The Backyard Economy: Massachusetts
A look at this state's economic issues.
— -- A highly skilled work force and above average incomes have kept Massachusetts economy growing, but "just barely," according to economists at Moody's Economy.com.
Jobs in the Bay State are closely tied to Wall Street through financial firms like mutual fund processor State Street Corp. and retirement giant Fidelity Investments.
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As stock markets have suffered in recent months after the collapse of the housing market, employees of investment companies have begun to worry about their jobs. Moody's Economy.com forecasts there will be a decline in employment in business and professional firms due to national and regional economic trends.
Massachusetts' housing and construction sector has also experienced a significant slowdown after a period of strong growth in the housing market in 2003 and 2004. That sector has all but ground to a halt.
But Michael Goldman, director of economy and public policy research at the University of Massachusetts' Donahue Institute, notes that even as consumers and households are being hit hard by rising food and fuel prices, most of the state's economy is actually not driven by consumer spending.
"For some time, the Massachusetts economy has been quite regionally imbalanced with a lot of the growth generated by the metropolitan Boston region," Goldman said. "In the rest of the state there's been relative stability. So what doesn't go up, doesn't need to go down."
The greater Boston area has seen strong growth, Goldman said, from technology firms, pharmaceutical companies and bio-tech developments.
Moody's Economy.com notes a new law mandating that employers offer health care is boosting hiring costs in the state. Goldman said he hasn't seen a negative effect for businesses but said it has cost the state's government more than anticipated.
What might ultimately help Massachusetts weather a downturn is its large number of teaching hospitals and colleges, which Goldman noted provide a stable source of employment and economic activity.
But the state is still at risk of falling into a recession if the national economy does so, according to Moody's Economy.com. As along as the state has high business costs and a higher cost of living, future economic growth could be lackluster.
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