Recent Performance of the Massachusetts Economy

(The Governor’s top economic team member discusses the state of the Massachusetts Economy.   – promoted by Rob “EaBo Clipper” Eno)

There were a couple of posts last week about the growth of the Massachusetts economy. The posts, and the comments on them, suggested that the statistics were all over the place and did not tell a consistent story. In fact, putting aside for a minute the reasons behind our economic performance, the numbers from various sources do tell a very consistent story:

1. The state’s employment and GDP growth from 2000 to 2006 were among the worst in the nation, compared to other states.

2. The state’s employment and GDP growth from 2007 to date have been among the best in the nation, compared to other states.

3. Our economy’s recent performance has not yet been enough to offset our economy’s earlier poor performance, so our numbers for the last decade as a whole are still not good.

The statistics on our economy’s performance in this major national/global recession are particularly noteworthy, since Massachusetts had performed relatively poorly in both of the last two major national/global recessions (1989-91 and 2001). Something very different is happening in our Massachusetts economy now.

There are a lot of great questions to discuss, such as whether our economy’s performance will continue to be relatively strong, compared to other states, and what are the reasons for its good recent performance. But the fact that the Massachusetts economy is now performing very differently should be the starting point for those discussions.

Note: I am the secretary of housing and economic development for the Commonwealth of Massachusetts.

About Greg Bialecki

  • That’s what Romney left his successor, Patrick. How much do you suppose Patrick will leave his successor?

    Or is he running the government in a fiscal hole, spending cash to prop up cronies, unions and failed businnes, and presenting an illusion of growth.

  • Mr. Bialecki:

    The below story clearly indicates that the Governor has different plans relative to crime in our “gateway” cities. It’s hard to argue that less crime increases home values and increases the ability and willingness of entrepreneurs to open and succeed in establishing businesses in those same “gateway” cities.

    Please help me understand the motivation and the secondary plan that the administration has in place to bring industry back to places like Lawrence. I choose Lawrence in my example simply because there is no greater example of a community that needs the kind of help that a robust and usefull program such as “Secure Communities” offers. Plus, I’m already paying to educate my kids, put out fires, and staff a police department in my community. Isn’t it about time we took advantage of the programs that are actually working?

    I look forward to your response.

    Massachusetts has become the latest state to reject DHS’s controversial Secure Communities program.

    On Monday, Massachusetts Governor Deval Patrick announced that he would not sign a memorandum of understanding to participate in the DHS program. Governor Patrick is the third governor to reject Secure Communities program in recent weeks. Under the program, the fingerprints of individuals apprehended by local law enforcement officials are automatically run through DHS and Department of Justice databases to verify their immigration status as well as their criminal record. But the program has drawn sharp criticism from opponents who say that it has been used by zealous immigration officials to deport large numbers of law-abiding undocumented aliens.


  • the increase in the cost of healthcare in Massachusetts included in the “growth of the GDP” calculation?

    I will not that the traffic streaming in on Rt. 3 from NH seems to have increased in the 6am commute over the last 2 years.

  • It is amazing to see the effort to blur the lines and try and convince everyone that Deval Patrick has had any success in this job market.  

    Let’s first look at the interesting time frame that Mr. Bialecki wants us to look at.  

    Number one he cites the years 2000-2006.

    Amazingly, in 2000 – Massachusetts had it’s lowest unemployment rate in history, 2.6% – let me repeat that, in the year 2000 the unemployment rate was 2.6% – best ever.  

    So – Mr. Bialecki takes that as the starting point, the historical peak – and then argues… everything’s going downhill since then…makes you wonder

    BUT more interesting he then stops at 2006 – when the unemployment rate was 4.7% – how terrible.

    He is trying to talk about ‘growth rates‘ instead of looking back and seeing, hey look at that, lots of people were actually working in the 2000’s, more people than today!  

    Correct me if I am wrong but according to the Labor and Workforce Development office in Jan 2007 when Deval took office, the total non-farm employment was 3,283 – yet the latest available month, April 2011 – shows total non-farm employment (both seasonally adjusted) at 3,228.  Am I wrong, but is it true that less people have jobs today, then 4 years ago??

    When Deval Patrick was sworn into office, the unemployment rate was 4.6%

    There are currently 21 – yes 21 states that have LOWER unemployment rates than Massachusetts.

