BOSTON — A strengthening housing market and consumer spending on automobiles are helping to improve the Massachusetts economy, but higher federal taxes combined with significant federal spending cuts are serving as a drag on growth, area economists say.
“Even as the Massachusetts economy shows some genuine signs of strength, contractionary federal government fiscal policy is manifestly slowing economic growth in Massachusetts,” MassBenchmarks Executive Editor Robert Nakosteen wrote in a summary of recent discussions by area economic experts released Thursday morning.
“In the coming months, assuming these policies stay in place, a further retarding of economic growth can be expected. At the same time, the state’s labor market continues to be under considerable stress and faces profound challenges that are not fully reflected in the state’s headline unemployment rate.”
While the state’s jobless rate is a full percentage point below the national rate, rising numbers of people in Massachusetts are working part-time but want to work full-time or have not looked for a job in the last four weeks but would take one if offered.
MassBenchmarks reported gross state domestic product growth slowed to a 1 percent annualized rate in April and May, with employment growth in Massachusetts “virtually stalled,” a situation reflected in the state’s withholding tax collections.
Also, export activity in Massachusetts was down more than 11 percent in April, compared to April 2012.
MassBenchmarks is published by the Donahue Institute at UMass in collaboration with the Federal Reserve Bank of Boston.