July 30, 2007
Economy being pulled in opposite directions
By Matthew L. Brown
For the rest of the year, the state's economy is expected to continue to expand at a pace of about 3 percent, according to the latest Mass Benchmarks Bulletin put out by the University of Massachusetts Donahue Institute.
Strength in the state's technology, science, knowledge, and health sectors will be partially offset by weakness in residential real estate, according to the bulletin. Despite improvements in some recent housing market indicators, such as rises in median prices and declines in inventory of unsold homes, the market has not hit bottom yet, according to the bulletin.
Prices are expected to fall further and mortgage delinquencies and defaults are likely to rise as the peak of the subprime lending crisis approaches.
"The Massachusetts economy is being pulled in two directions," noted Alan Clayton-Matthews, UMass Boston Professor and co-editor of the Benchmarks bulletin. "On the upside, strong demand for the state's technology, science, knowledge, and health-based goods and services is creating good job and income growth. On the downside, the housing market slump is restraining employment growth and consumer spending in related sectors," he said.
These two opposing forces are reflected in differences in recent employment trends by sector in Massachusetts. Employment in computer systems design; management, scientific, and technology consulting; scientific research and development; software; securities, commodity, and investment finance; and health care has been expanding at more than twice the overall payroll employment growth of 1.1 percent over the past year. Employment in sectors related to housing, such as construction, and retail sales of furniture and building materials, have declined over the past year.
Strength in the state's technology, science, knowledge, and health sectors will be partially offset by weakness in residential real estate, according to the bulletin. Despite improvements in some recent housing market indicators, such as rises in median prices and declines in inventory of unsold homes, the market has not hit bottom yet, according to the bulletin.
Prices are expected to fall further and mortgage delinquencies and defaults are likely to rise as the peak of the subprime lending crisis approaches.
"The Massachusetts economy is being pulled in two directions," noted Alan Clayton-Matthews, UMass Boston Professor and co-editor of the Benchmarks bulletin. "On the upside, strong demand for the state's technology, science, knowledge, and health-based goods and services is creating good job and income growth. On the downside, the housing market slump is restraining employment growth and consumer spending in related sectors," he said.
These two opposing forces are reflected in differences in recent employment trends by sector in Massachusetts. Employment in computer systems design; management, scientific, and technology consulting; scientific research and development; software; securities, commodity, and investment finance; and health care has been expanding at more than twice the overall payroll employment growth of 1.1 percent over the past year. Employment in sectors related to housing, such as construction, and retail sales of furniture and building materials, have declined over the past year.
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