By Brooke Thomson
President & CEO

It appears for the moment that the Federal Reserve has engineered an economic “soft landing” by moderating inflation without throwing the nation into recession.

It also appears, however, that Massachusetts may be slowing down a bit faster than the nation as a whole.

Alan Clayton-Matthews, Professor Emeritus of Economics and Public Policy at Northeastern University, and a member of the AIM Board of Economic Advisors (BEA), recently presented data to the BEA that shows Massachusetts facing an undertow beneath the otherwise rosy economic numbers.

Start with economic output. MassBenchmarks reports that the commonwealth grew at an estimated annualized rate of 1.2 percent in the fourth quarter of 2023 compared to 3.3 percent for the United States. Massachusetts grew by 4.8 percent in the third quarter.

Payroll employment grew 0.8 percent in Massachusetts during the final three months of last year, well below the 1.3 percent pace for the rest of the nation. That pattern has been consistent in the post-pandemic era – the graph below shows that the United States regained all the net jobs it lost during the COVID-19 pandemic a year before Massachusetts did.

What concerns AIM the most is the fact that data suggest fewer people are participating in the Massachusetts economy. The commonwealth’s Labor Force Participation Rate has declined from more than 67 percent in 2019 to less than 65 percent today.

Most experts agree that the slower growth rate does not reflect cyclical weakness in the Massachusetts economy. Instead, it underscores underlying structural impediments such as demographic shifts, labor-force limitation, housing costs, and transportation issues that continue to hold back the commonwealth.

AIM has been at the forefront of the business community’s response to these issues, understanding that the structural shortage of workers in Massachusetts requires employers and policymakers to pull out all the stops to get as many of our fellow citizens as possible into the workforce.

It’s the reason we launched our Pink Slip initiative to support caregivers in the workplace. It’s the reason we support pay equity and transparency legislation. It’s the reason we support many of the workforce development portions of Governor Maura Healey’s economic development plan and it’s the reason we support the Governor’s skills-based hiring approach. It’s the reason that AIM HR Solutions works with scores of companies each month on strategies to attract and retain talent.

Other initiatives are in development, and we have some exciting announcements coming soon.

The bottom line is that a persistent shortage of workers continues to hamstring Massachusetts employers. The only way to liberate the state economy from these limitations is to address the issues that prevent our fellow citizens from living and working here and sharing in the economic prosperity of the commonwealth.