Fiscal Year 2019 Budget

Beginning July 1, 2018 and ending June 30, 2019

Last updated: 7/1/18

The Economy

A City’s economic condition can positively or negatively affect its ability to raise revenue. As such, the State and national economies are of great importance to the City’s well-being.

The nation’s economic recovery is now ten years removed from a deep recession. Since the recession, the U.S. economy has grown in fits and starts since June 2009 as evidenced by GDP growth. Accommodative monetary policy and extended unemployment insurance back-stopped any slide back into recession. The labor market has continued to strengthen and economic activity has been rising moderately. Recently, job gains have been strong and the unemployment rate has remained low.

Gross Domestic Product Growth

Overall economic value as measured by real Gross Domestic Product (GDP) has been positive, but growth has been relatively slow. For all but two of the thirty-two quarters after the recession’s official end in the second quarter of 2009 through the fourth quarter of 2017, real GDP growth has been positive but only averaging 0.5%. The Federal Reserve reaffirmed estimates of moderate economic growth. During the period of 2007 to 2016, Massachusetts’ annualized growth rate of 1.3% in real Gross Domestic Product (GDP) by state, ranking 14th out of all 50 states and DC, according to the Bureau of Economic Analysis (BEA).

The State remains one of the wealthiest in terms of its GDP per capita -- $65,281 in 2016 – 2nd in the nation and 129% of the national average.

Unemployment Rate Improving

The seasonally adjusted unemployment rate in the U.S., Massachusetts and Boston has been steadily decreasing since the end of the recession. The rate in Massachusetts has since fallen to 3.5% as of December 2017, which is still higher than the 2.6% seen in the year 2000; however, this is due to growth in the labor force. The State and local economies have regained all jobs lost during the recent recessions. Boston’s unemployment rate is at 3.2% as of December 2017. According to Federal Reserve estimates, the unemployment rate is expected to continue improving.

Inflation Estimates

Inflation has been below the Federal Reserve’s target of 2%. Despite the improvements in the labor market and the expectation that inflation would rise to its target of 2%, the Federal Reserve forecasts that economic conditions will evolve in a manner that will warrant only gradual increases to the federal funds rate.

In December 2015, for the first time since 2008, the Federal Reserve increased the Federal Funds target rate by 0.25%, to a target range of 0.25% to 0.50%. Most recently, the Federal Reserve increased the Federal Funds target rate in June 2018 by 0.25%, to a target range of 1.75% to 2%. The Fed’s benchmark rate, after these modest increases, is still quite low by historical standards.

Wage Growth

Massachusetts wage and salary income in the fourth quarter of 2017 rose 6.3% over the same quarter 2016, continuing a trend of positive year-over-year quarterly growth rates since first quarter 2010. Earnings growth by industry grouping over the period of the last quarter in 2016 to 2017 was strongest in “Finance and Insurance” and “Utilities”, while “Government and Government Enterprises” and “State and Local” showed the weakest growth during the same period.

Massachusetts’ seasonally adjusted total personal income rose 4.9% from 2016 to 2017, 9th out of the 50 states and DC in terms of growth and above the national average of 4.0%.