A recent report from the Pioneer Institute concludes Massachusetts has been in an economic slowdown for the past four years. Photo by James Sanna | Banker & Tradesman Staff
It’s unlikely Massachusetts will ever return to its quasi-Rust-Belt days of the 1970s, when manufacturing plants were shutting their doors and the jobless rate peaking at 12 percent mid-decade.
But the Bay State’s economy, after experiencing a renaissance over the past few decades powered by knowledge-based sectors like life sciences and high-tech, now appears to be mired in what could be a prolonged slowdown.
And unless we find a way to bring down housing costs and address business community concerns about taxes and regulation, a return to brisker and more dynamic growth is unlikely to happen anytime soon.
That’s my main takeaway from a new report released last week by the Pioneer Institute, which finds that economic growth in the Bay State has slowed dramatically over the last four years and now trails other leading states.
Overall, the crazy high cost of housing and an increasingly “less than hospitable” business climate have taken a toll on the Bay State’s economy, turning it from a national leader to a laggard, according to the report, “Massachusetts at Risk: GSP Growth Slows Relative to Competitor States.”
The Bay State’s economy fell from the fourth fastest growing in the country to the 28th from 2020 to 2024, the public policy think tank finds. The high-tech sector and other knowledge-based industries – the state’s bread and butter for a quarter century – are taking the biggest hit.
Overall per capita private sector growth – as measured by GSP, or gross state product – weighed in at 12.5 percent over the four-year period, well behind that of other leading states like Florida and Texas, which grew at roughly double the Massachusetts rate.
“Continued inaction on longstanding barriers to growth, like housing and taxes, leaves the state less able to compete for talent and investment – and even more vulnerable to new federal policy pressures,” Aidan Enright, Pioneer’s economic research associate and author of the report, said in a statement.
GDP Contribution Drops
Even more disturbing, the state’s share of national GDP in the crucial professional, scientific and technical services sectors – a rough proxy for high-tech and other knowledge-based industries – shrank by 6.6 percent from 2020 to 2024, the report finds.
By contrast, Florida, Texas and North Carolina all gained significant market share.
While Massachusetts remains a top player in these key industries, its lead is now being steadily eroded by Sun Belt states where the cost of living is much more reasonable, especially when it comes to housing costs, and that also offer more business-friendly tax and regulatory policies, the report contends.
“The Pioneer Institute’s report spotlights a serious threat to Massachusetts’ economic future – especially in our innovation sectors, long the backbone of the commonwealth’s success,” Chris Anderson, president of the Massachusetts High Technology Council, said in a statement.
Of course, Massachusetts has weathered slowdowns before, such as the lull in growth from 2010 to 2014 in the wake of the Great Recession. But this slowdown appears to be more structural in nature, rather than the result of a national economic downturn.
It’s not just that the Massachusetts is grappling with a dire crisis in housing affordability. There is also now “weak private sector job growth (among the slowest in the country), … anemic rates of new development activity and slow permitting, an aging labor force and sustained net outmigration – particularly among younger and higher-income residents,” according to the report.
Add these all up and you have a set of trends that “threaten the state’s long-term economic competitive edge,” Pioneer warns.
Scott Van Voorhis
“It’s a wake-up call for elected leaders to move beyond incremental steps and pursue a bold, unified strategy – one that taps our world-class universities, research centers and talent to restore Massachusetts’ edge in innovation and opportunity,” Anderson said.
Here’s hoping this is one wake-up call that State House leaders don’t press the snooze button on.
Scott Van Voorhis is Banker & Tradesman’s columnist and publisher of the Contrarian Boston newsletter; opinions expressed are his own. He may be reached at sbvanvoorhis@hotmail.com.
