Mass. economy improving, but worries persist, economists say

An improving state economy has been lifted by increased consumer spending, rising wages and salaries, and falling unemployment, according to a group of local economists.

But the economists, whose consensus opinion was published Tuesday, in MassBenchmarks, the University of Massachusetts’ economic journal, said several factors warrant caution in the outlook. They include a stalled housing market beyond Greater Boston and weak levels of business investment, a key driver of the state’s economy.

Massachusetts has high concentration of businesses that sell equipment and services to other companies. In addition, the economists said, the federal spending cutbacks in recent years also appear to be taking a toll on hiring in the state’s technology sector, which wins a high share of defense contracts and federal research grants.


“While the negative impact of [budget cuts] is moderating, it does appear to be having an impact on the Commonwealth's vaunted ‘innovation economy,’ “they said. That “is likely part of the reason why state employment in research and development sectors has been stagnant as of late.”

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Massachusetts’ economy generally recovered from the last recession more quickly than the nation as a whole, and unemployment here declined to 6 percent in April, compared to the US average of 6.3 percent. State officials will release the May unemployment statistics on June 19.

The economists making the assessment of the state economy are members of the editorial board of MassBenchmarks journal. The board includes economists from the Federal Reserve Bank of Boston, Federal Deposit Insurance Corporation, University of Massachusetts, Northeastern University, State Street Corp., and the Massachusetts Institute of Technology.

Their consensus found that the overall pace of global trade remains “weak,” but said Europe is slowly growing again and significant growth in China is also projected. Both regions are important trading partners for the state.

The state’s rebound in single-family housing construction has stalled, the economists said, which coincides with low levels of household formation, which remain below long-term averages. The weak economy has left many young workers unemployed and underemployed, with some living with parents and others putting off starting families.


That is a “troubling trend that has been in evidence since the beginning of the recession and one that may help to explain the lack of sustained growth in single family housing construction and consumer durables” such as large appliances and furniture, the economists said.

The economists also cited the continued effects of long-term unemployment on the state economy, citing high numbers of people who have been unemployed for more than six months.

“It is now very clear that the longer a person is out of work the more diminished their prospects are for finding a job,” they said.

Megan Woolhouse can be reached at Follow her on Twitter @megwoolhouse.