Mass. economy grows due to increased employment

An economic report released Thursday by MassBenchmarks, an economic journal at the University of Massachusetts Donahue Institute, shows the Commonwealth’s economy has expanded significantly due to employment growth, rising incomes and increased consumer spending.

The gross state product grew by approximately 5.5 percent in the last quarter of last year according to the report. MassBenchmarks compiles this information through a series of data points including state payroll, employment, unemployment rate and state withholding taxes, which gives an estimate of wage and salary income, state regular sales and motor vehicle sales tax.

“The whole country now is in a recovery phase, the recovery seems to be picking up steam, and it was good in Massachusetts in the fourth quarter,” said Dr. Alan Clayton-Matthews, senior contributing editor at Benchmarks and professor of economics at Northeastern University. “Massachusetts had a stronger recovery than the United States as whole. Its strength is probably related to the goods and services that it produces.”

Clayton-Matthews said some of the innovations that help keep Massachusetts at the forefront of America’s economy are information and technology products, medical science and biotechnology products, and high-knowledge sectors such as consulting, engineering, software computer design and research and development. He also had suggestions for how to foster more economic expansion.

“Like virtually every state government, [Massachusetts] had budgetary problems during this recession,” he said. “The state had to go into its rainy day fund to help supplement the budget and a lot of areas were cut. Now, the state’s budget is not much above what it was before the recession began.”

Most states could benefit from increased public investments, especially in infrastructure and in boosting public K-12 and pre-K education to make the level of education higher quality and more accessible, Clayton-Matthews said.

In addition to analyzing the state of the current Massachusetts economy, MassBenchmarks uses state consumer confidence, state initial employment claims, statewide stock index, national interest rate, construction employment and motor vehicle sales spending to predict future economic changes.

“We predict continued strong growth, about 4.7 percent rate of growth, over the first half of 2014,” Clayton-Matthews said.

Bruce Watson, senior lecturer of economics at Boston University, explained how all three factors of economic growth, employment rates, increased incomes and consumer spending, all rely on a good job market.

“The consumer market, consumer’s ability to spend, depends on employment,” he said. “Massachusetts is really fortunate because even in the depths of the recession, our unemployment was nowhere near what it was nationally. It’s largely a function of the presence of so many universities and colleges, so much in the way of biotechnology, high tech in general … that makes a huge difference to employment, which in turn makes a big difference to consumer spending.”

Watson also said having the state invest and focus on the science, medical and educational fields is vital to have a resilient job market, which in turn fuels the commercial market.

“The biggest impact in Massachusetts, which kind of immunizes it against the nation-wide downturn, was the emphasis here on technology jobs and jobs related to colleges and universities,” he said. “Massachusetts is ahead of the curve because of the prevalence and the availability of so many high tech jobs.”

Some residents said they agree wholeheartedly that having a high employment rate is the main factor in keeping the state’s economy afloat.

“Without well-paying jobs, people can’t fund the other parts of the economy like tourism, retail, restaurants and other things,” said Daniel Johnson, 46, of Back Bay. “Once your job market goes downhill, everything does because the people suffer and the people are of course the key to a growing economy.”

Gregory Brown, 61, of Boston, said unemployment had the biggest strain on people during the recession.

“The biggest impact that most people felt during the recession was lay-offs and difficulty finding new jobs,” he said. “Boosting this part of the economy will lift everything else up with it, especially if the jobs are in innovative sectors.”

Grace Omotunde, 24, of Allston, also said a city like Boston relies on people that are able to spend money.

“This may not apply to the whole state, but you can see just by using Boston as an example that every part of the economy involves people spending money on things,” she said. “Without that money to spend, the basis of that would pretty much collapse.”

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