1. What’s Going on in the Economy? Michael D. Goodman, Ph.D. Associate Professor and Chair Department of Public Policy, UMass Dartmouth Co-Editor, MassBenchmarks November 4, 2010

2. How did we get here? A perfect storm of the man-made variety

3. Nationally, job losses have been massive and unemployment remains a major problem

4. So far the Commonwealth is recovering much faster than the US as a whole According to the MassBenchmarks Current Economic Index, economic activity in Massachusetts is estimated to have grown at an annual rate of 3.7 percent in the third quarter of 2010, versus 2.0 percent for the U.S. as a whole. Since December 2009, both the payroll and the household employment surveys estimate a net increase of approximately 40,000 jobs. Job growth in Q2 2010 was the fastest since the third quarter of 1984. In contrast to previous economic downturns and recoveries, the mix of industries in the state has been an advantage during this recovery.

5. But, Massachusetts has not been spared the pain of this “Great Recession” Between the third quarter of 2008 and the end of 2009, Massachusetts lost an estimated 152,800 or approximately 2.2 percent of its total jobs. In September, 2010, an estimated 292,300 Massachusetts workers were unemployed; 35.6 percent of unemployment insurance claimants had been unemployed for over 15 weeks. Source: New England Economic Partnership; Massachusetts Department of Workforce Development

6. A Blue Collar Depression Source: Center for Labor Market Studies, Northeastern University

7. Lost jobs in Manufacturing and Construction are not expected to be recovered anytime soon

8. The composition of the regional economy is working against a similarly robust recovery on the Cape The Unemployment Rate in Massachusetts in September, 2010 was 8.4 percent (as compared to a national rate of 9.6 percent). In the Barnstable, MA Metropolitan NECTA, it was 7.6 percent However, between September, 2009 and September, 2010 the Cape lost an estimated 3,100 jobs (-3.0%). The state added an estimated 23,400 jobs (+0.7%) during the same period. Statewide, in September, construction workers represented 11.8 percent of all workers receiving unemployment benefits. In the Cape and Islands WIB region it was 18.1 percent.

9. The Housing market remains a threat to the national and, to a lesser extent, the statewide recovery

10. A Vicious and Self Reinforcing Cycle

11. Overall, a relatively slow recovery nationally and a somewhat faster recovery in Massachusetts is the most probable scenario -- bad news for those seeking work…

12. …and for state and local governments who will remain in dire financial straits for the next few years Significant job losses have greatly reduced income tax revenue. Foreclosures result in losses to both financial institutions and local property tax collectors. Given the dismal performance of the stock market, state capital gains tax receipts will likely be much smaller. Job losses and declining household wealth (housing and investments) have constrained household spending and by extension sales tax receipts.

13. The Outlook: A Feast or Famine Economy Ongoing economic challenges will continue to provide profound challenges for many working families and the businesses that rely on their spending. However, businesses serving high-end consumers can expect a return in demand for their products and services. This should bode well for the regional tourist market. Technology, Energy Efficiency and other sectors providing goods and services that improve efficiency should also continue to experience high demand. Massachusetts is clearly benefitting from these trends and its industry mix. This is little consolation for those regions of our state (such as the Cape and Islands region) that are not home to a large number of the high technology and knowledge intensive industry firms that are leading the economic recovery in the Commonwealth.

14. Questions? For more and timely and comprehensive analysis of the Massachusetts economy, please: Visit and subscribe to MassBenchmarks online at: http://www.massbenchmarks.org Visit “The Accidental Economist”, my blog at: http://www.policypragmatist.blogspot.com/ For more information about the face-to-face and fully online Master’s in Public Policy program please see me or: Visit the UMass Dartmouth Department of Public Policy at: http://www.umassd.edu/seppce/departments/publicpolicy/ http://www.umassd.edu/seppce/departments/publicpolicy/