Massachusetts economy showing `clear signs’of weakening
The Massachusetts economy, like the nation’s, is showing “clear signs of slowing,’’ and unemployment remains “troublingly high,’’ according to a leading group of local economists.
The state’s high tech industry, which has helped Massachusetts generate jobs and recover more quickly from the 2008 recession than the nation, will suffer in coming months as global demand for its products and services flatten, according the analysis, released today by the University of Massachusetts and published in the journal MassBenchmarks.
The economists said the answer to the economy’s struggles isn’t government budget cutting. Instead they called for fiscal stimulus — more federal spending, tax cuts, or both — to help right the economy.
“It is clear that the economy is not going to heal itself, and that fiscal austerity in the short run will only prolong economic suffering,’’ the summary said. “The economically prudent policy — more fiscal stimulus in the short run coupled with deficit reduction that takes effect as the economy recovers — can be achieved only is we reach political consensus.’’
The group — which includes economists from the Federal Reserve Bank of Boston, Boston University, Harvard, and MIT — said interest rate reductions and other steps taken by the Federal Reserve have “reached the limit of their effectiveness,’’ and called upon federal policy makers to take additional steps.
Michael Goodman a public policy professor at the University of Massachusetts at Dartmouth and editor of MassBenchmarks, said the the board does not typically make policy recommendations, but did so because there was consensus that government actions are necessary due to the gloomy outlook in the United States and Europe.
“We’re describing considerably weakened and extraordinarily difficult labor market,’’ Goodman said. “There are questions about whether our political institutions are up to doing what needs to be done.’’
A bipartisan Congressional group, the so-called supercommittee, began holding hearings earlier this month to find ways to slow the growth of the federal debt by $1.5 trillion to $4 trillion. Proposed spending reductions have focused on defense and scientific research funding, two areas important to the state’s economic health. With its leading universities, hospitals, and technology firms, Massachusetts receives a large share of these federal funds.
The economists expressed concern that proposed cutbacks in federal spending could disproportionately affect Massachusetts’ economy, adding to their bleak assessment of future growth. Fears about the European debt crisis and the possibility that problems abroad could spread quickly across the Atlantic and to Massachusetts “with hard to predict consequences’’ also factored heavily into the analysis.
The Massachusetts economy has already showed signs of slowdown, as employers in August cut jobs for the first time in three months, the state Executive Office of Labor and Workforce Development reported recently.
The state’s unemployment rate of 7.4 percent is lower than the nation’s 9.1 percent rate in August, but the group concluded that state levels remain “troublingly high.’’ The typical duration of unemployment reached 35 weeks in 2011, the highest in state history, according to the analysis, affecting workers of all ages.
The unemployment rate also does not include more than 200,000 Massachusetts workers who are employed part-time but want full-time work, the UMass analysis said, referring to these workers as the state’s “hidden unemployed.’’
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