What’s UP with the Massachusetts Economy?
MAPC Fall Council Meeting
Crowne Plaza Hotel
Natick, Massachusetts
October 26, 2010
Barry Bluestone
The Economic Picture
The U.S. Context
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
07 08 09 10
A Fragile U.S.Economic Recovery…Monthly payroll employment change, excl. Census Jobs
Consistent monthly job growth of over 150K will be necessary to reduce unemployment
-2
-1
0
1
2
3
4
5
08 09 10 11
…As Federal Fiscal Stimulus Fades
Source: Moody’s Analytics
Stimulus Contribution to real GDP growth, %
Tax rebate checks
Recovery Act
Cash for Clunkers
Housing tax credit
-30
-20
-10
0
10
20
30
40
50
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
70 75 80 85 90 95 00 05
Profits Surge and Jobs Should Follow…
Sources: BLS, BEA
Profit growth,lagged 3 quarters (R)
Job growth,% change year-over year (L)
0
20
40
60
80
100
120
1790 1815 1840 1865 1890 1915 1940 1965 1990 2015
Sources: Treasury, Moody’s Analytics
The average federal debt-to-GDP ratio since WWII is 40%
Worries over Federal Debt
Federal debt-to-GDP ratio
The Economic Picture
Massachusetts Rebound
Massachusetts
The Massachusetts economy is growing faster than that of the U.S.
-0.7
4.7
3.5
2.5
-0.5
2.0
-3.5
-7.3
-0.6
-3.3
1.3
4.6
6.1
5.4
0.9
3.2
2.3
2.9
-0.7
0.6
-4.0
-6.8
-4.9
-0.7
1.6
5.0
3.7
1.7
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2007 2008 2009 2010
Qu
art
erl
y G
row
th a
t A
nn
ua
l Ra
tes
Growth in Real Product, Massachusetts Current Economic Index vs. U.S. GDP
MA US
Source: U.S., Bureau of Economic Analysis; Massachusetts, Massachusetts Benchmarks
0.9000
0.9200
0.9400
0.9600
0.9800
1.0000
1.0200
1.0400
Economic Activity Index and Employment Index for Massachusetts and U.S. - 1990 Recession
U.S. Economic Activity Index
U.S. Employment Index
+ 2.7%
- 2.3%
- 8.0%
0%
Massachusetts Economic Activity Index
Massachusetts Employment Index
0.9400
0.9500
0.9600
0.9700
0.9800
0.9900
1.0000
1.0100
1.0200
Economic Activity Index and Employment Index for Massachusetts and U.S. - 2001 Recession
U.S. Economic Activity Index
U.S Employment Index
Massachusetts Economic Activity Index
Massachusetts Employment Index
+ 1.0%
- 2.0%
- 2.5%
- 5.3%
0.9300
0.9400
0.9500
0.9600
0.9700
0.9800
0.9900
1.0000
1.0100
Economic Activity Index and Employment Index for Massachusetts and U.S. - 2007 Recession
Massachusetts Economic Activity Index
U.S Economic Activity Index
Massachusetts Employment Index
U.S Employment Index
- 1.6%
- 3.2%
- 4.5%
- 5.5%
1.2%
6.4%
0.7% 0.7%
0.4%
1.6%
2.4%
0.8%
1.9%
1.5%
-0.4%
0.5%
-0.6%
1.0%
0.5%
-1.2%
-0.8%
1.4%1.2% 1.3%
0.9%
-1.1%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Total Non-Farm Construction Manufacturing Trade, Transportation,
and Utilities
Information Financial Activities
Professional and Business Services
Education and Health Services
Leisure and Hospitality
Other Services Government
Percentage Change in Employment - January 2010 - September 2010 Massachusetts vs. U.S.
Massachusetts United States
However, metro areas outside of Boston are still in recession,
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
Jan-08 Jan-09 Jan-10
Gro
wth
Fro
m S
ame
Mo
nth
Pri
or Y
ear (
%)
Massachusetts and U.S. Payroll Employment Growth
MA US Springfield, NSA
Source: U.S. Bureau of Labor Statistics
The Greater Boston Housing Market
140
145
150
155
160
165
170
175
180
185
Case-Shiller Single-Family Home Price Index for Greater Boston, November 2005 - June 2010
0.8
0.85
0.9
0.95
1
1.05
Months
Greater Boston Housing Cycles: 1988-1997 vs. 2005-2010, Case-Shiller Single Family Home Price Index
1988-1997 Cycle 2005-2010 Cycle
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%Ja
n
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Year-Over-Year Percent Change in Monthly New Privately Owned Housing Starts in the United
States, 2001-2010
6,376 5,604 5,531 5,290
6,222 6,552
4,910 4,139
2,682 2,507 3,000
660
642 709 1,067
985 991
1,180
636
376 278 300
2,527 2,683 2,318
4,763
5,506
7,564
6,242
4,997
3,471
1,929 2,200
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (est.)
