Massachusetts estimated to have grown at over three times the rate of the U.S. in the first quarter
High tech job growth and life sciences exports boost state economy
The Massachusetts economy grew at a 4.7 percent annual rate in the first quarter, according to the MassBenchmarks Current Economic Index. This is the fastest rate of growth since the expansion began in the second quarter of 2003. Massachusetts appears to have grown at over three times the rate of the U.S. during the first quarter of 2007. According to the Bureau of Economic Analysis, U.S. real gross domestic product (GDP) grew at an annual rate of 1.3 percent during this period, following a growth rate of 2.5 percent in the fourth quarter of 2006.
The MassBenchmarks Current Economic Index for March was 167.2, up 5.0 percent from February (at annual rates), and up 4.0 percent from March of last year. The current index is normalized to 100 in July 1987 and is calibrated to grow at the same rate as Massachusetts real gross state product over the 1978–2003 period.
The MassBenchmarks Leading Economic Index for March was 3.9 percent, and the three-month average for January through March was 4.6 percent. The leading index is a forecast of the growth in the current index over the next six months, expressed at an annual rate. Thus, it indicates that the economy is expected to grow at an annualized rate of 3.9 percent over the next six months (through September).
While both estimates of state and national growth are subject to revision, it is clear that the state has been growing much faster than the nation in recent months. Strong payroll employment gains and a falling unemployment rate were the indicators responsible for the Commonwealth’s strong showing in the first quarter. The near-term outlook looks positive with an expectation that the state’s economy will continue to grow at a strong pace of about 4 percent through the summer.
In February and March, the Commonwealth’s 1.5% rate of job expansion in Massachusetts matched that of the U.S. and was reminiscent of the expansion of the 1990’s. Employment gains were especially strong in technology and science-related sectors.
“It appears that high tech job growth and strong demand for bioscience and health technology products – as evidenced by growing exports in some key product areas – boosted state economic growth during the first quarter of 2007,” noted UMass Donahue Institute Director of Economic and Public Policy Research and MassBenchmarks Managing Editor, Dr. Michael Goodman.
“The forecast of strength going forward should be viewed with some caution” added Alan Clayton-Matthews, UMass Boston Professor and co-editor of MassBenchmarks. “Expected continued softness in the housing market may dampen consumer spending and in doing so weaken economic growth in the Commonwealth. In addition, the possibility of rising inflation and a rise in interest rates could further weigh on the state’s near-term growth prospects,” Clayton-Matthews added.
MassBenchmarks releases are published by the University of Massachusetts Donahue Institute in cooperation with the Federal Reserve Bank of Boston. The Donahue Institute is the public service, outreach, and economic development unit of the University of Massachusetts Office of the President. The current and leading economic indexes are complied and analyzed by Dr. Clayton-Matthews and released monthly by the UMass Donahue Institute.
Associate Professor, UMass Boston
Director, Economic and Public Policy Research, UMass Donahue Institute
Managing Editor, MassBenchmarks
MassBenchmarks Regional Analysts
Economic Indices Professor Alan Clayton-Matthews, UMass Boston (617) 287-6945
Berkshires/Pioneer Valley Professor Robert Nakosteen, UMass Amherst (413) 545-5687
Central Professor John Mullin, UMass Amherst, (413) 545-6636
Greater Boston Professor David Terkla, UMass Boston (617) 287-6952
Northeast Professor Robert Forrant, UMass Lowell (978) 934-2722
Southeast/Cape Cod and Islands Professor Clyde Barrow, UMass Dartmouth (508) 999-9265
April 27, 2007