Experts see ‘bright spots’ for Massachusetts economy in 2022, despite uncertainty

There are plenty of reasons to feel good about the Massachusetts economy heading into 2022, experts say. records and the state has billions of dollars in federal funds to spend on areas like infrastructure and workforce development.

We’ve had a lot of positives in the economy over the past few months,” said Jeffrey Thompson, director of the New England Public Policy Center at the Federal Reserve Bank of Boston. “There are a lot of companies trying to to hire.”

This sunny outlook comes with an obvious caveat as an omicron surge imposes new restrictions in some parts of the world, adding to uncertainty over the coronavirus pandemic. Hospitalizations have increased in Massachusetts as well as across the country. Although the Commonwealth has one of the highest vaccination rates in the country, it is still unclear how this new wave of infections could impact hospitals, residents, workers and businesses.

As we enter the new year, WBUR spoke with several experts about the economic trends they’ve been tracking in Massachusetts and their predictions for 2022.

Massachusetts employers still feeling optimistic

According to The Associated Industries of Massachusetts, employers are more confident than they were a year ago. Business confidence was 57.9 in November 2021, down from 49.3 for the same period in 2020. The AIM measure is based on a 100-point scale. Anything over 50 is considered optimistic.

Business confidence has been falling since the summer of 2021 but remains in “optimistic” territory. (Source: AIM)

Still, COVID-related fears, supply chain issues and inflation have tempered that optimism since the summer.

“It matters because confident employers hire people,” said Chris Geehern, executive vice president of public affairs at AIM. “Confident employers invest in the expansion of their factories, offices or facilities and generally fuel economic growth.”

Geehern expects to see continued growth in sectors such as software, biopharma and advanced manufacturing. Construction will likely have a good year, he says, thanks to a planned injection of $9 billion in federal infrastructure funds. Geehern also thinks 2022 will be a better year for retailers, who expect an 11.5% increase in holiday sales.

But industries that rely on in-person contact are likely heading for another tough year. This includes restaurants, hotels, gyms and performing arts centers. Although attendance at some of these establishments is slowly increasing, it has still not reached pre-pandemic levels.

We are concerned about a reduction in the workforce

Most of the people who left the workforce during the pandemic have returned, making the state’s recovery relatively quick compared to the rest of the country. But Massachusetts is still short of about 6,800 people from its pre-pandemic workforce. A smaller workforce and strong employer demand means we’re likely to see plenty of hiring in 2022.

Massachusetts' labor force has not quite returned to pre-pandemic levels.  (Source: MA Department of Economic Research)
Massachusetts’ labor force has not quite returned to pre-pandemic levels. (Source: MA Department of Economic Research)

Nationally, the United States has gained only about half of the workers it lost during the pandemic, according to the Federal Reserve Bank of Boston.

The state’s labor shortage hasn’t reached crisis levels, but it will take work to keep it going, according to Mark Melnik, director of economic and public policy research at the Institute. Donahue from the University of Massachusetts.

Melnik says there is currently a significant realignment in the Massachusetts workforce, especially among low-wage workers.

People say, “This job isn’t worth the hassle I’m getting right now, and someone else might be willing to pay me more,” Melnik said.

Labor force participation is a key factor in predicting future economic growth. The pandemic accelerated early retirement among older, more educated workers, but there were signs of a shrinking workforce even before that. Massachusetts has gained fewer foreign-born workers, who have accounted for 80% of labor force growth in the state since 1990. Net migration has slowed over the past five years due to government policies. immigration under the Trump administration, followed by pandemic closures.

Given these challenges, Massachusetts has an opportunity to build a new workforce, says Karen Wallace, who leads marketing at AIM.

“Companies are going to have to do a better job of hiring people who don’t necessarily look like them in order to move the economy forward,” Wallace said.

They may also need to scout for talent in different locations. An example of how to do it: train and recruit more workers in parts of the state where graduation rates are relatively low.

Massachusetts job openings in November 2021 (Source: MA Department of Economic Research, based on data from Burning Glass Labor Insight)
Massachusetts job openings in November 2021 (Source: MA Department of Economic Research, based on data from Burning Glass Labor Insight)

Massachusetts will need a lot of ‘upgrading’ or ‘re-skilling’

The World Economic Forum estimates that half of all workers in the world will need some sort of retraining or “upskilling” to keep up with a rapidly changing economy. The same can be said for Massachusetts, where nearly 40% of jobs are in the so-called “innovation economy,” according to state agency MassTech.

“We feel more confident than other parts of the economy,” said Patrick Larkin, deputy director of MassTech.

That confidence is unlikely to slow down. In 2021, local biotech companies are expected to break their investment record of $5.8 billion in 2020, according to MassBio. This should translate into nearly 40,000 local jobs over the next four years.

While the amazing growth of the innovation sector is certainly something to celebrate, it leaves large segments of the population behind. This includes many people of color, people without a college degree, and residents of rural areas outside of Greater Boston.

Larkin says the Baker administration intends to bolster the redevelopment and training of the state’s workforce using federal pandemic relief money.

They have an aggressive push and are working very closely with us to try to identify what the needs might be in the tech sectors,” Larkin said.

2022 could be a big year for unions

There is a lot of movement on the labor front. According to Gallup, 65% of Americans approve of unions. Steven Tolman, president of the AFL-CIO of Massachusetts, says he sees encouraging signs from the Biden administration.

“Life has changed for us with the new president and the new administration,” Tolman said.

Tolman points to workers’ efforts to unionize at big corporations like Starbucks and Amazon as evidence of a stronger labor movement. He also remains hopeful that the US Senate will pass one of the most important pieces of labor legislation in recent memory, the “Protecting the Right to Organize Act,” or PRO Act. Among other things, it would make it easier to organize and impose tougher penalties on employers who disrupt this process.

In Massachusetts, voters will also have the opportunity to help shape work and the gig economy in 2022. A proposed statewide ballot question would ask voters whether delivery drivers and drivers – delivery people should be classified as independent contractors or employees. The initiative is similar to Proposition 22 in California, which allowed companies like Uber and Lyft to classify their workers as independent contractors.

“They’re trying to uberize everything and create a bottom layer of workers,” said Beth Griffith, who heads the Boston Independent Driver’s Guild, a group that opposes the measure.

Griffith says what voters decide in Massachusetts could have major consequences for gig workers in the rest of the country.

Proponents of the measure – including companies DoorDash, Instacart, Lyft and Uber – say classifying workers as independent contractors gives them more flexibility and more control over things like shifts and schedules .

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