Secretary Bialecki, On Jobs, A Better Response than “Meh” is Deserved

Meh

At various times over the last five years, Massachusetts has done particularly well compared to other states (ranking 4th or 5th or 6th best in the country) and at other times we have not done so well. It happens. It’s easy to over-analyze any short-term numbers. – Greg Bialecki – Massachusetts Secretary of Housing and Economic Development

Yes it is easy to “over-analyze” any short term economic numbers.  That much is true.  However, that is what the Deval Patrick Administration was doing during the 2010 campaign, using monthly job’s numbers (Bureau of Labor Statistics Current Employment Survey) to show that we in Massachusetts had a booming economy compared to the rest of the nation.  In hindsight the data does not support that contention.  

Bialecki’s response above, was the administration’s answer to the question, what happened starting in the second quarter of 2011 that caused a divergence of Massachusetts job growth from the nation?  The chart below highlights that divergence.

It is clearly visible that around April of 2011 the Massachusetts economy started to slow down it’s job creation engine, while the national economy kicked into a higher gear.  Finding out what happened is key to averting another “lost decade” for Massachusetts.

Something is clearly happening.  Taking a look at a larger time period as Secretary Bialecki suggested is warranted.  After the jump, please find a chart of the job creation indexed to January of 2007 (Bureau of Labor Statistics Current Employment Survey).

Using the date of Deval Patrick taking office does seemingly paint a picture of Massachusetts doing better than the nation.  Asked about this apparent trend, Charlie Baker, former Republican Gubernatorial Candidate said via email, “When you hit the wall at 10 mph, it’s a lot different than hitting it at 70 mph. The rest of the country fell harder than we did – because they were growing.”

Is Baker right? Was it a question of momentum and inertia causing a larger drop nationally?  Taking a long-term view seems to bear this out.  Below is a chart of job growth, indexed to January of 1990.  January of 1990 was picked because it is the first year Data is available for ease of download on the Bureau of Labor Statistics website.

The chart above shows that yes, the nation was growing at a much faster rate in the mid 2000s before the crash.  Because of our relatively slower growth, Massachusetts wasn’t engaged in the same sorts of things the economy as a whole was, our housing construction market has been stagnant for decades, that was the primary industry effected early on nationally.  

The first chart above, shows that since reaching the trough for employment since the recession happened, in around December, 2009 to January of 2010 the nation as a whole has been growing at a much faster rate than Massachusetts. Throughout 2010 Massachusetts seemingly kept up with the nation, in 2011 the Commonwealth slowed down.

Rephrasing Baker’s quote above.  Not only was the economy growing faster nationally than in Massachusetts which resulted in the relatively shallow Massachusetts jobs recession, but our relative engines are vastly different.  It’s as if the nation hit the wall driving a NASCAR race car, while Massachusetts hit it driving an electric golf cart.  As the relative vehicles have been repaired, the nation’s race car is accelerating past us once again.

The excellent study by Andrew Sum of Northeastern University for MassINC seemingly supports this contention.  On page 56 of the study, entitled “Recapturing the American Dream: Meeting the Challenges of the Bay State’s Lost Decade”, Sum writes:

The shift-share analysis of industrial output changes in the state reveals that the national growth effect by itself would have increased state real output by $44.4 billion over the 2000-2009 time period. This compares to an actual increase of only $26.9 billion, or a level of output that was $17.5 billion lower than predicted by the national growth effect. The below-average performance of the state in producing a higher level of GSP was not due to an unfavorable mix of industries with below-average growth in output nationally but instead due to declining state shares of output in key industries. The net industry mix effect was exactly equal to zero; however, the regional share effect for the entire economy was a $19.8 billion or between 5 percent and 6 percent of the state’s real GSP in 2009.

There is something about the Massachusetts economy which structurally hinders growth.  Sum does not expound on what that may be, but clearly shows a problem is there.  Instead of a knee jerk, “Meh” when asked a serious question about the economy, perhaps the Patrick Administration would do well to study it and find the root cause.  The citizens of this Commonwealth can’t afford anything less.

About Rob "EaBo Clipper" Eno