Alan Clayton-Matthews 2013 Economic Forecast presented to Mass Econ 1/18/13

The Massachusetts Economy:
Patiently Waiting for Worldwide
Growth to Return

Presented to MassEcon

Alan Clayton-Matthews
School of Public Policy and Urban Affairs
Northeastern University
NEEP, MassBenchmarks
January 18, 2013

A steady, slow to moderate national recovery, with
workers bearing the burden.
Consumption, Income, and Wages (Nominal)

14,000.0 7,500.0
Personal Consumption Expenditures Income Wages

13,000.0 7,000.0

12,000.0 6,500.0

11,000.0 6,000.0

10,000.0 5,500.0

9,000.0 5,000.0

8,000.0 4,500.0

7,000.0 4,000.0
Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Alan Clayton-Matthews presentation to MassEcon on 1/18/2013

The state and the nation are growing at about the same
pace.
Growth in Real Product, Massachusetts vs. U.S.
Source: U.S., Bureau of Economic Analysis; Massachusetts: MassBenchmarks
6.0
5.4

5.0

4.3
4.1
Quarterly Growth at Annual Rates (%)

4.0 3.7 3.6

3.1
Projected
3.0 2.8 2.7
2.6 2.7 2.6 2.7
2.4 2.5
2.3 2.2
1.9 2.0 1.92.0
2.0

1.3 1.3

1.0

0.1
0.0

-1.0 -0.8

-2.0
2010 2011 2012 2013

Massachusetts U.S.


Massachusetts fared better this recession than the
nation…
Massachusetts and U.S. Payroll Employment Growth
Source: U.S. Bureau of Labor Statistics
3.0

2.0
Growth From Same Month Prior Year (%)

1.0

0.0

-1.0

-2.0

-3.0

-4.0

-5.0

-6.0
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

MA US


…but it hasn’t always been that way.

Massachusetts and U.S. Payroll Employment Growth
Source: U.S. Bureau of Labor Statistics
8.0
Growth From Same Month Prior Year (%)

6.0

4.0

2.0

0.0

-2.0

-4.0

-6.0

-8.0
Jan-60 Jan-65 Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10

MA US


A preview of the coming payroll employment annual
revisions.
Official and Re-Benchmarked CES-790 Payroll Employment
3,300.0

3,280.0

26.5
3,260.0

3,240.0
Thousands of Jobs

3,220.0

3,200.0

3,180.0

3,160.0

3,140.0
Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Unoffical Re-Benchmarked Official


How the pain of the recession has been shared as told
by unemployment.
Unemployment Rates by Sex, Massachusetts
12 12-Month Moving Average.
Source: Current Population Survey

10
All
Men
Women
8

6

4

2

0
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12


Unemployment Rates by Minority Status, Massachusetts
14
12-Month Moving Average.

12

10

8

6

4
White Non-Hispanic
Non-White or Hispanic

2

0


Unemployment Rates by Age, Massachusetts
18 12-Month Moving Average.

16

Less than 25 Years Old

14 25-54 Years Old
55 or Older

12

10

8

6

4

2

0


Unemployment Rates by Educational Attainment, Massachusetts
25
12-Month Moving Average.

Less Than High School
High School or GED
20 Some College, Less Than a Bachelor's Degree
Bachelor's Degree or Higher

15

10

5

0


Babyboomers are working more these days.
Employment Rates by Age, Massachusetts
90% 12-Month Moving Average.

80%

Less than 25 Years Old
70%
25-54 Years Old
55 or Older

60%

50%

40%

30%


The European crisis has hurt Massachusetts.
Massachusetts Merchandise Exports, Seasonally Adjusted 3-Month
Moving Average
Source: U.S. DOC, WISER, seasonally adjusted by author.
240

220

200
US
Index, 1998=100

180 MA

160

140

120

100

80
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Month


Information technology markets have been weak.
Semiconductor Billings
Source: Semiconductor Industry Association, seasonally adjusted
150.0

140.0

130.0

120.0
2007=100

110.0

100.0

90.0

80.0

70.0

60.0
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

World Europe Japan Americas Asia Pacific


Worldwide Semiconductor Equipment Billings and Bookings
Source: Semiconductor Equipment and Materials International
3,500.0

3,000.0
$ Millions, 3-mo mov. Avg.

