The Massachusetts economy is expected to grow slowly before accelerating in early 2014, benefiting from a boost from an unexpected sector — manufacturing — according to an economic forecast released Wednesday by a group of regional economists.
Although Massachusetts is in the midst of a slowdown in hiring, the five-year forecast by the New England Economic Partnership shows the state’s economy adding jobs at a significant pace beginning next year. Employers will add about 30,000 jobs this year, about 50,000 next year, and more than 70,000 in 2015, according to the forecast.
The state’s unemployment rate, 6.4 percent in April, is expected to average 6 percent in 2015 and fall to about 5.2 percent by the end of 2017, the report said.
“The outlook for the future is much better than it has been and that has a lot to do with restoring confidence and consumer demand,” said Alan Clayton-Matthews, a Northeastern University economics professor and director of the New England Economic Partnership, a nonprofit forecasting group of academic and business economists. “By 2015, we’ll be in a growth spurt phase of the recovery where people’s spending catches up to their wants. The jobs, they’ll be there and people will be willing to spend, which begets more jobs.”
The New England Economic Partnership issues forecasts twice a year for the region and each of the six New England states. The forecasts sometimes have proven more pessimistic than the eventual performance of the economy, and sometimes more optimistic.
Two years ago, for example, the group forecast that the state’s unemployment rate would remain above 7 percent this year — more than a half point above the current jobless rate. On the other hand, the group also projected New England would regain all the jobs lost in the last recession by early 2014, but the recovery has been slower than expected.
Now, the region is not expected to return to prerecession job levels until 2015.
Massachusetts expansion in coming years is expected to be fueled by rising consumer confidence, spending, and income, boosted by an improving job market, soaring stock market, and rebounding housing market. Massachusetts home prices were up by 5.3 percent in February from a year earlier, while residential building permits increased 24 percent.
The forecast predicted continued improvement in housing, with prices expected to rise another 5 percent this year and more jobs in construction, one of the hardest hit sectors in the last recession.
Manufacturing, which has experienced large job losses in recent decades, is expected to expand over the next few years because of global demand for advanced products made here, including medical devices, specialized materials, and semiconductors. Clayton-Matthews said demand for such products in developing nations will increase over the next decade as global incomes rise.
Across New England, manufacturers will add about 7,000 jobs by 2016 after years of losses, according to the forecast. In Massachusetts, more than 250,000 people, or about 8 percent of the state’s labor force, work in manufacturing.
“The long sectoral decline in the number of manufacturing workers may be over,” the forecast said.
The Massachusetts economy is currently weathering a soft patch after a period of strong growth, slowed by tax increases and federal budget cuts, as well as a recession in Europe, the state’s largest trading partner. Unemployment and underemployment — those working in jobs outside their career to make ends meet — continues to be a problem in the state, the report said, “especially for youth, and those without a college education.”
Still, the state has recovered from the last recession faster than the nation as a whole, regaining all the jobs lost in the downturn earlier this year. The state unemployment rate is more than a point below the national rate, 7.5 percent in April.
The partnership predicted that the unemployment rate for all of New England will drop from 6.9 percent this spring to 5.3 percent by the end of 2016.
The report also raised questions about whether there will be enough skilled workers in Massachusetts to meet employers’ demands as baby boomers retire and leave the workforce. As many as 100,000 job vacancies in manufacturing will be created by retirements, the report said, but there may not be enough student interest in vocational education to fill those jobs or enough capacity in the educational system to train so many workers.Megan Woolhouse
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