evidence is growing that employers are hiring again, but cautiously. As a result, economists expect the jobless rate to retreat only slowly. With a relatively small construction and manufacturing sector, Massachusetts has not received the same jolt from federal stimulus programs aimed at housing and autos, said Robert Nakosteen, an economics professor at UMass Isenberg School of Management. It's likely to take another six months before the state economy begins to experience steady improvement, he said.
"We're in the middle of a long slog,'' Nakosteen said. "The economy is trying to get to a spot where we're in a self-sustaining recovery, but there's just on traction yet."
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