2,500.0

2,000.0

1,500.0

1,000.0

500.0

0.0

Billings Bookings


U.S. Investment in Information and Processing Equipment and
Software
Source: U.S. Bureau of Economic Analysis, NIPA Accounts
Nominal growth from prior quarter at annual rate (%)

25.0

20.0 18.1
16.4
15.0
15.0
12.0
10.2 9.5
10.0 7.9 8.4
6.6 6.8
5.3 5.3 5.4 5.8 5.9 5.2 5.8
4.2 3.9 3.6
5.0 2.5 2.2
1.6 1.5 2.1 1.7
1.2 0.5 0.5
0.0
-0.1 -0.6
-1.9 -1.1 -1.2
-5.0 -3.1-3.8

-10.0 -8.2 -8.3

-15.0

-20.0
-21.9
-25.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Housing finally appears to be on the mend in
Massachusetts.
Single Family Home Sales
Source: Mass. Assoc. of Realtors, Seasonally Adjusted by NU
5,000

4,500

4,000

3,500

3,000

2,500

2,000
Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12


Case Shiller Boston Home Price Index
185.00

180.00

175.00

170.00

165.00

160.00

155.00

150.00

145.00

140.00
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Construction will be the last housing indicator to
improve.
Massachusetts Single Family Housing Permits
Number per Month, Seasonally Adjusted
1,600

1,400

1,200

1,000

800

600

400

200
Source: Census Bureau, Seasonally Adjusted by Author
0
Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12


Expect weak growth for the last quarter of this year and the first
quarter of next, followed by moderate acceleration through 2015.

Average Annual Growth
Forecast
11 12 13 14 15-16 Period
Payroll Employment 0.3 1.2 0.8 1.9 1.8 1.4
Wage and Salary Disbursements (WSD) 2.7 5.2 5.6 5.8 5.3 5.3
Personal Income 3.8 5.0 4.6 6.4 5.4 5.2
WSD per Payroll Worker 2.4 4.0 4.7 3.8 3.5 3.8
Population 0.5 0.5 0.5 0.5 0.4 0.5
Income Deflator (PCE U.S.) 2.5 1.9 2.1 2.0 1.6 1.9
Real
Gross State Product 1.8 2.4 2.9 4.0 3.5 3.3
Personal Income 1.2 3.0 2.4 4.3 3.7 3.2
Per Capita Personal Income 0.6 2.4 1.8 3.8 3.3 2.8
WSD per Payroll Worker -0.2 2.0 2.5 1.7 1.8 1.8

Growth in each period is the annualized growth rate over the following quarters:
11: 2010Q4 to 2011Q4
12: 2011Q4 to 2012Q4
13: 2012Q4 to 2013Q4
14: 2013Q4 to 2014Q4
15-16: 2014Q4 to 2016Q4
Forecast Period: 2012Q2 to 2016Q4

Employment growth will be slow until 2014. Growth in 2016 is
restrained by demographics.

Employment Growth, Massachusetts
Source: NEEP, Moody's Analytics
4.0

2.0
Quarterly Growth at Annual Rates

0.0

-2.0

-4.0

-6.0

-8.0
07 08 09 10 11 12 13 14 15 16


Housing is finally coming back.

Massachusetts Median Existing House Price, Seasonally
Adjusted
Sources: National Association of Realtors, Moody's Analytics, NEEP
20
360
10
Percent change at annual rates

340

Thousands of dollars
0

320
-10

300
-20

-30 280

-40 260
03q1 04q1 05q1 06q1 07q1 08q1 09q1 10q1 11q1 12q1 13q1 14q1 15q1 16q1

Appreciation Rate (L) Price (R)


Employment loss impact of the fiscal cliff on Massachusetts
(Current law, with no action by Congress).

•74,000. Moody’s Analytics. Reflects tax and
spending impact of current law versus “middle
ground” scenario of this forecast.
•60,497. Stephen Fuller, George Mason
University. Spending cuts only.
•52,000. MassBenchmarks. Spending cuts only.


The Massachusetts economy has been characterized by
periods of higher productivity growth. Will that continue?
Productivity Growth, Centered 5-Year Moving Average
4.0%

3.5%

3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%
55 60 65 70 75 80 85 90 95 00 05 10 15
-0.5%
MA US


A longer-term view of average productivity growth.
Productivity Growth, Centered 21-Year Moving Average
3.0%

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%
55 60 65 70 75 80 85 90 95 00 05 10 15
MA US


Alan Clayton-Matthews 2013 Economic Forecast presented to Mass Econ 1/18/13

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