Massachusetts’ economy appears to be slowing, according to a review of data in May by the MassBenchmarks Board, which also noted a number of growing concerns for 2023, along with some better-than-expected news in payroll, employment and demographics.
MassBenchmarks is an initiative of the University of Massachusetts Donahue Institute and the Federal Reserve Bank of Boston.
The state has “shown a recent, though hesitant, uptick in the size of its labor force and working age population,” the report stated.
Among the concerns noted by the board are underlying weaknesses and structural issues “that could chip away at the longer-term competitiveness of the Massachusetts economy.”
The board noted that real GDP growth is slowing mid-year and may turn negative. Also, despite a recent increase, the working age population is not expected to grow at a significant rate in coming years; inflation is falling, but slowly; and state tax revenues seem to have flattened.
“The combination of a drawdown in savings built up during the pandemic, high inflation, challenges in accessing capital and a changeable stock market are also taking a toll on consumer confidence in Massachusetts,” the MassBenchmarks report stated.
“Massachusetts’ perennial structural issues of housing affordability, high energy and childcare costs and a troubled transportation system continue to be seen as dampening the state’s competitiveness and its ability to meet its economic potential.”
A highlight of the state’s economy is growth in payroll jobs. It grew at an annualized rate of 3 percent, which is just above the national average.
Massachusetts surpassed its February 2020 pre-pandemic peak by 15,000 jobs in March, reaching a new record of more than 3.75 million total jobs. However, 31 states have reported faster employment growth rates since February 2020, and within New England, New Hampshire and Maine have added jobs more quickly than Massachusetts over the past three years.
The state’s unemployment rate continues its downward trend, with April unemployment at 3.3 percent, down from 3.7 percent in April 2022 and below the U.S. rate of 3.4 percent.
Per the report, “The declining unemployment rate, while a positive indicator, has been in part the result of a declining labor force. That said, the labor force has actually been increasing month-over-month since early 2023, but April’s labor force size still remained smaller than it was in April 2022.
“Similarly, household employment also experienced an increase in early 2023 but remains behind the higher levels it reached in the first part of 2022. The recent growth in both the labor force and household employment is a switch from what had been observed in prior board meetings, but it remains to be seen if this growth carries into the future.”
The report concluded that there are “mixed messages” concerning the state’s economy. The increase in payroll jobs and a construction boom are positives, while the 0.1 percent real GDP growth estimate for the first quarter of 2023 indicates the economy is losing steam.
“Overall, the Massachusetts economy is currently viewed as fragile by the board. There are many risks including inflation, declining consumer confidence, the exposure of banks to commercial real estate, the Russia-Ukraine conflict and the possibility of a Chinese downturn affecting the global economy.”
MassBenchmarks is managed and staffed by the Institute’s Economic & Public Policy Research group. The project mobilizes economic experts within the University of Massachusetts system and from other public and private research institutions around the state to produce and distribute assessments of the state’s economy through reports, commentary and analysis.
Grocery industry ‘resilient’
Chris Flynn, president of the Massachusetts Food Association, said the grocery industry in the state has been “very resilient and remains strong,” considering the challenges over the last few years. He added that it is “amazing” how the industry has made it through the supply chain and labor shortages, in addition to cost inflation and other issues.
“The industry has been very nimble and worked across the various industry sectors to service their customers. The future will bring more stabilization and allow the industry to grow and prosper.”
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