Bay State economy seen threatened by global slowdown

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BOSTON – Massachusetts holds a “precarious footing” on its economic future, according to a group of regional economists and forecasters, who cited global uncertainty, a potential debt crisis and a U.S. economic slowdown as reasons for concern.

The outlook released Wednesday by MassBenchmarks economists notes that first quarter growth in Massachusetts exceeded the national rate, climbing 2.3 percent compared with a 0.5 percent gain in U.S. gross domestic product. The forecasters cited gains in jobs and incomes compared with the last three months of 2015. In the short-term, they said the commonwealth’s top industries – health, education, advanced manufacturing and technology – are expected to continue driving the state’s growth, especially in the Greater Boston area.

“It seems likely that the state economy will remain on an even keel in the short run,” the economists, who work for many leading colleges and universities as well as government regulators, said in a summary of their meeting last month. “However, the risks of a global slowdown have increased, which could impede the state’s continuing economic expansion if conditions worsen.”

They also cited concerns about the state’s crumbling transportation infrastructure, high housing costs, and uneven education system, which limits the supply of adequately prepared workers. As older workers retire, finding capable younger ones becomes a primary concern. High housing prices and inadequate transportation hinders out-of-state workers from coming to the Bay State. “These issues cry out for public policy solutions,” the group based at the UMass Donahue Institute said.

Clouding the outlook is the slowdown of China’s economy, which has decelerated the global supply-chain. This, coupled with a recent uptick in dollar-denominated private debt in emerging markets already hurting from the China-induced economic lag, indicates that a new debt crisis may be on the horizon, the economists warned.

The Great Recession of December 2007 through June 2009 was preceded by a debt crisis prompted in the U.S. by high housing prices, easy credit and the collapse of the mortgage-backed securities markets.