Regional economy still isn’t gathering steam

By Dan O’Brien | The Lowell Sun | October 28, 2012

John Mattheos, owner of Salon Mattheos, has been building his brand in Lowell for 20 years. He’s seen strong economic times and weak ones.

Earlier this year, Mattheos took advantage of a still-depressed real-estate market to scoop up a foreclosed property on Rogers Street, then invested tens of thousands of dollars to renovate it into a salon.

“I grew up in this neighborhood, Belvidere, so I figured I would do really well here,” Mattheos said in a recent interview. “It’s been OK. But I really thought I’d be able to get to that next level by now.”

More than three years after the last recession (supposedly) ended, many businesses are just not seeing the strong comeback they anticipated would happen.

Because it really hasn’t happened.

A report released Friday from MassBenchmarks, a journal of the Massachusetts economy published by the UMass Donahue Institute in collaboration with the Federal Reserve Bank of Boston, found that economic growth in Massachusetts was a mere 1.9 percent during the third quarter.

In past economic recoveries, Massachusetts has shown a tendency to bounce back both more quickly and with more vigor. But third-quarter Bay State growth was even slower than the nation’s own sputtering recovery, which came in at 2 percent for third quarter.

MassBenchmarks also revised down economic growth in the state earlier in the year. In the first and second quarters of 2012, the state’s economy grew at revised annual rates of 2.0 percent and 3.0 percent respectively, well below the 4.0 percent rate of growth originally reported for each quarter earlier this year.

In the first two quarters of 2012, the U.S. economy grew at annual rates of 2.0 percent and 1.3 percent, respectively.

Economists say factors contributing to the state’s slower growth include higher unemployment (the state’s rate has risen from 6 percent in June to 6.5 percent in September) and lower spending on items subject to the regular sales tax and motor-vehicles tax, which declined by an annual rate of 1.5 percent in the third quarter.

Mattheos is aware people cut back on discretionary spending during leaner times.

“They come less often,” he said. “But I’m always looking for new customers, too. I’m in a business where a lot of people come and go, but I’ve been here in Lowell for 20 years and that should count for something.

“I’m not doing badly, I just thought it would be better by now.”

Northeastern University economist Alan Clayton-Matthews, who serves as senior contributing editor for MassBenchmarks, said in a statement that current trends suggest state economic growth will only be marginally better, 2.3 percent, through March 2013.

“Given expected productivity growth, this trend is consistent with an expectation of virtually no net employment growth in Massachusetts over the next six months,” he said.

Economists also blame difficulties in Europe and the global growth slowdown as drags on the state’s economy. Through Aug. 31, state exports were down 5.9 percent compared to the same period last year. In contrast, U.S. exports grew 5.6 percent during the same period.

As far as employment goes, Greater Lowell has added just 1,000 jobs in the year ended Sept. 30, according to the Massachusetts Executive Office of Labor and Workforce Development. That brought total employment in the region for September to 118,100, only 0.9 percent higher than what it was the same time a year ago.

State job growth over that same period was 1.6 percent.

Aaron Schindler, a regional vice president for staffing firm Adecco, said in a recent interview that companies have been reluctant to hire unless they are able to get workers who are already fully trained.

“They don’t have the resources for training,” he said, adding that the “same pockets of strength” are seen in the Massachusetts labor market, namely demand for skilled positions related to the medical-device industry and electromechanical assemblers.

“If a position pays $15 to $25 per hour, it’s in demand,” Schindler said. “The $10-per-hour jobs, not so much.”

Housing has shown signs of rebounding, but builders are in some cases responding to shifts in demand. Longtime Dracut developer Steve Coravos, along with partner Gary Campbell, recently won approval from selectmen to change a plan for a 48-unit residential complex planned for Mammoth Road from condominiums to monthly rentals that will count toward the town’s 40B requirement as affordable housing.

Condo sales in the region declined in September, year over year, although they are up year to date.

“There isn’t a market for that, and I don’t think it’s going to be there for a while,” said Coravos, of condominiums. “We’ve been extending the permits every two years, waiting for the economy to move, but it just hasn’t for that market (condominiums).”

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