MassBenchmarks: Fed spending cuts could cause job losses

MASSBENCHMARKS, University of Massachusetts Donahue Institute, estimated that federal spending cuts could result in 52,993 job losses in 2013 for the Bay State.
Posted 2/23/12

HADLEY, Mass. – “Planned federal budget cuts loom as a Damoclean sword over the state’s economy,” the Feb. 22 MassBenchmarks report said, while estimating potential job losses for the Bay State at 52,993 in 2013.

The report, published by the University of Massachusetts Donahue Institute, analyzes the potential impact of the federal budget cuts set to take effect in 2013, reducing spending by $1.2 trillion over the next 10 years.

“A reduction in state employment of 52,000 is over 20 percent larger than the entire net increase in employment the Commonwealth experienced during 2011 when net job growth was an estimated 40,500,” said Martin Romitti, MassBenchmarks managing editor.

Massachusetts benefits “greatly” from direct federal spending – nearly $84 billion in the most recently reported fiscal year, 2010.

Of those funds, nearly 40 percent go to Massachusetts residents in Social Security and other payments; federal workers there earn $4.5 billion in salaries; the state is the fifth-highest recipient of the Department of Defense expenditures at $4.5 billion; and about $7.7 billion in federal funding goes to research and development activities in the Bay State.

By sector, the most significant losses would be in: professional and technical services, with nearly 10,000 jobs cut; health care and social assistance, with more than 6,000 jobs lost; and the federal civilian and military sector would see 10,000 job losses, the report estimated.

“These are the sectors that have allowed the Massachusetts economy to outperform in the nation in recent years,” the report said, while claiming that the state’s high-technology sector wouldn’t be able to continue leading the way in inventions and innovations, much of which was made possible with federal funding of research and development.

“These clusters require a critical mass of activity to thrive, and large federal budget cuts threaten this diverse community of firms,” said Robert Nakosteen, MassBenchmarks executive editor and professor of economics at the University of Massachusetts Amherst.

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