The Massachusetts’ economy continues to outperform the nation’s, but the state’s relatively low unemployment rate masks significant problems for many people who want to find jobs but cannot, according to a report by top local economists.
While the housing market is bright spot for the state, with sales, prices and building permits all on the rise, other developments are worrisome, the economists said. Massachusetts’ exports to its major international markets slowed significantly in the last year as the global economy weakened, while federal tax increases and budget cuts are further undermining growth.
All this adds up to an economy that is growing, but not creating jobs fast enough for the tens of thousands of unemployed, underemployed and discouraged workers, the economists said.
“The state’s labor market continues to be under considerable stress and faces profound challenges that are not fully reflected in the state’s headline unemployment rate,” the economists said.
The economists, from the Federal Reserve Bank of Boston, local universities, and State Street Corp., constitute the editorial board of MassBenchmarks, an economic journal published by the Donahue Institute at the University of Massachusetts. They made their assessment at the June 21 meeting of the board, reported in a summary released Thursday.
The unemployment rate in Massachusetts was 6.6 percent in May, compared to 7.6 percent for the nation. However, Massachusetts’ recovery has not benefitted a significant number of state residents, including people who are working part-time but want full-time work and those who are out of work and have stopped looking, but would take a job if offered. The number of people in both categories has risen in 2013, the report said.
The economists also said younger and often less-skilled workers are increasing unemployed and the “extent of their disconnection from the labor market is troublingly high.”
Part of the slowdown is due to the poor economic conditions in Canada, Europe, and Asia, which have hurt the state’s exports. Massachusetts exports have declined by more than 11 percent in the year ending in April, the economists said.
Federal income tax rates rose for upper income households in January and payroll taxes increased for working Americans, the report said, hitting consumers on both ends of the economic spectrum.
Additionally, billions in federal spending cutbacks known as sequestration, which went into effect when Congress could not reach a budget agreement, have taken a toll in Massachusetts. Federally-funded medical research and defense spending in the state has slowed, as has federal spending on programs such as Head Start, the preschool education program for children, and Section 8, the housing subsidy program for poor families.