January 30, 2015

Mass. posts 3rd straight quarter of strong growth

The Massachusetts economy grew at a significantly stronger clip than that of the U.S. during the fourth quarter, marking three consecutive quarters of strong growth, according to data released on Friday by the UMass Donahue Institute.

In its MassBenchmarks report, the institute said real gross domestic product (GDP) for Massachusetts grew at an annualized rate of 4.7 percent in the fourth quarter, compared to an annualized rate of growth of 2.6 percent for the U.S. GDP.

Growth in the state economy during the fourth quarter slowed from 6 percent in the third quarter and 5.2 percent in the second quarter, but the data points to nine months of strong growth after the state economy contracted by 2.4 percent during the first quarter of 2014.

Looking ahead, the state economy is expected to grow at an annualized rate of 5.2 percent over the next six months, according to the MassBenchmarks leading index.

According to the report:

  • Payroll employment in Massachusetts expanded at a 2 percent annualized rate in the third and fourth quarters;
  • Employment levels in the fourth quarter were 1.7 percent higher than in the fourth quarter of 2013;
  • The state's jobless rate fell from 6 percent in September to 5.5 percent in December; and
  • Wages and salaries grew at an annualized rate of 10.7 percent in the fourth quarter and was 6 percent higher than in the fourth quarter of 2013.

The strong economic news contrasts with a bleaker state budget picture on Beacon Hill, where Gov. Charlie Baker is studying his options to close a midyear budget deficit he estimates at $765 million and which he attributes largely to overspending. State tax collections have largely met budget targets halfway into fiscal 2015.

"The budget gap for FY '15 doesn't have that much to do with the state's economic performance or even the state's revenue receipts," said Dr. Michael Goodman, co-editor of MassBenchmarks and executive director of the Public Policy Center at UMass-Dartmouth.

Calling the state's economic growth "quite robust," Goodman noted unbudgeted health care expenses, including some tied to the Health Connector's website problems, appear a major factor behind the state budget difficulties. "Hopefully these are one-time expenses," he said.

This week's blizzard was a reminder of the lost productivity, property damage and other costs that can accompany cold winter weather and major storms. Economists have said cold weather and storms during the first quarter of 2014 were a factor in slowing economic growth.

Goodman said bad winter weather can merely delay some economic activity as people stay indoors. But he said stores that serve lunch, for example, or individuals paid by the hour, can't make up for business and wages lost when storms disrupt normal patterns.

"There are all of these cascading effects that come with the winter," he said.

Baker said Thursday that he plans to brief legislative leaders on his budget-balancing plans and related legislation early next week. Former Gov. Deval Patrick made unilateral budget cuts late last year, and budget stakeholders are on edge about additional cuts from Baker.

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