| Wage and salary growth boosted real gross domestic product in Massachusetts by 4 percent in the second quarter of 2017, outpacing real GDP growth in the U.S. of 2.6 percent during the same period.
The findings are from a recent study by MassBenchmarks, the journal of the Massachusetts economy published by the University of Massachusetts Donahue Institute in collaboration with the Federal Reserve Bank of Boston.
In the second quarter of the year, state wage and salary income shot up 24 percent on an annual basis, according to estimates from state withholding taxes, after only growing 3.7 percent in the first quarter. U.S. wage and salary income only grew 3.7 percent in the second quarter.
Relative to the second quarter of 2016, state wage and salary income is up 6.2 percent while national wage and salary income is up 3.1 percent.
State payroll employment expanded in the second quarter at a 0.9 percent annual rate after growing 2.2 percent in the first quarter, whereas U.S. payroll employment grew at a 1.4 percent annual rate in the second quarter and at a 1.5 percent rate in the first quarter.
Between the second quarter of 2016 and the second quarter of 2017, employment grew at virtually the same rate in Massachusetts as nationally, by 1.7 percent and 1.6 percent respectively.
But while unemployment has decreased nationally since the end of 2016, state unemployment has increased from 3.1 percent in December 2016 to 4.3 percent in June.
The study attributes the rise in the state’s unemployment rate to more people entering or rejoining the labor force, which outpaced rising employment in the first six months of the year.
“This rapid increase in the size of the commonwealth’s labor force – indicative of a healthy labor market attracting new or returning job-seekers into the labor force – explains the seeming paradox of both rising employment and a rising unemployment rate,” the study states.
Similarly, the number of people working part-time, but want full-time work, and those who want to work but have not looked for work in the last four weeks – the broader U-6 unemployment rate – rose in Massachusetts, but fell nationally.
The U-6 unemployment rate in the state went from 7.5 percent in December 2016 to 7.8 percent at the end of the second quarter, but dropped nationally from 9.2 percent in December 2016 to 8.6 percent in June.
Again, the study states this trend in the state reflects more people entering or rejoining the work force.
Consumer and business spending on items subject to the state regular sales and motor vehicle sales taxes fell by a 1.4 percent annual rate in the second quarter after rising at a 9.3 percent rate in the first quarter.
Sales tax eligible spending was 2.9 percent higher in the second quarter of this year than in the second quarter of last year.
Overall, according to the study, consumer spending appears to continue to be growing at a moderate pace, in line with moderate increases in consumer confidence.
The MassBenchmarks Leading Index suggests that the state’s economy will continue to grow at a 2.7 percent annual rate for the final six months of 2017.
This pace of growth is sustainable, the study states, provided skilled job seekers continue to be available to support the expansion of the commonwealth’s growing employers. However, the study also notes that an aging labor force is also likely to become a constraint on state economic growth.
