Decline in state economy slowing; performance better than U.S. picture

Published on Wednesday, April 29, 2009

Economic activity in Massachusetts is estimated to have declined at a 4.2 percent annualized rate in the first quarter of 2009, according to the MassBenchmarks Current Economic Index. The US Bureau of Economic Analysis reported today that the national economy declined at an estimated annual rate of 6.1 percent during the same period.

The MassBenchmarks Current Economic Index for March was 164.8, down 3.4 percent from February (at annual rates), and down 2.8 percent from March of last year. The current index is normalized to 100 in July 1987 and is calibrated to grow at the same rate as Massachusetts real gross domestic product over the 1978-2003 period.


The MassBenchmarks Leading Economic Index for March was minus 2.8 percent, and the three-month average for January through March was minus 3.0 percent. The leading index is a forecast of growth in the current index over the next six months, expressed at an annual rate. Thus, it indicates that the economy is expected to contract at an annualized rate of 2.8 percent over the next six months (through September, 2009).

Real Massachusetts gross state product is projected to decline at a 3.1 percent annualized rate in the second quarter of this year, and at a 2.8 percent annualized rate in the third quarter. These projections assume a monthly pace of decline at an annualized rate of 2.8 percent in the April through September period, as forecast by the MassBenchmarks Leading Economic Index.

“The job market continues to be devastated by layoffs as businesses are still adjusting to lower demand and overstocked inventories,” noted Alan Clayton-Matthews, MassBenchmarks co-editor and UMass Boston professor. “The pace of job loss in Massachusetts in the first quarter was 5.2 percent (at annual rates), even faster than the prior quarter’s rate of job loss of 4.3 percent,” Clayton-Matthews added.

The technology sector is suffering too, in this broad-based national and worldwide recession, as evidenced by declines in state, national, and worldwide measures of production and sales. Massachusetts professional, scientific, and technical services employment fell at an 11.0 percent annual rate in the first quarter of this year.

There is very little good economic news in these indicators, but there is some. Employment in education and health services in the state is still growing, at an annualized rate of 1.6 percent in the first quarter. Over the past several weeks, stock prices have rallied. The Bloomberg stock price index for Massachusetts rose 26 percent between March 9th and April 22nd. Finally, the current and leading indexes suggest that the rate of the state’s economic decline is slowing, and will continue to slow through the summer. There will be a bottom, and perhaps it will be reached by the end of this year or early next year.

MassBenchmarks releases are published by the University of Massachusetts Donahue Institute in cooperation with the Federal Reserve Bank of Boston. The Donahue Institute is the public service, outreach, and economic development unit of the University of Massachusetts Office of the President. The current and leading economic indexes are complied and analyzed by Dr. Clayton-Matthews and released monthly by the UMass Donahue Institute.

For a full breakdown of the latest indexes, click here.

A comprehensive analysis of the state of the Massachusetts economy can be found in the most recent issue of MassBenchmarks.