State economy outpaces US
The state's recovery slowed in the third quarter of the year, but the Massachusetts economy, buoyed by strong technology spending, still expanded at nearly double the rate of the US economy, the University of Massachusetts reported today.
The economic growth in the three months that ended in September represented the third consecutive quarter that the Massachusetts economy has outperformed the nation, UMass reported in its quarterly journal, MassBenchmarks.
The state economy expanded at a 3.7 percent annual rate in the three month period that ended in September, decelerating from a 4.7 percent rate in the second quarter and 6 percent in the first, UMass reported in MassBenchmarks.
The US economy grew at 2 percent annual rate, compared to 1.7 percent in the second quarter and 3.7 percent in the first, the US Commerce Department reported today.
"We're coming off a period of very rapid growth, and it's slowing,'' said Alan Clayton-Matthews, a Northeastern University economic professor who analyzes a variety of data to estimate the state's economic growth for the UMass journal. "But it's still stronger than the US and I expect we're going to be growing faster than the US over the next six months."
Powering the state's recovery is its large technology sector, Clayton-Matthews said. Global and international demand for tech products remains strong and businesses, while hiring cautiously, continue to invest in technology. The Commerce Department said in today's report that business spending on equipment and software rose at a 12 percent annual rate in the third quarter, after surging at 25 percent rate in the second quarter, and 20 percent in the first.
The solid, but slowing technology spending reflects the trends in the broader state economy. The Massachusetts recovery, which began more than a year ago, continues to advance, but at slower pace.
Statewide employment, for example, grew at a nearly 2 percent annual rate in the third quarter, down from about 5 percent in the second quarter. The growth in wage and salary income slowed to a 2 percent annual rate after surging 11 percent in the second. Combined consumer and business spending declined last quarter by a 4 percent annual rate after jumping 12 percent in the second quarter.
Ultimately, analysts said, the state is tied to national and international economies since Massachusetts firms sell a large share of goods and services in other states and countries. The economies of European nations, which provide large markets of Massachusetts exports, continue to struggle. Meanwhile, the US economy has shed jobs in each of the past four months, while the unemployment rate remains stuck near 10 percent, significantly higher than Massachusetts 8.4 percent rate.
UMass forecasts that the state's economic growth will moderate further over the next six months, which likely means little improvement in the unemployment rate. Clayton-Matthews said he doesn't expect to see significant declines in unemployment until the middle of next year, when an accelerating national economy should provide a lift to the state.