Bay State economy may be flagging

Panel calls for further stimulus as data show ‘clear signs’ of slowing

The Massachusetts economy, like the nation’s, is showing “clear signs of slowing,’’ and unemployment remains “troublingly high,’’ according to a leading group of economists who called for additional federal stimulus to support the sputtering recovery.

Economists said the state’s high-tech industry, which has helped Massachusetts generate jobs and recover more quickly from the 2008 recession than the nation, will suffer in coming months as global demand for its products and services flatten, according to the analysis, released yesterday by the University of Massachusetts and published in the journal MassBenchmarks.

The technology industry has been a torchbearer for Massachusetts economy, but as the outlook for the global economy has deteriorated, businesses are slowing spending on semiconductors, test equipment machinery, and other technology products in which Massachusetts firms specialize.


The economists said the answer to the economy’s struggles is not government budget cutting. Instead they called for fiscal stimulus - more federal spending, tax cuts, or both - to help right the economy.

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“It is clear that the economy is not going to heal itself, and that fiscal austerity in the short run will only prolong economic suffering,’’ the summary said. “The economically prudent policy - more fiscal stimulus in the short run coupled with deficit reduction that takes effect as the economy recovers - can be achieved only if we reach political consensus.’’

The group - which includes 17 economists from UMass, Boston University, Northeastern University, Harvard, MIT, the Federal Reserve Bank of Boston, and Federal Deposit Insurance Corp. - said interest rate reductions and other steps taken by the Federal Reserve have “reached the limit of their effectiveness,’’ and called on Congress and the Obama administration to take additional measures.

Michael Goodman, a public policy professor at the University of Massachusetts Dartmouth and an editor of MassBenchmarks, said the board does not typically offer policy recommendations, but did so because there was strong consensus that government actions are necessary because of the gloomy outlook in the United States and Europe.

“We’re describing a considerably weakened and extraordinarily difficult labor market,’’ Goodman said. “There are questions about whether our political institutions are up to doing what needs to be done.’’


A bipartisan congressional group, the so-called supercommittee, began holding hearings earlier this month to find ways to slow the growth of the federal debt by $1.5 trillion to $4 trillion. Proposed spending reductions have focused on defense and scientific research funding, two areas important to the state’s economic health. With its leading universities, hospitals, and technology firms, Massachusetts receives a large share of these federal funds.

The economists expressed concern that proposed cutbacks in federal spending could disproportionately affect Massachusetts, adding to their bleak assessment about growth.

Fears about the European debt crisis and the possibility that problems abroad could spread quickly across the Atlantic and to Massachusetts “with hard-to-predict consequences’’ also factored heavily into the analysis.

The Massachusetts economy has already showed signs of slowdown, as employers in August cut jobs for the first time in three months, the state Executive Office of Labor and Workforce Development reported recently.

The state’s unemployment rate of 7.4 percent for August was lower than the nation’s 9.1 percent rate the same month, but the group concluded that state levels remain “troublingly high.’’ The typical duration of unemployment reached 35 weeks in 2011, the highest in state history, according to the analysis, affecting workers of all ages.


The state unemployment rate also does not include more than 200,000 Massachusetts workers who are employed part-time but want full-time work, the UMass analysis said, referring to these workers as the state’s “hidden unemployed.’’

Megan Woolhouse can be reached at