Brighter outlook for Mass. businesses in 2013
US and global economies are predicted to rebound if the fiscal crisis can be resolved swiftly, and Massachusetts is well positioned to build on its strengths
By Globe Staff | The Boston Globe | December 30, 2012
The Massachusetts economy, despite slowing in recent months, should improve in 2013, adding jobs at a moderate pace and gaining speed towards the end of the year, according to economic forecasts.
But the forecasts hinge on an important factor: the fiscal cliff. If drastic federal tax increases and spending cuts go into effect next month as scheduled, they could tip the state and national economies into a double-dip recession, according to Northeastern University economics professor Alan Clayton-Matthews. Massachusetts stands to lose more than 50,000 jobs in the next few years unless a political compromise is reached soon.
Clayton-Matthews said he expects Congress and the White House will reach a compromise before the worst can happen. And once they do, he said, it should provide a lift for Massachusetts, freeing employers from uncertainty about taxes and the government’s next move.
“It looks like by the end of the year the economy will be accelerating robustly,” Clayton-Matthews said. “This weak period now, with all this uncertainty from the fiscal cliff and the slowdown in Europe, will improve throughout the year.”
Massachusetts recovered from the recession faster than the nation as a whole largely due to its high-tech industry and strong global demand for technology products. But the state economy slowed in recent months as national and global economies sputtered, weakening demand for Massachusetts products in key export markets such as Europe and China.
Both US and global economies, however, are poised to rebound, according to IHS Global Insight, a Lexington forecasting firm. Economists there say the dynamics for a gradually accelerating US recovery are already in place, assuming tax and spending issues get resolved. Global growth should also accelerate gradually next year.
“Over the past year, the risks facing the global economy were skewed to the downside,” said Nariman Behravesh, IHS Global Insight’s chief economist. “In the coming year, not only will some of the big-four threats — another US recession, a Eurozone meltdown, a Chinese hard landing, and a war in the Persian Gulf — become less menacing.”
In Massachusetts, employment is expected to grow by just under 1 percent, or about 30,000 jobs, in 2013, compared to 1.2 percent this year, Clayton-Matthews said. By 2014 and 2015, employment growth will increase by 2 percent, or more than 60,000 jobs, each year.
So far the state has regained 87 percent of the 143,000 jobs lost in the recession. By the end of 2013, the state should regain all the jobs it lost in the downturn that began here in 2008, according to Clayton-Matthews’s forecast.
The unemployment rate, 6.6 percent in November, is expected to decline slightly next year. In 2013, jobs in Massachusetts will grow fastest in the construction, professional and business services, information services, and the leisure and hospitality sectors, according to forecasts. - MEGAN WOOLHOUSE
Retail: a more level playing field
Massachusetts retailers are looking forward to a more even field in 2013 by getting online merchants to collect taxes on all purchases.
The effort to adopt a national Internet sales tax law appears to be gaining momentum as the world’s largest online store, Amazon.com Inc., has expressed support for it while major retailers, such as Walmart Stores Inc., push legislation to eliminate what they see as an unfair advantage for online-only competitors.
Online retailers have been protected by a 1992 Supreme Court ruling that requires them to collect taxes only in states where they have a store or other outpost. This loophole cost Massachusetts $387 million in taxes in 2011 and nearly 2,000 jobs, according to a recent study by the Massachusetts Main Street Fairness Coalition, a group of retailers, elected officials, and labor unions.
The coalition and the Patrick administration plan to lobby the federal government to adopt a national law that would require all online merchants to collect and remit sales taxes.
But even if these efforts fail, the Patrick administration recently succeeded in getting Amazon to collect the state’s 6.25 percent sales tax from Massachusetts customers beginning in November. - JENN ABELSON
Commercial real estate: livelier times
The commercial real estate market will get a lot livelier in 2013 with office rents and property values on the rise.
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