    Arkansas has a lower unemployment rate – yet Mr. Bialecki thinks that’s a great job.  Today’s unemployment rate stands at around 8% – after Deval’s starting point at under 5%.  

    In my opinion Mr. Bialecki is trying to spread desperate  propaganda – with carefully selected dates to confuse the public, to cover up the failed record of Deval Patrick.

  • petarpoul

    Thanks for this great posting! I just complete reading this  recent performance of the massachusetts economy. Thanks!  

  • Start with some throat-clearing: Greg is a great guy.  He really is.  Now some facts:

    Taking credit for sudden economic success upon stepping foot into office is, well, political, and that’s cool from the governor’s appointee.  But is it true?  Start with: Why would it be true? What would generate that success?  Has time to permitting gone down for state agencies?  There is no evidence of that.  No.  Have housing regulations changed in any substantial way?  No.  Has the emphasis on giving special incentives to “sweet-spot” industries created more than a few thousand jobs?  No.  Have business fees gone down?  No, they’ve gone up.  Credit goes to the Patrick administration and legislative leaders for slowly lowering the corporate tax rate, though that comes with other changes that increased costs for businesses on the tax front.  And then there is the sales tax, which went up by 25%.  Greg: That’s not a great encouragement for businesses.

    Then on whether something different is occurring under Governor Patrick, consider this: Governor Patrick came into office with the economy already growing jobs at a strong clip.  In Romney’s last year, 34,000 jobs were created.  In Governor Patrick’s first year (2007) until the start of the recession (December 2007), 21,000 jobs were created.  What I find a little troubling is that Greg is claiming that something totally different is happening in the past 4 ½ years-years during which, as BLS notes, Massachusetts has lost 42,000 jobs.  Please don’t call that a victory.

    The fact is there is evidence that we are losing opportunities.  Look, NH is not doing as well as some would like to say (it too has lost 14,000 jobs since 2007, after gaining 30,000 between 2003 and 2006).  But in 2003, the Massachusetts unemployment rate was 0.8% higher than NH’s; it is about 3 times that amount today.  Regionally, we are outcompeting some troubled New England states; but when it comes to a lower cost state like NH, the gap is widening in terms of where they are and where we are.

    If it’s not fair for Greg to give the governor credit for substantially changing our economic direction, it’s similarly unfair to fault him for single-handedly cratering the economy.  At Pioneer we are taking a look at the longer term, because right before our eyes over the past two decades, something different did happen-and it is not good.  The number of headquarters in MA has collapsed by 33% (16,000 to 11,000) since 1990.  The average size of accompany in MA has dropped 40% (16 to under 10 employees per firm).  Young firm creation is down.  

    And meanwhile the state agencies continue the same old, same old policies of picking winners and seeking to relocate companies here.  On that latter point, to show you how off-base the policy is, consider this: Only 2% of job growth in any one year over the past two decades has been through relocation.

    You can check out the facts about “Massachusetts’ New Economy” here: http://www.pioneerinstitute.or

    Is all of this Governor Patrick’s fault?  Nope.  But while the blame game on the all-important issue of jobs and business growth is tired, Governor Patrick hasn’t shown serious leadership, which starts with recognizing the depth of the challenge before us.  Greg’s post is, frankly, just spinning.  Try to get your arms around his “facts” and all you’ll end up is dizzy.

  • gary

    The state’s employment and GDP growth from 2000 to 2006 were among the worst in the nation, compared to other states…[meanwhile] The state’s employment and GDP growth from 2007 to date have been among the best in the nation, compared to other states.

    A tough conclusion to suggest that 2000-2006 were bad and 2007 good, when:

    Employed in 1/2000: 3,274,000

    Employed in 12/2006: 3,281,300

    Employed in 12/2010: 3,208,300

    Employed most recently stats: 3,228,000

    To take away the big picture: fewer people are working today compared to over 10 years ago.

    Respectfully?  Dispense with the ‘compared to other state’ bullshit:  Are you really having good recent performance if someone in California is up to his neck and you, are only up to your chest?

    And regarding the back-slapping recent good performance, the jobs numbers (keep in mind we’re still below the 2000 level of employment) are merely, ok, when compared to other states:  better than average but hardly leading the way.

  • Thank you Secretary Bialecki for initiating a discussion about the state of Massachusetts’ economy.  Massachusetts’ relative outperformance is due to several factors, some of which may not be sustainable.  Contributing factors include a less severe real estate recession, a relatively stable healthcare industry, and weak dollar induced exports.  Having said all that, nothing the Patrick Administration has done has supported Massachusetts’ performance.  Instead, overbearing regulation and higher taxes have impeded true progress.  Employment gains in the Commonwealth are essentially non-existent over the last decade.