Fig 2.1 Building Permits in Greater Boston by Housing Type, 2000-2010
Units in Single-Family Structures Units in 2-4 Unit Structures Units in 5+ Unit Structures
-88.5%-85.5%
-82.9%
-75.6% -73.1%
-63.7% -62.8% -60.7% -58.9%
-100.0%
-90.0%
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
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Percent Change in Building Permits for Selected Metropolitan Areas, January through June, 2005
- 2010
The Foreclosure Crisis
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000Ja
nuary
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Monthly Foreclosure Petitions in Greater Boston, 2000-2010
Source: The Warren Group
0
100
200
300
400
500
600
700
800
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Monthly Foreclosure Deeds in Greater Boston, 2000 - 2010
Source: The Warren Group
0
200
400
600
800
1,000
1,200
1,400
1,600
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
July
Octo
ber
January
Apri
l
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Monthly Foreclosure Auctions in Greater Boston, 2000 - 2010
Source: The Warren Group
3.7
4.5
3.7
6.7
4.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1-Family 2-Family 3-Family Condo Total
Ratio of Foreclosure PETITIONS 2010 vs. 2005 (January - June) in Greater Boston, by Housing Type
Source: The Warren Group
21.1
19.4
18.4
23.1
20.8
0.0
5.0
10.0
15.0
20.0
25.0
1-Family 2-Family 3-Family Condo Total
Ratio of Foreclosure DEEDS 2010 vs. 2005 (January -June) in Greater Boston, by Housing Type
5.6
7.3
9.3
14.1
7.1
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
1-Family 2-Family 3-Family Condo Total
Ratio of Foreclosure AUCTIONS 2010 vs. 2005 (January - June) in Greater Boston, by Housing Type
Source: The Warren
The Demographic Picture
33,292 33,34731,785
29,04126,515
30,28527,014
23,551 24,518
-22,892
-39,506
-48,514
-61,980-60,053
-49,528
-35,121
-18,675
3,614
10,400
-6,159
-16,729
-32,939 -33,538
-19,243
-8,107
4,876
28,132
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
Net Migration to and from Massachusetts, 2000-2009
Foreign Migration Internal Migration Net Migration
New Hampshire +20.4%Vermont +17.0%Maine +13.2%Rhode Island +11.3%Massachusetts + 9.1%Connecticut + 8.0%
U.S. +14.8%
93%99% 106%
113%
135%149%
530%
0%
100%
200%
300%
400%
500%
600%
D.C
.
Nevada
Uta
h
Texas
Idaho
Ore
gon
Arizona
Nort
h C
aro
lina
Washin
gto
n
Mary
land
Califo
rnia
Flo
rida
Georg
ia
Min
nesota
Virgin
ia
New
Ham
pshire
U.S
. Tota
l
New
Jers
ey
Tennessee
Dela
ware
Louis
iana
Verm
ont
South
Caro
lina
Ala
ska
Mic
hig
an
Rhode I
sla
nd
Ark
ansas
Wis
consin
Mis
sis
sip
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Monta
na
Colo
rado
Main
e
Mis
souri
Massachusett
s
Kentu
cky
India
na
New
Mexic
o
Haw
aii
Connecticut
Kansas
Pennsylv
ania
Illinois
Ala
bam
a
Okla
hom
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Wyom
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New
York
Ohio
West
Virgin
ia
Iow
a
South
Dakota
Nebra
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Nort
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akota
Proportion of State's Household Growthaccounted for by those Age 55+
2007-2020
U.S.: 99%Mass: 135%
Net Increase in Households: 222,700
Under 55: -77,70055+: +300,371
Impact on State and Local Government
Will the aging of the population have a major adverse effect on state and local revenue?
Will the aging of the population lead to an increased need for state and local public services
Will the aging of the public employee workforce create a drain on state and local budgets?
The “Third Civil War”
19th Century Civil War North-South: Slavery
20th Century Civil War North-South: Where MFG takes place
21st Century Civil War Which regions, states, and cities and towns will
be able to retain and attract young working families to fill in the labor force and revenue gap?
What factors are most important in winning the 3rd Civil War?
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