A broad variety of indicators illustrate gradual but widespread improvement in the Bay State economy over the last year.
Pockets of vulnerability remain in areas such as housing. Job growth remains sluggish, and overseas crises could sidetrack the recovery. But economic experts say the overriding trend points toward strengthening conditions.
Massachusetts has weathered the economic downturn better than most states, with an unemployment rate consistently lower than the U.S. average. The state’s leadership in the biotech, high tech and medical industries has helped stabilize the job market, said Michael Goodman, a professor of public policy at University of Massachusetts-Dartmouth.
“Our unemployment rate is significantly lower and that is due to our workforce being better educated than the nation,” Goodman said. “The people who’ve been suffering the most in this difficult economy are people with lower levels of educational attainment and marketable skills.”
Associated Press interactive graphic
Fred Breimyer, regional economist for the Federal Deposit Insurance Corp., said many economists revised their forecasts in mid-2011 downward after disruptive global events such as the Japanese tsunami. “The first half of the year was disappointing, but by year’s end things were getting better and that’s extended into this year,” Breimyer said.
An improving commercial real estate market reflects companies’ brightening confidence in the region.
Since last April, businesses and institutions have leased two million square feet of additional space within the 178.6-million-square-foot Greater Boston office market. In the fourth quarter alone, firms added 861,000 square feet of space, the biggest quarterly increase since 2007.
Biotech companies such as Biogen Idex and Vertex Pharmaceuticals are building massive new headquarters complexes in Cambridge and South Boston, while tech companies such as Google and Microsoft have both established a substantial presence in Cambridge.
“When you have those companies, it’s almost like a snowball effect,” said Brendan Carroll, a senior vice president at Boston-based commercial real estate brokerage Richards Barry Joyce Partners. “You have other groups that want to be close to them.”
Transportation networks are becoming more crowded with commuters and travelers.
According to statistics supplied by the MBTA, ridership on the region’s mass transit system has risen by double-digits in the last year. Passenger counts are up at Logan Airport, and so is traffic on the Massachusetts Turnpike from the New York border to Boston.
“Those are clearly reflections of an economy in expansion mode: more people working, more people commuting to work, and more business and leisure travel,” Goodman said.
Consumers are showing signs of loosening their purse strings in the new year. Spending at restaurants rose by double digits in January, while overall retail sales increased by more than 6 percent, according to the state Department of Revenue.
Retail sales got a boost from last summer’s sales tax holiday and continued on an upswing throughout the holiday season, said Jon Hurst, president of the Retailers Association of Massachusetts. “The industry has gotten more cautiously optimistic,” Hurst said.
But brick-and-mortar retailers will continue to face increasing pressure from online retailers, particularly among younger consumers, Hurst said. “That is still something that is hurting Main Street and until we fix that, there are still a lot of sales that are going to be going out-of-state,” Hurst said.
Residential real estate remains one of the weakest sectors of the local economy. The housing market is attempting to pick up momentum after a slump that has lingered for nearly five years. Sales volume of single-family homes fell 6 percent statewide in 2011, and the median price declined 3 percent, according to The Warren Group of South Boston, a real estate research company.
While the overall sales volume fell for the full year, home sales actually rose in the last months of 2011 when compared to the same months in 2010. In fact, the number of statewide transactions exceeded the previous year’s levels in five of the final six months.
“You often see the sales volume pick up for a year or more before you see an improvement in the median price,” CEO Timothy Warren Jr. said. “My gut feeling is that the market is improving and we’re digging our way out of what’s been a very long slump.”
Events in Europe and the Middle East pose the greatest threats to the Massachusetts economy in 2012.
With 40 percent of Bay State exports headed for Europe, the continent’s debt crisis could hurt manufacturers that do substantial business there, Goodman said. And global tensions in the Middle East have sent gasoline prices soaring, with ripples spreading throughout many corners of the economy.
“We’re doing better but we’re not immune to the international forces that slow growth,” Goodman said.
Steve Adams may be reached at sadams@ledger.com.