    Taxes were raised in 2002 and again in 2009 because our state government refuses to live within its means. Governor Patrick has publicly mused about imposing a graduated state income tax. Why would an entrepreneur establish a business in Massachusetts after the capital gains tax was raised from ZERO for 6+ year gains in 2002 to 5.3%, while New Hampshire has no income or capital gains taxes?  With the widening of Rte 3 from Burlington to Nashua, such entrepreneur can start a business in New Hampshire, travel easily into Massachusetts to visit customers, and return home to a state with no income taxes on his employees. While income from Massachusetts sources will be taxed, the capital value of the business will grow in New Hampshire and will be tax-free when it’s sold someday.

    For those entrepreneurs already established here, Massachusetts’ onerous estate tax will drive them out eventually to lower tax locales.

    The 2009 sales tax increase, beyond raising the tax burden on all Massachusetts families, widened the zone along the border that is now incentivized to shop in New Hampshire.

    Regulation — some examples worth noting. Municipal construction project costs are elevated due to state mandated prevailing wage laws, thereby burdening local propery taxpayers.  Building codes: ever increasing requirements drive up construction costs, thereby elevating housing costs. Health insurance: regulation restricts the type of policies the remaining insurance carriers can offer: one can’t purchase a catastrophic care policy customized to individual circumstance; benefit mandates require citizens to buy coverage for services they may not want.  

    Green energy mandates drive up the already near-highest power costs in the nation.  When the price of conventional fuels are high enough, the private sector will adopt the then competitive fuel sources.  

    Solutions: The Patrick Administration should adopt pro-growth economic policies that include aggressive tax reduction along with a less bloated, less intrusive state government. Studies show that states with the  lowest tax burdens outperform economically.  Politicians and bureaucrats can’t pick winners and losers among companies or even industries — eg Evergreen Solar.  Reduce taxes on investment capital, and let the private sector take the risks with its own funds.  New industries emerge out of seeming nowhere (e.g. social media). We deserve a state known for creating a business  environment that encourages risk taking, not a state famous for egregious patronage hiring.  Cut personal and corporate income taxes and then go and recruit businesses from New York, New Jersey and elsewhere to move here.

  • There is a simple explanation for the trends cited by Secretary Bailecki.  National economic developments have a differential impact on different regions of the country.

    The recession of the early part of the decade was due to the bursting of the internet/telecommunications/media bubble.  Massachusetts was a big player in internet content and telecommunications equipment companies.  Hence, employment levels in the state were crushed when the bubble burst.  That accounts for the poor performance over 2000-2006.

    Massachusetts did not have a large residential construction sector nor does it have large numbers of manufacturers that produce household goods.  When the housing bubble burst in 2007-present, it had relatively less impact on Massachusetts than other places.  In Florida, much of the economy was dependent on demand from inflows of people from other regions of the country.

    Employers do not make expansion decisions based on short run considerations.  Taking credit for short term swings is the stuff of politicians.  Long term, businesses look for:

    – Low commercial electricity rates

    – Low cost commercial space

    – Right to work state

    – Light regulatory environment

    – Low commercial property tax rates/low corporate income tax rates

    Massachusetts ranks low on every one of these metrics.

  • In doing some research for the Gubernatorial election, I admittedly came to similar conclusions as Greg. And I appreciate how he presented the data – these are the facts, let’s agree on that first bfore we analyze.

    The fact of the matter is, Massachusetts did perform better than most through the downturn.

    The key part here is the analysis of why, and really, how to keep improving. If we want to look purely at data, and then draw conclusions – we should talk about Texas, and how it simply dominates in terms of job creation. No income tax. And great tort reform. If we lowered (or eliminated) the income tax here, our growth would be incredible. The numbers don’t lie, there is a tremendous correlation between tax rates/structure, and economic growth/job creation. Massachusetts actually is one of the few with a flat tax (which is great), and relative to its Northeastern peers, it is generally a low rate. This is why Massachusetts can outperform. Period.

    By the way, the other numbers that don’t lie are healthcare costs. MA costs are growing faster than anywhere in the country. We have RomneyCare. Want costs to fall? Repeal RomneyCare…