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Mass., US show unexpected economic growth

A covered vehicle at a paint shop at a Chrysler assembly plant in Sterling Heights, Mich.AP

The state and national economies grew faster than expected over the summer, due to an improving housing market and wage and salary growth, according to a report by the University of Massachusetts and the Federal Reserve Bank of Boston.

The state economy grew at a 3.5 percent annual rate from July through September, according to the report. The national economy expanded at 2.8 percent rate during the same period, the US Commerce Department reported Thursday.

“It’s just underlying, pent-up demand for housing and other things that consumers and businesses want and need to buy, which is kind of the story of recoveries,” said Northeastern University economics professor Alan Clayton-Matthews, one of the report’s authors.


Economists, however, expect growth to slow next quarter as a result of the 16-day partial shutdown of the federal government last month.

The shutdown also delayed the release of state employment statistics for September, which are collected by the US Labor Department and would normally be used in estimating of overall growth of the Massachusetts economy. State officials will release September employment and unemployment numbers for Massachusetts on Nov. 22 along with the October statistics.

Clayton-Matthews said he used available federal data to estimate the state’s September employment gains at about 1,000 jobs and unemployment rate at 7.1 percent, just below the 7.2 percent rate in August.

Employment and unemployment are among several indicators the local economists use to estimate the state’s quarterly economic growth. Other factors include state sales tax collections, a gauge of consumer spending; payroll withholding taxes, a measure of wage and income growth; consumer confidence; and the stock performance of Massachusetts companies.

“The improvement in the third quarter is due to slow, but better, job growth, rising wage and salary incomes, and a higher rate of spending on items subject to sales taxes,” the report said. “A recovering housing market and consumer and business spending are driving up economic growth.”


Those improvements helped offset the economic drag from automatic budget cuts known as sequestration and higher federal payroll taxes that went into effect earlier this year.

The report, published in the UMass economics journal MassBenchmarks, also revised the state’s rate of economic growth between April and June, to a 1.7 percent annual rate, up from previous estimate of less than 1 percent.

Michael Goodman, co-editor of MassBenchmarks and a professor of public policy at the University of Massachusetts Dartmouth, said consumers and businesses are spending more, aided by an improving housing market. But government austerity, in the form of extensive spending cuts enacted earlier this year, continues to take a toll.

“There were definitely some bright spots,” Goodman said. But “we have to be cautious how much we read into any one data point.”

Megan Woolhouse can be reached at megan. woolhouse@globe.com.