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Whither the U.S. and Massachusetts Economy?. John LaWare Forum March 24, 2009 Federal Reserve Bank of Boston Barry Bluestone Dean, School of Social Science, Urban Affairs, and Public Policy. The U.S. Economy. Personal Savings Rates Plummeting. Federal Debt nearly double since 2000.

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whither the u s and massachusetts economy

Whither the U.S. and Massachusetts Economy?

John LaWare Forum

March 24, 2009

Federal Reserve Bank of Boston

Barry Bluestone

Dean, School of Social Science, Urban Affairs, and Public Policy

slide7
February 2009:

8.1%

Highest Unemployment Rate

in 26 years (December 1983)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2009

slide9
14.8%

8.7%

Involuntary Part-time

Discouraged

Official Unemployment Rate

u s economy
U.S. Economy
  • The fundamentals of the U.S. economy began to deteriorate years ago
  • The credit market collapse has had such devastating consequences because the economic fundamentals were not sound
  • We are now seeing the result in a hard credit freeze, sharply declining GDP, and soaring unemployment
slide12
Population Trends
  • Between 2000 and 2007, the population of Massachusetts increased by less than 87,000 (1.4%) – the second slowest increase in New England (after Rhode Island) … and 1/5 the rate in the U.S.
  • Much of this is due to a very low birth rate … but
  • Since 2000, Massachusetts has suffered a net domestic out-migration of over 305,000 residents.
  • This outflow of people has been softened only somewhat by the arrival of 206,000 foreign immigrants.
slide15
Immigration & Net Domestic Migration:

Massachusetts

Massachusetts Domestic Net-Migration and Foreign Immigration

slide16
Who’s Leaving Massachusetts?

Percent Change in Population by Age Cohort, Massachusetts v. U.S., 2000-2006

slide17
Of the 10 most expensive MSAs in the nation,

All 10 had net outmigration between 2000 & 2006

Greater Boston MSA –6.0%

X

slide19
The Future Demographics of Massachusetts

Projected Percent Change in Households by Age Cohort, 2006-2017

Of a net increase of 193,500 households,

244,600 are projected to be age 55 +

Source: U.S. Census Demographic Projections

slide21
Total Unemployment – Massachusetts

January 1999-January 2009

Unemployment increased by 96,000

Between January 2008 and January 2009

December 2007-December 2008

Employment Change: -74,000

slide22
Massachusetts Unemployment Rate

January 1999 – January 2009

Unemployment rate increased from

4.6% to 7.4% between January 2008 and

January 2009

slide23
Massachusetts Change in Total Non-Farm Employment

(Seasonally Adjusted) (January 2001 - December 2007)

massachusetts change in total non farm employment seasonally adjusted december 2007 december 2008
Massachusetts Change in Total Non-Farm Employment (Seasonally Adjusted) (December 2007 - December 2008)
but some good economic news
But some good economic news
  • Despite endowment problems, our universities and hospitals continue to expand, providing a strong base to the economy
  • Our manufacturing sector has turned the corner … increasing its share of gross state product and is poised to provide jobs for 100,000 young workers over the next decade
massachusetts state local government in trouble

Massachusetts State & Local Government in Trouble

Facing a continuing budget crisis

slide28
Price of State & Local Services rising

twice as fast as overall prices

slide29
Debt Service, Public Pensions, and Medicaid

will devour most of the Mass State Budget

the massachusetts problem
The Massachusetts Problem
  • Despite our lead in biotech and nanotech …
  • Despite our rich array of (once) well-endowed universities and hospitals …
  • Despite the beauty of Cape Cod, the Berkshires …
  • Despite our marvelous array of cultural attractions and amenities
the massachusetts problem1
The Massachusetts Problem
  • We are #1 in cost of living in the nation
  • We suffer from being cold … and getting old
  • We have a growing structural budget deficit in the Commonwealth that will soon sink our ability to maintain the education system we need, the public social services we morally should supply, and the public infrastructure we must maintain to retain and attract the private investment
what really needs to be done national economy
What Really Needs to be Done? – National Economy
  • Phase I – Instant Stimulus
    • “Uncle Sam” Debit Card
    • Home Price Insurance System
  • Phase II – Short-term Stimulus
    • Massive General State and Local Revenue Sharing
    • Extended Unemployment Benefits
  • Phase III – Longer-term Stimulus
    • Public Infrastructure Investment
what s to be done massachusetts
What’s to be Done? - Massachusetts
  • Local Option Tax, but with State meals tax and continued redistribution of state aid to older industrial cities
  • Capital Gains Tax Holding Tank and larger future rainy day fund
  • Continued investment in education and training
  • Continued support for Chapter 40R & 40S to assure adequate supply of housing to moderate housing cost appreciation when economy recovers
  • New “Grand Bargain” with public employee unions
we will get through this because
We will get through this because …
  • We have smart, competent leadership in the White House
  • We have smart, competent leadership in the State House
  • We have a broad range of corporations and civic institutions that are willing to pitch in to keep Massachusetts strong and vibrant
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