“The economy’s performance is much improved, and prospects are good that it will continue to improve,” Mark Zandi, Chief Economist at Moody’s Analytics, told the New England Economic Partnership’s Outlook Conference at the Federal Reserve Bank of Boston last week.
U.S. gross domestic product is expanding at an underlying rate of 3 percent annually, he said, though held lower in 2013-14 by fiscal drag from federal budget cuts and tax increases. His forecast shows growth accelerating in 2015-16 before being reined in by rising interest rates.
Zandi rejected the concept of a “new normal” pattern of slow growth like those prevailing in Japan and Europe. The U.S., having controlled unit labor costs better than other economies and achieved virtual energy independence, is now by his analysis the most competitive location in the world. Household debt burdens are lower overall, and public debt, though elevated, is stable and sustainable as long as health care costs are under control. The current slack in the workforce will be absorbed quickly; in fact, he warned, over the next 15 or 20 years, “our biggest problem is going to be a screaming lack of labor.”
Our own region will receive less of a lift than others from the rebound in construction, and will be hurt by constraints on energy delivery and by close economic ties to near-stagnant Europe. The most serious issue confronting Massachusetts and New England, however, is the workforce shortage, which is more immediate for us because of our slow population growth.
The Massachusetts forecast presented by Alan Clayton-Matthews of Northeastern University, a member of AIM’s Board of Economic Advisors, calls for “a modest acceleration though 2016 … followed by a demographic-induced slowdown.” By the beginning of 2017, he predicted, the state’s workforce will stop expanding and begin to erode as baby boomer retirements outweigh new entrants; and labor constraints quickly slow the state’s economic growth to below the national rate even on a per-capita basis.
This is the kind of big issue, both immediate and long-term, affecting employers’ day-to-day operations and their public policy priorities, which AIM will address in developing The Blueprint for the Next Century, a plan to create jobs, prosperity and long-term economic growth in the commonwealth. We are seeking to identify creative and compelling ideas from employers like you to improve the Massachusetts economy.
Please join AIM's John Regan for a free online discussion next Wednesday, October 15, from 2-3 p.m. to discuss the steps that business, government and other institutions must take to ensure that the next generation of Massachusetts residents will be able to build lives for themselves and their families.