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MASSACHUSETTS ANALYSIS
MEAGHAN LYNCH MACROECONOMICS PROFESSOR BAUMGARDNER APRIL 23, 2013

TABLE OF CONTENTS:
Page 3: Brief History Page 4: General Statistics/Background of Massachusetts Today Page 4: GDP of the State Page 5: Unemployment/Inflation Rates Page 5-6: Major Industries Page 6-7: Areas of Advantage Page 7: Major Trading Partners Page 7-8: Massachusetts State Budget Page 8-9: Massachusetts State Law Page 9: The Future of Massachusetts Page 9: Conclusion Page 10: Bibliography

Brief History
In seventeenth century Massachusetts, the founders of the Massachusetts Bay Colony area consisted of Puritans who had a strong vision of creating an institutional structure that focused mainly on self-restraint. In the settlers efforts to create a balance of government authority and free will, the wealth was distributed evenly throughout the state. Leaders in the Bay Colony invested toward the success of their Utopian venture, while most families had high standards of living with the abundant amount of land available. The large gain that Massachusetts had over other colonial states was unexpected during this particular era and gave them advantages in education, autonomy, and access to land. In 1631, a charter of the Massachusetts Bay Company consisted of a General Court and Court of Assistants. The Court of Assistants consisted of twelve magistrates who assisted the General Court in governing the new colony for four years. The two divisions lasted in the colony, but went through minor judicial changes. About thirty years later from 1661-1666, the colonial states were ruled under the Stuart monarchy in England, but Massachusetts was still considered a colony independent from English control by some scholars. Other found that the Bay colony adapted to the Restoration and a number of merchants formed a royalist party, which became loyal to England and unsympathetic to the loss of control that Massachusettss government faced in the restoration. These feelings turned around when a commonwealth faction demanded loyalty of the colony and a rise against any higher authority breaking the charter. (Colony

4 or Commonwealth 90) The political community believed in self-governance and ultimately defeated the rule under the monarchy.

General Statistics/Background of Massachusetts Today

Today, Massachusetts is the third most heavily populated state in the United States reaching above 6.5 million inhabitants in 2012. The dense population is a result of the surface area of only 10,555 square miles, which estimates at 840 people per square mile. The last recorded population census for the state was a rise of 3.1% in the past ten years at a total of 6,547,629 people. The five largest cities in Massachusetts consist of Boston, Worcester, Springfield, Lowell, and Cambridge. Although most range between 100,000 and 200,000 in population, Boston exceeds them all at a population of 617,594 people. In the future, the expected mark to reach at the 2020 census is estimated to reach seven million.

GDP of the State

In calculating GDP, an estimate of the total value of final goods/services produced in an economy is projected from the Dept of Commerce. From 2007 to 2009, Massachusetts GSP output decreased slightly during the recession, but quickly picked back up with a 4.2% increase in 2010. A year later, the GSP had a 2.2% increase from $344 to $351 billion which was rated as the 7th fastest GSP growth in the nation. Through the booming technology sector, there has been a strong recovery in 2011. According to NEEP, as the U.S. real GDP grew at a 1.7% rate in 2012, the state real GDP in Massachusetts grew at a rate of 2.5%. This shows the strength of Massachusettss economy and fast-paced recovery. The GSP for the state of Massachusetts is forecast to rise up in 2013 with new technological improvements.

Unemployment/Inflation Rates
Unemployment rate is the main indicator in determining the economic performance in a state. The employment has significantly recovered the past few years with a 1.2% increase from 2011 to 2012 and a job gain of 87% in 2012. Also, officials have recognized an underestimate of the 2011 and 2012 job growth in the release of recent data. In the year 2012, Massachusetts unemployment rate was recorded at the 14th lowest in the country. More recently, In January of 2013, the unemployment rate was at 6.7 percent, which was currently below the national rate at 7.9 percent. The state office of Labor and Workforce Development provided the unemployment rate statistics and stated that in January 2013, the state of Massachusetts added more than 16,000 new jobs. The expectations for the future are a continued recovery considering layoffs are at a low pace. The economy is finally beginning to heal from the recession in 2009. On the opposite side of the spectrum from Unemployment is Inflation. In 2012 the Consumer Price Index was calculated at 245.698 and in the following year it was 248.719. The inflation rate from 2012-2013 is a low 1.2 percent. Although there is usually a trade-off occurring between unemployment and inflation, Massachusetts provides a balance between the two extremes. On a timeline, it would be positioned relatively in the middle of the spectrum but closer toward unemployment.

