The recovery will speed up as jobs are created
The economic recovery will finally begin to feel like one in 2011.
After a long period of sputtering growth, the economy will gain enough momentum by the second half of the year to spark substantial job creation and bring down the stubbornly high unemployment rate. Certainly, a long climb lies ahead: It could be years before jobs lost in the recent downturn are regained and joblessness retreats to prerecession levels.
By the end of the year, however, workers, businesses, and investors will start to believe that conditions are headed for long-term improvement, laying the groundwork for what economists call a “virtuous circle.’’ In such a cycle, growing confidence leads to increased spending, which sparks more hiring, which in turn boosts confidence, spending, and hiring.
Already, signs point to a brighter year for US and Massachusetts economies. Nationally, the first time claims for unemployment benefits have fallen to two-year lows in recent weeks, while advertised job openings have reached their highest level since August 2008, according to the Labor Department.
Other indicators also suggest more hiring ahead. A recent Bank of America survey, for example, found that nearly half of US chief financial officers expect their companies to add workers next year, up from just over a quarter in the 2009 survey.
In Massachusetts, first time jobless claims in November fell 16 percent from a year ago, while the unemployment rate — 8.2 percent last month — has retreated significantly from its 9.5 percent peak in January. Job vacancies are up, and Massachusetts businesses are optimistic about hiring over the next several months, according to the business confidence survey of Associated Industries of Massachusetts, the state’s largest employers group.
Several factors will help propel the national economy next year, according to economists. First, a great deal of stimulus is coursing through the economy. The Federal Reserve has signaled that it will hold interest rates at or near record lows for some time. Congress, meanwhile, has put hundreds of billions of dollars in consumers’ pockets through tax cuts and unemployment benefit extensions.
Corporations, enjoying strong profits, are sitting on piles of cash. Households are repairing finances, paying down debt, and boosting savings. As a result, both sectors will be in stronger positions to spend, creating the kind of demand that leads businesses to add workers.
A stronger US economy, of course, benefits the state because many Massachusetts firms — particularly in critical technology and biotechnology industries — sell goods and services in national markets.
A solid rebound in the tech sector has already helped Massachusetts recover faster than the nation as a whole, and a recently approved federal tax break should give it another boost. That break allows companies to quickly write off the cost of new equipment, providing an incentive to buy from the many Massachusetts manufacturers that make high-tech equipment. That, in turn, would also boost the software and other firms that support these manufacturers.
Robert Gavin can be reached at email@example.com.