How will the Mass. economy fare in 2020? Here are some things to keep an eye on - The Boston Globe

Credit is easy, inflation is tame, and confidence among consumers, whose spending drives about 70 percent of the economy, remains solid.

But what’s in store for 2020? What signs can we identify to see how the drivers of the Massachusetts economy are performing?

In the year ahead, forecasters expect the US economy to grow 1.8 percent, a slowdown from an estimated 2.3 percent in 2019, according to a recent survey by the National Association of Business Economists.

In Massachusetts, growth has lagged behind the national average over the past year and half, as a tight labor market leaves businesses struggling to fill jobs.

How Massachusetts ultimately fares will depend mostly on what happens throughout the country, so national economic reports and financial markets are important to watch. But other indicators offer insight into where the local economy is headed. Here, with the help of my colleagues in the Globe Business section, are some of our favorites.

Office leasing

The construction cranes that dot the Boston skyline are a testament to the city’s appeal as a hub of commerce. According to Tim Logan, who covers real estate for the Globe, there are a handful of big commercial projects underway that will need to find tenants. If the available space isn’t leased by the end of 2020, it would be a sign the economy is softening.

So keep an eye on how leasing goes at One Congress, an office tower going up over the Government Center Garage, where about half of its 1 million square feet is unspoken for; Winthrop Center, which will include 770,000 square feet of office space in the Financial District; and One Post Office Square, which developers are gutting and renovating, with 750,000 square feet of offices slated to hit the market.

Also, the developer of the long-planned tower above South Station said Friday that it had nailed down financing and will soon start construction on more than 700,000 square feet of office space.

Tim says each of these buildings would be the biggest office tower built in downtown Boston since the 1980s. With all four soon to be on the market, their developers are making enormous bets that office demand will remain strong.

For-sale signs

The story in Greater Boston’s market for single-family homes boils down to this: Prices are holding up, but supply is tight. It’s a self-perpetuating cycle in which potential sellers hold back because they worry about finding an affordable property to buy. This is especially true among empty-nest baby boomers who would like to downsize.

The lack of inventory is actually making it hard for growing families to find larger homes, and for companies to hire people from outside of the region.

It’s hard to know what may break this cycle, and when.

One scenario: Prices start to fall as the economy cools, and reluctant sellers throw in the towel and list their homes for sale. In addition to prices, three other monthly data points will provide clues to the market’s direction: units sold, new listings, and all active listings.

The latest Greater Boston readings weren’t promising. For the year through November, single-family sales fell 4.4 percent over the same period in 2018, while new listings dipped 0.7 percent from October.

Active listings, or available supply, were down 15 percent since November 2018.

Sales tax revenue

Tracking monthly state sales tax revenue is a good way to gauge consumer confidence, which has the power to extend or end the historic economic expansion that began in mid-2009. In addition to the standard sales tax, the state breaks out taxes paid on meals and autos, two categories that tend to show how freely consumers are opening their wallets for big-ticket and nonessential items.

Conventional sales tax revenue was up 6.1 percent for the fiscal year that started July 1 through November; growth in meals and auto taxes was slower, at 4 percent and 1.5 percent, respectively.

Logan Airport lines

The number of people flying is a good proxy for the economy, notes the Globe’s Jon Chesto, who writes about local business and economic issues. When business is humming, employees tend to travel more. If consumers feel flush, they fly more for vacation. Passenger volume at Logan has climbed an average of 6.3 percent annually over the past five years. In 2019, passenger traffic is up only 3.4 percent through last month.

VC and IPOs

Private investments are the lifeblood of the tech and biotech sectors, two engines of the local economy. The trend this year — one that could affect job growth down the road — has been more money going to fewer companies. In the first nine months, local startups received $6.2 billion in venture capital funding, up 44 percent from the same period in 2018, says the third-quarter PwC/CB Insights MoneyTree report.The number of deals fell 17 percent to 319.

Biotech companies were the top money-raisers, and as the industry moves into 2020, the flow of venture capital dollars will determine how many companies will be launched and ramp up hiring. Demand for initial public offerings will also be crucial, because biotechs rely on the public markets as they grow and pursue clinical trials.

Jonathan Saltzman, who reports on biotech for the Globe, says investors are getting more selective about which companies they will back, a trend borne out by national data.

With the year virtually over, 69 health care IPOs (from biotech, medical device, and diagnostic companies) have raised $9.2 billion. That compares with 76 deals last year that brought in $9.1 billion.

Education and health

The education and health services sectors account for nearly a quarter of all jobs in the state, and their importance to the economy is hard to overstate. Boston and Cambridge would not be the cities they are without elite schools such as Harvard and MIT and top medical institutions such as Massachusetts General Hospital and Dana-Farber Cancer Institute.

In the past 12 months in the state, education jobs increased 5.7 percent to 182,400, while health services gained 2.1 percent to 642,600. That outpaced the 1.4 percent growth, to 3.7 million, in total nonfarm payrolls.

Whether that outperformance can extend into 2020 is uncertain. Colleges and universities are facing a demographic downshift in the number of students, while health care providers are under pressure from the state to control costs.

A final thought

Massachusetts enjoys an envious economic position. We are among the wealthiest states and have an abundance of high-paying jobs in industries well positioned for the future. But we also suffer from high levels of income and wealth inequality, a widening divergence in economic opportunity and security along racial and geographic lines that, left unaddressed, will eventually undermine any gains we record by traditional measures.

Even if the economy exceeds expectations in 2020, even if the jobless rate remains at historic lows and the stock market hits new highs, it would be cruel to call it a banner year when so many will be left behind.

You can reach me at larry.edelman@globe.com and follow me on Twitter @GlobeNewsEd.

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How will the Mass. economy fare in 2020? Here are some things to keep an eye on - The Boston Globe
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