Major Industries
The most important Massachusetts industries include health care, health education, and technology. These areas stimulate and support the economy and contribute to most of Massachusetts Gross-State Product. Most of the technological companies are

6 inventing new drugs, devices, and software to the market. These new products are presented at national conventions located in Massachusetts. One segment of the techindustry is the MA tech trend, which analyzes datasets from the Internet through advanced software.

Areas of Advantage
In the fast recovery of the recession, Massachusetts sets itself apart from other states due to its high-tech industry and technological products. The global demand for new and improved technology placed Massachusetts with an extreme advantage over the nation. Boston Scientific, a worldwide manufacturer of devices, is highly competitive in developing new products and is just one example of Massachusettss advantage in the technology sector. In 2012, The American Council for an Energy-Efficient Economy (ACEE) State Scorecard rated Massachusetts as being the top energy-efficient state in the nation. Governor Deval Patrick expresses his tremendous pride for his innovative and sustainable state. Through the Green Communities Act, Massachusetts is continuing in their efforts to become self-sufficient in their energy sources and a leading figure for sustainable energy. Another advantage that is non-related to technology is the real estate and housing market in the capital of Massachusetts, Boston. In the Boston area, the values of homes are becoming stable and there is an increase in sales. As the housing market improves, it improves the economy and positively affects individuals standard of living. The Boston Fed, Beige Reports elaborated more on the upside of commercial and residential real estate. Since 2009 and 2010 difficulty in vacancy rates and leasing, Boston has finally stabilized in commercial real estate and is expecting a slow growth in the next few years.

7 The beige report also points out that in the residential real estate industry, there is an increase in home prices. Although the housing prices in Massachusetts are relatively higher than most states, they are still affordable and individuals will not be forced to migrate elsewhere that occurred in the last expansion.

Major Trading Partners

Massachusetts major export markets include Europe and China. Many of the exports are promoted through the State Trade and Export Promotion program also recognized as STEP, which is accessible by the Massachusetts Office of International Trade and Investment. It was created in response to the President Obamas Small Business Jobs Act of 2010. This grant program, funded by the Small Business Administration, has helped businesses in Massachusetts to export over $27 billion per year worldwide. Unfortunately, in 2012 the merchandise exports decreased 7.8%, which has weakened the states performance. This has caused a slowdown in the equipment, software, and technological product exports. As Massachusetts was negatively affected by the low demand of products, the U.S. found a 5% increase in exports.

Massachusetts State Budget

The Massachusetts Legislative Preview for 2013-2014 laid out the facts for the 2013 Supplemental Budget. An estimate of $540 million budget deficit has been a result of a decline in revenues and other shortcoming factors. Massachusetts is subject to a decrease in net earnings due to the long-term issues of the Federal Governments resolution of the fiscal cliff. Deval Patrick, the governor of Massachusetts, planned for immediate spending cuts in December of 2012.

8 Most of the governmental budget is put towards international attractions and visits organized by the Office of Travel and Tourism in affiliation with Brand USA. In 2011, the budget for this focus was placed at $4.5 million. Another non-profit organization working with Brand USA is The Greater Boston Convention & Visitors Bureau, which is expecting the number of international visitors to double in the next few years. Although the state is dealing with a budget deficit, some of the recent benefits of living in Massachusetts are the property taxes that have decreased for homeowners since 2011 and are continuing to drop. A limit on increases has allowed for a huge relief to Massachusetts citizens. This was significant for the state of Massachusetts because in 2010, Tax Foundation ranked it 32 out of 50 of states with a high tax burden.

