The Massachusetts economy, which had been expanding faster than the national average, thanks largely to the state’s strengths in technology and medical research, is now barely growing at all because of economic problems around the world, according to a group of nearly a dozen local economists.
The MassBenchmarks panel reported Thursday that the state’s economy has slipped into “lower gear” because of the European debt crisis, slower growth in China, reduced US business investment in technology, and growing uncertainty in Washington over the future of taxes and budget spending.
Worse, the report suggested, the slow growth will probably continue for the foreseeable future — mirroring a slowdown in the national economy — though the panel did not predict the state will slide back into recession.
“It’s a little ugly,” said Northeastern University economist Alan Clayton-Matthews, senior contributing editor for MassBenchmarks, who predicted the Massachusetts economy would grow at a meager 1 percent in the third quarter of this year. “We are no longer growing faster than the nation.”
Moreover, the panel warned, the technology industry, long a bright spot in Massachusetts economy, is no longer immune from the slowdown. Global demand for demand for computer chips and other tech products is weakening. And in Massachusetts, exports of some technology products have declined, leading some economists to fear employment in the sector will follow.
One provider of equipment for computer-chip makers, Brooks Automation Inc., of Chelmsford, recently disclosed it would eliminate 150 jobs worldwide, or one-tenth of its workforce, by the end of the year to reduce costs and boost profits. Applied Materials Inc, another major equipment maker, recently told the state it would cut 55 jobs in Gloucester this month. The company needs to align its workforce with “business conditions,” a spokesman said Thursday.
And last week, the state government reported the private sector in Massachusetts had shed roughly 8,200 jobs in August, the biggest loss in more than three years.
The unemployment rate rose for the second straight quarter, to 6.3 percent.
That, however, was still below the national rate 8.1 percent.
On Thursday, the Commerce Department said the nation’s economy grew just 1.3 percent during the second quarter, less than the 1.7 percent rate first reported and far less than is needed to bring down unemployment.
But in a separate report Thursday, the Labor Department said fewer people filed new unemployment claims last week than in prior weeks, a bit of bright news that helped push stocks up moderately on Thursday. The Dow Jones industrial average gained 72.46 points, or 0.54 percent, to close at 13,485.97.
MassBenchmarks plans to release a new quarterly estimate for economic growth in the state next month.
Robert Nakosteen, an economics professor at the University of Massachusetts Amherst and editor of the MassBenchmarks journal, said he expects the economy to be hit hard by slower growth in China and the financial turmoil in Europe, which alone accounts for roughly 40 percent of exports fromMassachusettsbusinesses.
“Two of our main trading partners are in great difficulty,” he said.
Another factor weighing on business leaders is the political uncertainty in Washington due to the upcoming November elections and the gridlock in Congress.
Economists said that corporate leaders are increasingly wary of making investments in their businesses with the nation’s precious fiscal condition so up in the air; Massachusetts could be slammed, they warn, if Republicans and Democrats can’t find a way to compromise before significant budget cuts and tax increases automatically go into effect at the end of this year — the so-called fiscal cliff.
In addition, economists believe, it could take years to repair the damage from the recent financial crisis and recession, which eliminated millions of jobs and sank many financial institutions.
For now, though, economists say there are no indications that either the state or the country is sliding back into a recession.
Moreover, there are other parts of the Massachusetts economy —
“It’s neither bleak nor terrible,” Nakosteen said. “We are bouncing along the bottom with the rest of the country.”