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Report says state’s economy will slow

2012 job losses seen, followed by recovery

Massachusetts’ economy is expected to slow dramatically and the state is unlikely to reach prerecession employment levels until mid-2014, according to a forecast to be released today by the New England Economic Partnership.

The darkening projections by the nonprofit forecasting group come on the heels of a state employment report that pleasantly surprised several economists because it showed solid job gains last month, nearly 11,000 spread across most sectors.

The unemployment rate held steady at 7.3 percent, well below the national rate of 9 percent, the state’s Executive Office of Labor and Workforce Development reported yesterday.

Northeastern University economist Alan Clayton-Matthews, who prepared the forecast for Massachusetts, said the monthly report was a relatively good one, but it does not significantly change his predictions for slowing growth and job losses through the first three months of 2012.

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Although Massachusetts’ economy recovered faster than the nation’s, largely due to the strength of the state’s high-tech industry, the global economy has contracted and demand for the state’s high-tech products is expected to decline significantly.

“That phase of the expansion is now over,’’ Clayton-Matthews wrote in his forecast. “The state’s economic growth is decelerating sharply.’’

The state will avoid a recession, according to the forecast, but the labor market will be weak enough to cause the unemployment rate to rise by about a half percentage point before the second half of 2013, then an economic recovery will kick into high gear, Clayton-Matthews said.

Massachusetts has lost nearly 140,000 jobs since its peak prerecession employment in early 2008, Clayton-Matthews said, and has gained back 76,000, or a little more than half. The state will not regain the rest of the jobs until the second half of 2014, according to the forecast.

Business confidence appears to be slipping in the state, largely due to bleak or uncertain national and international global economic conditions, said Andre Mayer, vice president for research at Associated Industries of Massachusetts, a trade group. The group’s Business Confidence Index, a survey of Massachusetts employers, has declined five times in six months and dropped two points to 46.4 earlier this month. Readings under 50 mean companies are pessimistic about business conditions.

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Mayer said this month’s job report showed job gains, but such growth has been inconsistent. He questioned whether it could be sustained.

“If we can keep creating 10,000 to 11,000 jobs a month we’ll make real progress,’’ he said. “But so far we haven’t been able to.’’

The New England Economic Partnership also downgraded the regional forecast it issued last spring, calling the New England economy “stagnant.’’ The group said the turnaround it expected next year or in 2013 will be delayed until 2015.

“In the US, like the region, you have low consumer confidence due to a very weak housing market,’’ said a University of New Hampshire management professor, Ross Gittell, who compiled the regional report. “Government is cutting back at all levels and people’s economic resilience is breaking down because this has been the situation for quite a while and we’re still not recovering.’’

The New England economy lost 343,000 jobs in the recession and has recovered just 101,000, or less than one-third, Gittell said. The six-state region is not expected to return to prerecession employment levels until mid-2015.

Based on unemployment rates and overall economic activity, Gittell said New England’s recovery stacks up “a little better than the national average,’’ although global and national economic malaise looms over all the predictions, he said.

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So far this year, Massachusetts has added more than 45,000 jobs. Last month, job gains were spread across eight of the 10 private employment sectors, according to the Executive Office of Labor and Workforce Development. Education and health services added 4,700 jobs in October, and the financial activities sector grew by 1,900 jobs. Construction and professional and business services each gained 1,700 jobs last month.

On the downside, leisure and hospitality lost 2,700 jobs in October.

Michael Goodman, professor of public policy at the University of Massachusetts Dartmouth, said net job gains were surprising, in light of uncertainty about turmoil in Europe and congressional actions to reduce the federal deficit, two issues weighing on Massachusetts businesses. The state’s defense contractors, hospitals, and research universities could bear the brunt of budget cuts.

“This report suggests employers are plugging along for the time being,’’ he said. Any “positive job growth in this environment is undeniably a good thing.’’


Megan Woolhouse can be reached at mwoolhouse@globe.com.