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-MatthewsSchool of Public Policy and Urban Affairs

Northeastern UniversityNEEP, MassBenchmarks

January 18, 2013

A steady, slow to moderate national recovery, with workers bearing the burden.

4,000.0

4,500.0

5,000.0

5,500.0

6,000.0

6,500.0

7,000.0

7,500.0

7,000.0

8,000.0

9,000.0

10,000.0

11,000.0

12,000.0

13,000.0

14,000.0

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

Consumption, Income, and Wages (Nominal)

Personal Consumption Expenditures Income Wages

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

The state and the nation are growing at about the same pace.

4.3

1.9

3.7 3.6

-0.8

2.7

2.0

5.4

1.9

2.6 2.72.8 2.7

2.3 2.2

2.62.4

0.1

2.5

1.3

4.1

2.0

1.3

3.1

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010 2011 2012 2013

Qu

arte

rly

Gro

wth

at

An

nu

al R

ate

s (%

)Growth in Real Product, Massachusetts vs. U.S.

Massachusetts U.S.

Source: U.S., Bureau of Economic Analysis; Massachusetts: MassBenchmarks

Projected


Massachusetts fared better this recession than the nation…

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

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

Gro

wth

Fro

m S

am

e M

on

th P

rio

r Y

ear

(%)

Massachusetts and U.S. Payroll Employment Growth

MA US

Source: U.S. Bureau of Labor Statistics


…but it hasn’t always been that way.

-8.0

-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

Gro

wth

Fro

m S

am

e M

on

th P

rio

r Y

ear

(%)

Massachusetts and U.S. Payroll Employment Growth

MA US

Source: U.S. Bureau of Labor Statistics


A preview of the coming payroll employment annual revisions.

3,140.0

3,160.0

3,180.0

3,200.0

3,220.0

3,240.0

3,260.0

3,280.0

3,300.0

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

Tho

usa

nd

s o

f Jo

bs

Official and Re-Benchmarked CES-790 Payroll Employment

Unoffical Re-Benchmarked Official

26.5


How the pain of the recession has been shared as told by unemployment.

0

2

4

6

8

10

12

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 Sex, Massachusetts

All

Men

Women

12-Month Moving Average.Source: Current Population Survey


0

2

4

6

8

10

12

14


Unemployment Rates by Minority Status, Massachusetts

White Non-Hispanic

Non-White or Hispanic



0

2

4

6

8

10

12

14

16

18


Unemployment Rates by Age, Massachusetts

Less than 25 Years Old

25-54 Years Old

55 or Older



0

5

10

15

20

25


Unemployment Rates by Educational Attainment, Massachusetts

Less Than High School

High School or GED

Some College, Less Than a Bachelor's Degree

Bachelor's Degree or Higher



Babyboomers are working more these days.

30%

40%

50%

60%

70%

80%

90%


Employment Rates by Age, Massachusetts

Less than 25 Years Old

25-54 Years Old

55 or Older



The European crisis has hurt Massachusetts.

80

100

120

140

160

180

200

220

240

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

Ind

ex

, 1

99

8=

10

0

Month

Massachusetts Merchandise Exports, Seasonally Adjusted 3-Month Moving Average

US

MA

Source: U.S. DOC, WISER, seasonally adjusted by author.


Information technology markets have been weak.

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

150.0

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

2007=

100

Semiconductor Billings

World Europe Japan Americas Asia Pacific

Source: Semiconductor Industry Association, seasonally adjusted


0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

3,500.0


$ M

illio

ns, 3

-mo

mo

v. A

vg

.

Worldwide Semiconductor Equipment Billings and Bookings

Billings Bookings

Source: Semiconductor Equipment and Materials International


5.3

2.5

18.1

12.0

-1.9

4.25.3

3.93.6

5.45.8

1.6

15.0

1.5

7.9

1.2

16.4

0.52.1

10.2

1.7

-0.1

-8.2

-21.9

-8.3

-1.1

9.5

6.6

-1.2-0.6

5.9

8.4

0.5

6.8

2.2

5.25.8

-3.1-3.8

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

No

min

al g

row

th f

rom

pri

or

qu

art

er

at

an

nu

al ra

te (

%)

U.S. Investment in Information and Processing Equipment and Software

Source: U.S. Bureau of Economic Analysis, NIPA Accounts


Housing finally appears to be on the mend in Massachusetts.

2,000

2,500

3,000

3,500

4,000

4,500

5,000

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

Single Family Home Sales

Source: Mass. Assoc. of Realtors, Seasonally Adjusted by NU


140.00

145.00

150.00

155.00

160.00

165.00

170.00

175.00

180.00

185.00

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

Case Shiller Boston Home Price Index


Construction will be the last housing indicator to improve.

0

200

400

600

800

1,000

1,200

1,400

1,600

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

Massachusetts Single Family Housing Permits

Number per Month, Seasonally Adjusted

Source: Census Bureau, Seasonally Adjusted by Author


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

11 12 13 14 15-16

Forecast

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

Average Annual Growth


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

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

07 08 09 10 11 12 13 14 15 16

Qu

art

erl

y G

row

th a

t A

nn

ua

l R

ate

s

Employment Growth, Massachusetts

Source: NEEP, Moody's Analytics


Housing is finally coming back.

260

280

300

320

340

360

-40

-30

-20

-10

0

10

20

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

Th

ou

sa

nd

s o

f d

olla

rs

Pe

rce

nt ch

an

ge

at a

nn

ua

l ra

tes

Massachusetts Median Existing House Price, Seasonally Adjusted

Appreciation Rate (L) Price (R)

Sources: National Association of Realtors, Moody's Analytics, NEEP


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?

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

55 60 65 70 75 80 85 90 95 00 05 10 15

Productivity Growth, Centered 5-Year Moving Average

MA US


A longer-term view of average productivity growth.

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

55 60 65 70 75 80 85 90 95 00 05 10 15

Productivity Growth, Centered 21-Year Moving Average

MA US


alan clayton-matthews 2013 economic forecast presented to mass econ 1/18/13

Economy & Finance