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The state’s leading economists expect the Massachusetts economy to grow at a moderate pace this year, but warn that the low unemployment rate could create worker shortages in certain fields, including construction and skilled manufacturing.
“The Massachusetts economy is fast approaching full capacity,” the editorial board of the economic journal MassBenchmarks — made up of economists from the state’s colleges and universities along with the Federal Reserve Bank of Boston -- said in its 2017 forecast.
“As the labor market for qualified workers becomes ever tighter, the state faces the challenge of helping low- to moderately-skilled unemployed workers slot in to available job openings.”
The unemployment rate in November in Massachusetts dropped to 2.9 percent, the lowest since January 2001. The state’s economy likely grew at a rate of 2 percent in 2016, according to Alan Clayton-Matthews, a Northeastern University economics professor and a senior contributing editor of MassBenchmarks.
Clayton-Matthews anticipates that the state’s economy will grow at nearly the same pace in 2017.
“It has to be moderate [growth] when the unemployment rate is so low,” Clayton-Matthews said. “It’s hard to see where the extra workers are going to come from.”
The board released the forecast Wednesday and acknowledged that much remained uncertain under a Trump presidency with a Republican-controlled Congress. Changes in national economic policy, along with weak global growth, could remain a challenge for the Massachusetts economy.
The Massachusetts defense industry, which includes employers such as Waltham-based Raytheon, could benefit if the new administration boosts military spending, the economists said. Raytheon’s share price surged immediately after the November election and has since dipped slightly. It was trading at $146.12 per share on Wednesday afternoon, a 7 percent increase from $136.51 per share on Election Day.
But the outlook is muddier for the state’s health care sector, which has benefitted from and been influenced by the Affordable Care Act. If Congress repeals or replaces the health care law, everyone from pharmaceutical researchers to medical manufacturers could be affected, according to the economists.
“Until the policy priorities of the new administration become clearer later this year, state policymakers will be forced to contend with an uncertain policy environment in addition to a sluggish global economy,” the economists said.
Still, the Massachusetts economy remains well-positioned to weather the changing politics, the economists said.
State policymakers will have to address the shrinking workforce and ensure that all workers are participating in the recovery, the economists said. The unemployment ratse in former industrial communities, such as Lawrence and Fall River, have fallen since the recession but remain higher than in Boston. And the jobless rates for workers who only completed high school are considerably higher than for those with a college degree, the economists said.