Transcript Massachusetts

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
Real GDP Growth Rate 2004-2009
4.0%
3.6%
3.5%
3.1%
2.9%
3.0%
2.5%
2.2%
2.0%
1.5%
1.0%
0.5%
0.0%
0.0%
2004
2005
2006
2007
2008:I
2009 (est)
-0.5%
-0.5%
-1.0%
U.S. Personal Savings Rate (1998-2008:I)
5.0%
4.5%
4.3%
Personal Savings Rates Plummeting
4.0%
3.5%
3.0%
2.3%
2.5%
2.1%
2.0%
1.5%
1.0%
0.4%
0.5%
0.2%
0.0%
1998
2000
2004
2007
2008:I
U.S. Federal Debt (in $billions)
(1940-2009)
$12,000.0
$10,413.4
$10,000.0
Federal Debt nearly double since 2000
$8,950.7
$7,905.3
$8,000.0
$6,000.0
$5,628.7
$4,001.8
$4,000.0
$2,000.0
$909.0
$50.7
$260.1
$290.5
$380.9
1945
1960
'1970
$0.0
1940
1980
1992
2000
2005
2007
2009 (Est.)
Real Median Family Income ($2006)
$62,000
$60,000
$59,088
$59,398
$58,545
$57,920 $57,751 $57,705 $58,036
$57,734
$58,000
$58,407
$57,648
$55,823
$56,000
$54,127
$54,000
$53,349
$52,173
$52,000
$50,782
$50,000
$48,000
$46,000
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Civilian Unemployment
(1998-2009) (in 000s)
13,000
February 2009:
8.1%
Highest Unemployment Rate
in 26 years (December 1983)
12,467,000
12,000
11,000
10,000
9,266,000
9,000
8,000
7,000
6,688,000
6,000
5,481,000
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
May
Sep
Jan
5,000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2009
Loss in Employment (December
2007-December 2008)
Change in
Employment
Percentage Change
Construction
-632,000
-8.5%
Manufacturing
-791,000
-5.7%
Retail Trade
-522,000
-3.4%
Financial Services
-148,000
-1.8%
Temp Services
-490,000
-19.0%
Labor Underutilization Rate
(December 2007 vs. December 2008)
14.8%
16.0%
14.0%
5.5%
12.0%
10.0%
8.7%
1.5%
8.0%
3.1%
Involuntary
Part-time
0.8%
Discouraged
6.0%
8.1%
4.0%
2.0%
4.8%
Official
Unemployment
Rate
0.0%
2007
2008
2009
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
The Massachusetts Challenge
People and Jobs
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.
Massachusetts Population
Population (in thousands)
6600.0
6400.0
6200.0
6363.2
6407.6
6431.8
6438.5
6433.7
6429.1
6434.4
6449.8
2000
2001
2002
2003
2004
2005
2006
2007
6016.4
6000.0
5800.0
5737.0
5600.0
5400.0
5200.0
5000.0
1980
1990
U.S. Bureau of the Census
Population Trends in New England
Population Growth, 2000-2007
8.00%
6.88%
7.00%
6.08%
6.00%
5.00%
4.00%
3.13%
2.65%
3.00%
2.00%
1.86%
1.36%
0.67%
1.00%
0.00%
MA
RI
VT
CT
ME
NH
US
Immigration & Net Domestic Migration:
Massachusetts
Massachusetts Domestic Net-Migration and Foreign Immigration
40,000
33,292
33,347
31,785
29,041
26,515
30,285
27,014
20,000
0
2000-2001
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
-20,000
-22,892
-40,000
-35,121
-39,506
-48,514
-49,528
-60,000
-61,980
-60,053
-80,000
Foreign Migration
Internal Migration
Who’s Leaving Massachusetts?
