Mass. economy slows in fourth quarter

Mass. economy slows in fourth quarter

The Massachusetts economy slowed significantly in the fourth quarter of 2010, the first time in a year that the US economy grew faster than the state’s.

Gross state product in Massachusetts grew at an estimated annual rate of 1.8 percent in the fourth quarter, according to a report published today by the University of Massachusetts Donahue Institute and the Federal Reserve Bank of Boston.

The US Department of Commerce said the nation’s gross domestic product increased 3.2 percent during the same quarter.

The state report said Massachusetts’ weak fourth quarter performance reflected an economy that has “paused to catch its breath, rather than one that is about to slow to a stop.”

Massachusetts’ burst of growth was fueled by an international spike in demand for technology products including semiconductors and semiconductor equipment made in Massachusetts. According to the US Department of Commerce, those increases began in late 2009 with demand soaring to 24.8 percent by the second quarter of 2010. Demand slowed to 5.8 percent by the fourth quarter of last year.

“The degree to which the state economy slowed in the fourth quarter is somewhat surprising,” said Michael D. Goodman, an economic analyst and professor at the University of Massachusetts Dartmouth. “The technology sector has been driving our growth since the end of the recession and in the fourth quarter, it continued to grow, but not as fast. It’s pulling us forward but not as strongly.”

The report noted that despite declines, demand for information technology remains at high levels and that science and knowledge-based sectors, such as professional and technical services, will continue to add jobs.

The overall slowdown occurred in a few areas: employment growth, income and spending, which declined in the fourth quarter. While the official unemployment rate fell from 8.7 percent in the third quarter to 8.2 percent in the third quarter, a broader measure that includes underemployment and labor force dropouts rose from 13 percent in the third quarter to 14.2 percent in the fourth. The US rate rose from 16.8 to 16.9 percent during the same period.

“Going forward, state and US economic growth rates should be much closer than they were in 2010 when the state grew substantially faster than the nation for much of the year,” the report said.

By Megan Woolhouse, Globe Staff

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