UPDATE ON THE MASSACHUSETTS ECONOMY

PRESENTATION BY DR. MICHAEL GOODMANDr. Michael Goodman| Executive Director for the Public Policy Center at UMASS Dartmouth

Michael D. Goodman, Ph.D. Professor of Public Policy

Executive Director, the Public Policy Center (PPC)University of Massachusetts Dartmouth

Co-Editor, MassBenchmarks

Twitter: @Mike_Goodman

November 20, 2019

The State of the State Economy

The rising tide is finally lifting more boats thanks to what is now the longest economic expansion in US history.

The pace of economic growth has been slowing nationally

An initial growth boost fueled by tax cuts has faded and the business investment some expected has not materialized

Source: Jason Furman; Congressional Budget Office

The state economy appears to have stalled in Q3“In the third quarter of 2019, Massachusetts real gross domestic product declined at a 0.2 percent annualized rate according to MassBenchmarks, while U.S. real gross domestic product grew at a 1.9 percent rate according to the U.S. Bureau of Economic Analysis (BEA).“

The BEA estimates the state grew at a 1.5 percent rate in the second quarter. The US grew at a 2.0 percent rate during the same period.

Source: MassBenchmarks

Our population isn’t growing fast enough the old fashioned way.

Demographic constraints are weighing on state growth prospects

It appears low fertility rates will be around for a while

International immigration has been driving state population growth

Chart: MassBenchmarks

Current immigration policies constrain a key source of labor force growth

Source: Boston Indicators Project, The Boston Foundation

Imbalanced growth and poor infrastructure conditions are further constraining our capacity for growth

Source: https://www.abettercity.org

Imbalanced growth and congestion are hitting us where we live

Source: MassINC Polling Group

The economic outlook is for slow growth nationally and for evenslower growth in Massachusetts

Tariffs threaten the prospects for key state export sectors

“Tariffs are by far the most serious issue my company has faced in 40 years of business — much more important than health insurance costs, regulations, and finding workers.”

A Massachusetts CEO in response to the AIM Business Confidence Survey

Source: Open Doors Survey, 2018

Uncertainty and risk abound

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10

01

50

20

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1985 1990 1995 2000 2005 2010 2015

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US Economic Policy Uncertainty Index, January 1985 to September 2019

Source: "Measuring Economic Policy Uncertainty" by Scott R. Baker, Nicholas Bloom and Steven J. Davis, as updated

at www.policyuncertainty.com. Monthly data normalized to 100 prior to 2010.

Black

Monday

Gulf

War I

Russian

Crisis/LTCM

Bush

Election

9/11

Gulf

War II

Stimulus

Debate

Lehman and

TARP

Debt Ceiling

Debate

Fis

cal C

liff

Bre

xit

Go

vt.

Shutd

ow

n

Eurozone Crises,

U.S. Midterm

Elections in

November 2010

Rising tariffs & trade policy

tensions, especially between

U.S. and China; scope of

conflict broadens

U.S. Pulls

out of TPP

Ste

el&

Alu

min

um

Tariff

s

Clinton

Election

Tru

mp

Ele

ction

Winter is coming

Scituate MA Winter 2015 -- Source: Michael Dwyer/AP

Boston, MA January 2018 -- Source: @Libjammin

How long will the expansion last?

Source: Wall Street Journal Economic Forecasting Survey, November 2019

How long will the expansion last?

Source: Wall Street Journal Economic Forecasting Survey, November 2019

The Commonwealth is fiscally well positioned in the event of a downturn

The Public Policy Center at UMass Dartmouth: www.umassd.edu/ppc

MassBenchmarks, the Journal of the Massachusetts Economy: www.massbenchmarks.org

Twitter:@Mike_Goodman@PublicPolicyCtr

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