Signs point up for state economy
June home sales are latest indicator Mass. may be starting long recovery process
The Massachusetts economy has hit bottom and begun a recovery that many analysts expect will be slow and difficult, a variety of economic data suggest.
Over the past several weeks, key indicators - from consumer and business confidence to unemployment claims to automobile sales tax revenues - have begun to improve after a year or more of constant deterioration. The latest evidence of a nascent recovery came yesterday, when data reported by the Massachusetts Association of Realtors indicated the long-suffering housing market may have bottomed.
June sales of single-family homes jumped 10 percent from May and climbed nearly 20 percent since hitting a low point in January, according to numbers adjusted for seasonal variations by the University of Massachusetts. Median home prices, meanwhile, have increased in each of the past three months to a seasonally adjusted $289,800 from $260,500 in March.
“This is a fairly definite turnaround. We appear to be in the first phase of an economic recovery,’’ said Alan Clayton-Matthews, an economic analyst and professor at the Uni versity of Massachusetts at Boston.
“We’ve got the beginnings of what looks like a recovery,’’ said Andre Mayer, senior vice president for research at Associated Industries of Massachusetts. “In all likelihood, we’ve bottomed out, but the climb back is not going to be easy.’’
Massachusetts has waited more than three years for housing sales to turn around, and more than a year for the broader economy to grow again.
The state’s recovery is expected to be weak; unemployment, which rose to 8.6 percent in June, is expected to continue growing into next year before peaking above 9 percent, analysts said.
Still, the state seems to have reached a key turning point that suggests better times ahead. Eric Rosengren, president of the Federal Reserve Bank of Boston, said Massachusetts and New England likely would recover earlier than other parts of country because the region’s key industries, such as technology, were not at the center of an economic collapse led by housing and autos.
“Fortunately, Massachusetts does not have a concentration in these areas,’’ he said. “As a result, the recession in this area is likely to be not as deep or as long as more severely impacted regions of the country.’’
It’s often difficult to identify economic turning points until long after they’ve passed, and the economy can send false signals. During the last recession, for example, it appeared that the Massachusetts economy was beginning to turn in 2002, but the recession ultimately lasted into the next year.
Nonetheless, evidence is mounting that a recovery is getting underway. The rate of job losses in Massachusetts has slowed in recent months. First-time claims for unemployment benefits plunged to about 44,000 in June from about 60,000 in March, a decline of more than 25 percent.
Meanwhile, temporary employment, a leading indicator for the future of the job market, has risen in each of the past two months, according to state labor statistics. When the economy begins to turn around, economists have said, employers often use temps until they feel confident enough to make permanent hires.
At the staffing firm Hollister Inc. in Boston, employer orders for temporary workers have jumped more than 25 percent over the past six to eight weeks, as compared with earlier this year, said senior vice president Julie Dardano. In addition, orders for permanent workers rose 10 percent in the second quarter from the first quarter of the year, while conversions from temporary to permanent rose 6 percent.
“We’re starting to see the statistical evidence that the economy is improving,’’ Dardano said.
Also improving are business and consumer confidence, which economists view as precursors to increased spending and investment. The business confidence index of Associated Industries of Massachusetts has risen in three of the past four months, and preliminary data indicate another increase in July, AIM officials said.
In May, the consulting firm Mass Insight Corp. reported its consumer confidence index rose to the highest level since October 2007.
Auto dealer Jerry Chase said he’s experienced increasing consumer confidence at his business, Framingham Ford Lincoln Mercury. Sales rose 6 percent in June compared with the previous year - the first year-over-year increase in 15 months, Chase said.
Other auto dealers also saw business pick up last month. State automobile sales taxes, seasonally adjusted, jumped 11 percent in June from May, according to the state Department of Revenue and UMass.
“We’re getting more traffic than we’ve seen in a long, long time,’’ Chase said. “People are taking a little longer to make decisions, but we’re seeing renewed consumer confidence out there.’’
The technology sector, a key driver of the Massachusetts economy, is also showing signs of a rebound. Semiconductor maker Analog Devices Inc. of Norwood reported better-than-expected revenues in the second quarter and expects revenues in its third quarter, which ends Saturday, to be about the same. Computer storage equipment giant EMC Corp. of Hopkinton also reported better-than-expected results last week. Chief executive Joseph Tucci said business investment in technology has stabilized.
“Simply put,’’ Tucci told analysts in a conference call, “our business felt more predictable, and customers seemed to be more comfortable with their spending processes.’’
Robert Gavin can be reached at firstname.lastname@example.org.