What’s UP with the Massachusetts Economy?
MAPC Fall Council MeetingCrowne Plaza HotelNatick, Massachusetts
October 26, 2010
Barry Bluestone
The Economic Picture
The U.S. Context
-800-700-600-500-400-300-200-100
0100200300
07 08 09 10
A Fragile U.S.Economic Recovery…Monthly payroll employment change, excl. Census Jobs
Consistent monthly job growth of over 150K will be necessary to reduce unemployment
-2
-1
0
1
2
3
4
5
08 09 10 11
…As Federal Fiscal Stimulus Fades
Source: Moody’s Analytics
Stimulus Contribution to real GDP growth, %
Tax rebate checks
Recovery Act
Cash for Clunkers
Housing tax credit
-30
-20
-10
0
10
20
30
40
50
-5-4-3-2-10123456
70 75 80 85 90 95 00 05
Profits Surge and Jobs Should Follow…
Sources: BLS, BEA
Profit growth,lagged 3 quarters (R)
Job growth,% change year-over year (L)
0
20
40
60
80
100
120
1790 1815 1840 1865 1890 1915 1940 1965 1990 2015Sources: Treasury, Moody’s Analytics
The average federal debt-to-GDP ratio since WWII is 40%
Worries over Federal DebtFederal debt-to-GDP ratio
The Economic Picture
Massachusetts Rebound
Massachusetts
The Massachusetts economy is growing faster than that of the U.S.
-0.7
4.7
3.5
2.5
-0.5
2.0
-3.5
-7.3
-0.6
-3.3
1.3
4.6
6.1
5.4
0.9
3.2
2.32.9
-0.7
0.6
-4.0
-6.8
-4.9
-0.7
1.6
5.0
3.7
1.7
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2007 2008 2009 2010
Qu
art
erl
y G
row
th a
t An
nu
al R
ate
s
Growth in Real Product, Massachusetts Current Economic Index vs. U.S. GDP
MA US
Source: U.S., Bureau of Economic Analysis; Massachusetts, Massachusetts Benchmarks
0.9000
0.9200
0.9400
0.9600
0.9800
1.0000
1.0200
1.0400
Economic Activity Index and Employment Index for Massachusetts and U.S. - 1990 Recession
U.S. Economic Activity Index
U.S. Employment Index
+ 2.7%
- 2.3%
- 8.0%
0%
Massachusetts Economic Activity Index
Massachusetts Employment Index
0.9400
0.9500
0.9600
0.9700
0.9800
0.9900
1.0000
1.0100
1.0200
Economic Activity Index and Employment Index for Massachusetts and U.S. - 2001 Recession
U.S. Economic Activity Index
U.S Employment Index
Massachusetts Economic Activity Index
Massachusetts Employment Index
+ 1.0%
- 2.0%
- 2.5%
- 5.3%
0.9300
0.9400
0.9500
0.9600
0.9700
0.9800
0.9900
1.0000
1.0100
Economic Activity Index and Employment Index for Massachusetts and U.S. - 2007 Recession
Massachusetts Economic Activity Index
U.S Economic Activity Index
Massachusetts Employment Index
U.S Employment Index
- 1.6%
- 3.2%
- 4.5%
- 5.5%
1.2%
6.4%
0.7% 0.7%
0.4%
1.6%
2.4%
0.8%
1.9%
1.5%
-0.4%
0.5%
-0.6%
1.0%
0.5%
-1.2%
-0.8%
1.4% 1.2% 1.3%
0.9%
-1.1%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Total Non-Farm Construction Manufacturing Trade, Transportation,
and Utilities
Information Financial Activities
Professional and Business Services
Education and Health Services
Leisure and Hospitality
Other Services Government
Percentage Change in Employment - January 2010 - September 2010 Massachusetts vs. U.S.
Massachusetts United States
However, metro areas outside of Boston are still in recession,
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
Jan-08 Jan-09 Jan-10
Gro
wth
Fro
m S
am
e M
on
th P
rio
r Y
ea
r (%
)
Massachusetts and U.S. Payroll Employment Growth
MA US Springfield, NSA
Source: U.S. Bureau of Labor Statistics
The Greater Boston Housing Market
6,376 5,604 5,531 5,290
6,222 6,552 4,910
4,139 2,682 2,507 3,000
660 642 709 1,067
985 991
1,180
636
376 278 300
2,527 2,683 2,318
4,763
5,506
7,564
6,242
4,997
3,471
1,929 2,200
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (est.)
Fig 2.1 Building Permits in Greater Boston by Housing Type, 2000-2010
Units in Single-Family Structures Units in 2-4 Unit Structures Units in 5+ Unit Structures
The Foreclosure Crisis
The Demographic Picture
33,292 33,347 31,78529,041
26,51530,285
27,01423,551 24,518
-22,892
-39,506
-48,514
-61,980-60,053
-49,528
-35,121
-18,675
3,614
10,400
-6,159
-16,729
-32,939 -33,538
-19,243
-8,107
4,876
28,132
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
Net Migration to and from Massachusetts, 2000-2009
Foreign Migration Internal Migration Net Migration
New Hampshire +20.4%Vermont +17.0%Maine +13.2%Rhode Island +11.3%Massachusetts + 9.1%Connecticut + 8.0%
U.S. +14.8%
U.S.: 99%Mass: 135%
Net Increase in Households: 222,700
Under 55: -77,70055+: +300,371
Impact on State and Local Government
Will the aging of the population have a major adverse effect on state and local revenue?
Will the aging of the population lead to an increased need for state and local public services
Will the aging of the public employee workforce create a drain on state and local budgets?
The “Third Civil War” 19th Century Civil War
North-South: Slavery 20th Century Civil War
North-South: Where MFG takes place 21st Century Civil War
Which regions, states, and cities and towns will be able to retain and attract young working families to fill in the labor force and revenue gap?
What factors are most important in winning the 3rd Civil War?