Worcester Economy Posts Best Year in Recent Decades

The greater Worcester economy grew at a 3.1 percent annualized rate during the fourth quarter of 2018, which, while off from the 3.8 percent rate turned in during the prior quarter, represents the third consecutive quarter with above 3 percent growth, according to the latest update of the Worcester Economic Index (WEI). Overall in 2018, the WEI grew 3.2 percent, it’s highest annual rate since the 1990s.

The WEI, which is included in the Worcester Economic Indicators report released each quarter by Assumption Professor of Economics Thomas White, Ph.D., is an estimate of local economic activity based on recent Worcester area employment and unemployment data. 

“The employment numbers from both the payroll survey and household survey were up over the course of the fourth quarter, and the local unemployment rate continued to fall, settling at 2.9 percent in December,” said Prof. White.  “And while after adjusting for seasonal variation the gains weren’t huge, together these labor market measures were enough to generate an uptick in the Worcester Economic Index.” 

In addition to updating the WEI, each issue of Worcester Economic Indicators provides a six-month forecast for the WEI based on four national leading indicators, recent WEI estimates, as well as its long-run trend.  According to the December forecast, the WEI is expected to grow at a 2.7 percent annualized rate over the first half of 2019.

“The inertia provided by recent economic activity is the primary factor in the above trend forecast,” added Prof. White. “However, two of the leading indicators are currently negative and bring down the growth forecast by about half of a percent.  The S&P 500 sell-off in late 2018 combined with continued tighting of monetary policy are reasons to avoid being too optimistic.”  

In addition, the report discusses two local leading indicators. Fourth quarter new business incorporations in the greater Worcester area increased only 0.5 percent since the final quarter of 2017, a weak positive signal.  While state-wide initial unemployment claims fell 4.8 percent from a year ago, which is a positive signal of the strength of the economy.

The next Worcester Economic Indicators report will be issued in May 2019. The full report is available here.