Percent Change in Population by Age Cohort, Massachusetts v. U.S., 2000-2006
35
30
25
20
15
10
5
0
-5
Under 5
5-19
20-24
25-34
35-54
-10
-15
Massachusetts
US
55-64
65+
Net Domestic Migration (2000-2006) by Housing Cost Decile
8.0%
5.66%
6.0%
4.0%
4.94%
5.07%
7th Decile
8th Decile
3.56%
2.95%
2.01%
2.0%
0.48%
0.38%
0.0%
1st Decile
2nd Decile
3rd Decile
4th Decile
5th Decile
6th Decile
9th Decile
Next 15
Next 10
Top 10
-0.70%
-2.0%
-0.31%
Of the 10 most expensive MSAs in the nation,
All 10 had net outmigration between 2000 & 2006
-2.86%
-4.0%
Greater Boston MSA
-6.0%
–6.0%
X
-6.65%
-8.0%
Housing Cost – Top 10 MSAs
Honolulu, HI
San Francisco-Oakland-Fremont, CA
Santa Cruz-Watsonville, CA
Oxnard-Thousand Oaks-Ventura, CA
San Diego-Carlsbad-San Marcos, CA
Boston-Cambridge-Quincy, MA-NH
Santa Barbara-Santa Maria-Goleta, CA
Washington-Arlington-Alexandria, DC-VA-MD-WV
New York-Northern New Jersey-Long Island, NY-NJ-PA
Los Angeles-Long Beach-Santa Ana, CA
The Future Demographics of
Massachusetts
Projected Percent Change in Households by Age Cohort, 2006-2017
Change in Num ber of Households by Age Cohort: 2006-2017
Massachusetts
150,000
100,000
Of a net increase of 193,500 households,
244,600 are projected to be age 55 +
50,000
111,437
118,566
37,681
14,614
40
0
18-24
25-34
35-44
45-54
-6,326
55-64
-50,000
-82,548
-100,000
Source: U.S. Census Demographic Projections
65-74
75+
The Mass Employment
Situation
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
Massachusetts Unemployment Rate
January 1999 – January 2009
Unemployment rate increased from
4.6% to 7.4% between January 2008 and
January 2009
Massachusetts Change in Total Non-Farm Employment
(Seasonally Adjusted) (January 2001 - December 2007)
5.0%
4.2%
3.8%
4.0%
3.0%
2.3%
1.8%
2.0%
1.5%
1.0%
0.6%
0.0%
MA
CT
ME
VT
NH
RI
U.S.
-1.0%
+5,609,000 jobs
-2.0%
-100,600 jobs
-3.0%
-3.0%
-4.0%
Source: U.S. Bureau of Labor
Massachusetts Change in Total Non-Farm Employment
(Seasonally Adjusted) (December 2007 - December 2008)
0.0%
RI
U.S.
ME
VT
CT
MA
NH
-0.5%
-1.0%
-1.1%
-1.3%
-1.5%
-1.7%
-2.0%
-1.9%
-2.2%
-2.5%
-3.0%
-3.5%
-4.0%
-4.5%
-5.0%
-4.4%
-1.9%
Employment Growth (2000-2006) by Housing Cost Decile
14%
11.84%
12%
10.30%
9.89%
10%
8.96%
8.80%
8%
5.65%
6%
5.54%
5.30%
5.20%
4.07%
4%
3.56%
3.67%
1st Decile
2nd Decile
2%
0%
3rd Decile
4th Decile
5th Decile
6th Decile
7th Decile
8th Decile
9th Decile
Greater Boston MSA
Next 15
–2.0%
Next 10
Top 10
X
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
Facing a continuing budget
crisis
Price Increases: Total Economy
vs. Cost of State and Local Services
2000-2008:I
45.0%
40.0%
35.0%
40.7%
Price of State & Local Services rising
twice as fast as overall prices
26.8%
30.0%
25.0%
21.3%
20.0%
15.0%
10.0%
5.0%
0.0%
Total Economy
Private Services
State & Local Services
Debt Service, Public Pensions, & Medicaid Payments
as % of Massachusetts State Budget (2001-2027)
100.0%
90.1%
90.0%
Debt Service, Public Pensions, and Medicaid
will devour most of the Mass State Budget
80.0%
64.4%
70.0%
60.0%
50.0%
40.0%
32.8% 33.5%
38.8% 40.1% 40.9%
37.1%
35.6%
45.0% 46.0%
30.0%
20.0%
10.0%
0.0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2018
2027
The Massachusetts Problem
 Despite our lead in biotech and
nanotech …
 Despite our rich array of (once) wellendowed universities and hospitals …
 Despite the beauty of Cape Cod, the
Berkshires …
 Despite our marvelous array of
cultural attractions and amenities
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
But there’s hope on the way …
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
 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 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