Mass. economy slows amid ‘stagnant employment growth,’ report says

In the fourth quarter of 2024, the state’s economy expanded at a slower pace than the country as a whole

A woman passed a hiring sign in Attleboro in 2022.Steven Senne

The Massachusetts economy is growing, but there are signs of some softening.

In the fourth quarter of 2024, the state’s economy expanded at an annual rate of 1.1 percent, according to MassBenchmarks, a research collaboration between the University of Massachusetts Donahue Institute and the Federal Reserve Bank of Boston.

That lagged the national pace of 2.3 percent growth, the report said.

Meanwhile, the US Bureau of Economic Analysis said that in the third quarter, Massachusetts saw its economy grow at a 2.3 percent annual rate, compared with the US expansion of 3.1 percent.

“The Massachusetts economy appears to have shifted into a lower gear, with stagnant employment growth, rising unemployment, and tepid spending on items subject to regular sales taxes,” noted Alan Clayton-Matthews, the economist behind the report. “This is in contrast to the US economy, which may be decelerating, but is still growing at a moderate pace.”

Hiring in the state fell at a 0.3 percent annualized rate during the period, compared with a 0.7 percent growth seen in the third quarter. Meanwhile at the national level, employment jumped 1.2 percent in the last three months of the year from a 1.1 percent growth seen in the third quarter.

The unemployment rate hit 4.1 percent in December in Massachusetts, the same as the US level, but that has ticked up from 3.2 percent at the same time in 2023.

“This is consistent with a weaker labor market here than in the nation, since Massachusetts typically has a lower unemployment rate than the US due to its more highly educated workforce,” Clayton-Matthews said.

The number of unemployed residents in the state rose by nearly 13,000 in the fourth quarter, after increasing by a little more than 25,000 in the prior three months, which accounted for the more than a percentage point jump in the unemployment rate, the report said.

The uptick in the jobless rate may be due to an increase in the labor force and not because of a rise in layoffs.

Residents who are in the job market grew by 1.6 percent annualized in the quarter after a nearly 6 percent increase in the third quarter, the report pointed out.

While the data on this segment of the labor market can be “noisy” as a result of the small sample size for the household survey in Massachusetts, Clayton-Matthews noted, “it is clear that jobs are becoming more difficult to find.”

Spending on items subject to the state’s sales tax dropped 2.3 percent in the quarter after it soared by nearly 10 percent annualized in the third quarter of 2023.

Massachusetts spending, grew a “tepid” 2.7 percent in the fourth quarter of 2024 compared with the same time the previous year, helped by a nearly 24 percent increase in the buying of cars. The rise in automobile purchases could have been fueled by some residents preempting the introduction of tariffs by the Trump administration, which economists say could lead to a rise in prices.

Inflation in the Boston metro area was “subdued” in the third and fourth quarters — prices jumped 1 percent on a yearly basis and declined by 0.2 percent in the third quarter.