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BHI Forecast: Massachusetts economy set to grow 2.9% in 2011 and 2.8% in 2012

(BOSTON) The state’s economy is expected to grow by 2.9% in 2011 and 2.8% in 2012 according to a forecast released today by the Beacon Hill Institute at Suffolk University. Meanwhile, as part of the forecast, the Institute estimates that the state will have added 84,000 jobs by the end of 2011. Job growth will continue at a moderate pace into 2012 with 65,000 jobs coming on line.

The employment increases will boost salaries and wages by a modest 3.2% in 2011, accelerating to 3.6% in 2012. This wage and salary growth would be on par with the recovery coming out of the dot.com recession in 2001, but significantly slower than the recovery from the 1990-1991 recession.

The primary indicator is a measurement of State Gross Domestic Product which tracks the economic output within a state. BHI’s forecasting models show that Massachusetts, after benefiting from a blistering pace of 5.0% in 2010, will join the national economy in a slower growth trajectory.

“The Massachusetts economy has fared better than the national economy in terms of output and employment growth,” said Paul Bachman, Director of Research at the Institute. “We project that Massachusetts economic growth will moderate over the next six-quarters, while employment will experience steady growth.”

While some soft spots persist, the Massachusetts economy is outperforming most other states. Conditions remain favorable. State tax revenues surged to $20.507 billion in fiscal year 2011, exceeding all estimates. In June, the Massachusetts unemployment rate was 7.6%, well below the nation’s rate of 9.2%. Inflation is a bit more bearable: In the Boston metropolitan areas overall prices (May 2010-May 2011) for all items rose 2.7% but remained lower than the national average of 3.6%. Since the beginning of the recovery in June 2009, Massachusetts has added 61,500 jobs, an increase of 1.94%. That percentage increase places Massachusetts sixth in the nation since the marking of the end of the recession.

There are some areas for concern. According to the Institute, 30% of Massachusetts out-of work employees were unemployed for a period of more than 52 weeks —slightly above the national average for this measurement.

To create its economic forecast, the Institute employs the same statistical methods it uses to successfully forecast the state’s tax revenues. For each economic series, we estimate a regression equation that extrapolates from historical data to predict the future. In estimating the regressions, we paid particular attention to the structure of the errors in order to pick up the effects of seasonal and other variations in the series.



Related: July 2011 Issue Economic Indicators

Last updated on 07/29/2011 4:45 PM
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