Mass. economy sees surprisingly strong growth
Massachusetts economy grew at a solid pace in the first three months of 2013, with jobs, wages and salaries on the rise, according to a new report released Friday by the University of Massachusetts and the Federal Reserve Bank of Boston.
The state economy expanded an annual rate of 3.9 percent between January and March, up from 2.4 percent in the preceding three months. In contrast, US Commerce Department said Friday that the nation’s economy grew by 2.5 percent between January and March, up from 0.4 percent in the final three months of 2012.
“What’s surprising was how quickly the growth occurred in the beginning of this year,” said Northeastern University economist Alan Clayton-Matthews, who compiled and analyzed the data in the report. “There were all these signs of an economy starting to take off.”
Consumer spending and income grew, supported by rising stock market and sizeable bonus payments to employees in the financial services and professional sectors. However, payroll taxes increased for most Americans in January when Congress allowed a temporary tax cut to lapse. Additionally, the impact of automatic federal spending cuts is beginning to be felt as agencies cancel or delay contracts and furlough workers.
Massachusetts is particularly vulnerable to the cuts because the state receives billions annually in federal defense and research spending. The spending cuts are slowing hiring in many of the state’s leading industries, including health care, higher education, and research and development, Clayton-Matthews said.
The report, published in the UMass economic journal MassBenchmarks, said the state’s economy would continue to grow at a slow but steady pace over the next several months.
Following weak national employment growth last month, Massachusetts’ economy slowed in March as employers cut 5,500 jobs, the second consecutive month of job losses.
The unemployment rate decreased to 6.4 percent in March, from 6.5 percent in February, but that was largely due to the more than 6,000 people who stopped looking for work in what is still a weak job market. Only those who actively seek jobs are counted as unemployed by state officials.
Earlier this year, Massachusetts recovered all the jobs lost in the last recession, following a steady recovery that progressed faster than the nation’s. The US unemployment rate was 7.6 percent last month.
Michael D. Goodman, professor of public policy at the University of Massachusetts at Dartmouth, said the report highlights the state’s overall progress, but noted that the number of people unemployed for six months or longer remains troublingly high. Many are older workers, displaced from jobs in still struggling sectors of the state economy, such as manufacturing.
The western part of the state, as well as cities like Lawrence and New Bedford also continue to wrestle with persistently high levels of unemployment.
“The state is doing well,” he said. “But even though we have had strong performance, there are still large regions of the state that aren’t experiencing the benefit.”Megan Woolhouse can be reached at firstname.lastname@example.org.