Massachusetts State Laws

Some of the federal laws in effect for 2013 are focused in increasing costs of individuals by forcing healthcare providers toward more corresponding care with the payers. Massachusettss laws in the health division are also making deep cuts by hospitals in Medicaid and Medicare, which are two health insurance programs for Americans receiving low incomes. On the other hand, individuals are getting a fair share in their health care coverage. One law in particular, The Fair Share Employer Contribution for Health Insurance, is being altered through legislation into, An Act Improving the Quality of Health Care and Reducing Costs through increased Transparency, Efficiency, and Innovation. This act will be in effect July 1, 2013 to reduce costs in health care coverage that will allow for higher quality healthcare for a lower and more manageable cost. In

9 addition, employers can be qualified for annual tax credit of $10,000 for any new wellness programs established for employees. Another new 2013 Massachusetts law that is being enacted to modify previous laws in the staffing industry is the Temporary Workers Right to Know Act. One modification is the workers right to knowledge of an assignments appropriate wages, length of time, and safety precautions. Other modifications in the employees favor are reimbursements of transportation costs for workdays in which there is no employment present and the banning of work-fee charges to temporary worker.

The Future of Massachusetts

Looking ahead, there are likely to be significant growth in the states economy and employment. Specifically, the large mix of goods and services that are supporting the industry and boosting the economy are going to develop and form trends in the long run. The high importance of the technology sector of Massachusetts is predicted to supply the nation with significant output. Based on employment, jobs in education and health services are expected to be 14.5% higher from 2008 to 2016. On the other hand, there is a 7.2% decrease expected in construction jobs. Also looking into 2016, there is a 4.8% increase expected of nonagricultural employment. Overall, the improvements in employment rate are projected to be a high of 4.8% from the recession of 2009, into the developed economy in 2016. The steady improvements are forming a positive outlook for Massachusetts in the near future.

Conclusion

10 Through the technological advancements and job recovery, Massachusetts is a fairly stable state with low financial stress. The state has been on its fourth year of expansion since 2009 and all of the jobs lost due to the recession have been regained in the expansion. The state of Massachusetts has an advantage over other states considering it recovered from the recession faster than the entire nation. Although there has been a strong recovery since the 2009 recession, the state is in need of a budget plan to work through the long-term issues caused by the fiscal cliff to fix the considerable deficit in effect. Hopefully, Governor Deval Patrick can find a solution to the current deficit problem, considering his capability of largely impacting a community in his sustainable energy efforts.

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Bibliography
Massachusetts Population 2012. (2011-2013). Retrieved April 23, 2013, from World Population Review Atom: http://worldpopulationreview.com/massachusetts-population-2012/ Brighter Outlook for Mass. Businesses in 2013. (2012, December 30). The Boston Globe. Massachusetts Repeats as Top Energy-Efficient State. (2012, October 22). Air Conditioning, Heating, & Refrigeration News. New England - Consumer Prices. (2012, February 10). Retrieved April 23, 2013, from U.S. Bureau of Labor Statistics: http://www.bls.gov/xg_shells/ro1xg01.htm New Massachusetts Laws in 2013. (2012, December 7). Mondaq Business Briefing. Massachusetts 2013-2014 Legislative Session Preview. (2013, January 11). Mondaq Business Briefing. Boynton, D. (2013, January 12). Grants Available To Spur Area Exports; Businesses Can Use State Program to Expand Opportunities. Telegram & Gazette. Massachusetts: Worcester Telegram & Gazette, Inc. Chesto, J. (2011, January 13). Report: Modest Momentum Expected; New England Economic Recovery Continues to Gain Some Traction. The Patriot Ledger. Glassman, J. E. (2013, February 17). Massachusetts Economic Outlook. Regional Perspectives. Massachusetts: JPMorgan Chase & Co. Harrop, F. (2012, June 20). The Massachusetts Model For Reform. Virginian-Pilot . Lucas, P. R. (1967). Colony or Commonwealth: Massachusetts Bay, 1661-1666. The William and Mary Quarterly, 88-107. Nelson, W. E. (2005). The Utopian Legal Order of the Massachusetts Bay Colony, 1630-1686. The American Journal of Legal History, 183-230. Precious, T. (2011, February 6). Massachusetts Offers Less-Txing Lifestyle; Limit on Increases Envied in New York. The Buffalo News.

site this one: http://www.newenglandcouncil.com/assets/MA-ExecutiveSummary.pdf

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