MassBenchmarks: Mass. economy will continue moderate growth

MASSBENCHMARKS said Massachusetts real gross domestic product grew at an annual rate of 3 percent in the second quarter. / COURTESY MASSBENCHMARKS
MASSBENCHMARKS said Massachusetts real gross domestic product grew at an annual rate of 3 percent in the second quarter. / COURTESY MASSBENCHMARKS

BOSTON – The Massachusetts economy will continue to expand over the next six months “at a moderate pace,” but the tightening labor market and slower worldwide economic growth are expected to restrain growth, according to the MassBenchmarks Current Economic Index.

MassBenchmarks, a journal of the Massachusetts economy, is published by the UMass Donahue Institute in collaboration with the Federal Reserve Bank of Boston.
The index is predicting that the state economy will grow at a 2.9 percent rate in the third quarter, and a 2.2 percent rate in the fourth quarter.
“China’s rapid pace of economic growth has decelerated, Japan’s economy is growing very slowly, and the European economy remains sluggish. Adding risks to the downside is volatility in global financial markets. Although turmoil in stock markets in reaction to falling commodity prices – and more recently, the U.K.’s vote to exit the European Union – has calmed, risks related to the potential impact of weak global demand on corporate profits remain,” the index stated.
Massachusetts real gross domestic product outpaced the U.S. GDP in the second quarter at an annual rate of 3 percent compared with 1.2 percent, the index said.

The index said Massachusetts employment and earnings grew strongly in the second quarter, while the jobless rate fell. Payroll employment expanded at a 3 percent annual rate in the second quarter, an increase from 2 percent in the first quarter. In addition, total employment in the second quarter was 1.9 percent higher compared with last year. Year over year, wage and salary income was 3.7 percent higher than in second quarter of 2015.
The state’s unemployment rate was 4.2 percent in June, a drop from 4.4 percent in March, and 4.9 percent in June 2015. The U.S. unemployment rate in June was 4.9 percent.
The Massachusetts rate is now lower than the pre-recession low of 4.6 percent in 2007, and is at the lowest level observed in nearly 15 years (the rate in September of 2001 was 4.1 percent), according to MassBenchmarks.
A broader unemployment measure, which includes those who are working part-time but want full-time work as well as those who are marginally attached to the labor force, remains above pre-recession levels, however.
MassBenchmarks estimates that this unemployment rate fell to 9 percent in June compared with 9.9 percent in June 2015. The U.S. rate in June was 9.6 percent. Prior to the 2007 recession, this unemployment rate fell to 7.1 percent in Massachusetts and 8 percent in the United States.
Consumer and business spending on items subject to the state regular sales tax posted another quarter of slower-than-average growth. Spending rose modestly during the second quarter, however. Second-quarter consumer spending grew at an 0.8 percent rate, following a first-quarter decrease of 6.1 percent.
“Year over year, spending was flat, registering only 0.1 percent higher in the second quarter of 2016 than during the same period in 2015,” Alan Clayton-Matthews, MassBenchmarks senior contributing editor and associate professor of economics and public policy at Northeastern University, said in a statement.
“This relatively poor performance was driven in part by a marked reduction in automobile purchases, which declined at a 6.4 percent rate in the second quarter of 2016. Notably, non-automobile spending increased 2.2 percent in the second quarter,” he added.

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