Boston – Despite recent gains in its biotech sector, Massachusetts ranked 49th in job creation over the past six years and experienced a loss in its share of the nation’s payroll jobs. While trailing in job creation, Massachusetts was among the leading states in productivity, ranking 7th in the nation and also increasing its output per worker faster than the nation, according to Mass Jobs: Meeting the Challenges of a Shifting Economy, a report released today by the Massachusetts Institute for a New Commonwealth (MassINC) and the Center for Labor Market Studies at Northeastern University.

“The combination of job loss and rising productivity shows Massachusetts is developing a highly specialized economy – a boutique economy – that rewards well-educated and skilled workers in knowledge-based sectors, but offers fewer options for everyone else,” said Gregory Torres, President of MassINC. “The report underscores the need for a job creation strategy and a greater sense of urgency on how to respond to the shifting economy and provide a mix of opportunities for all workers.”

Massachusetts trailed its 10 economic competitor states and each of the New England states in job creation in recent years and, as of July 2007, is the only one of those states that has not recovered all of its 2001 jobs. (New York state essentially broke even in July 2007.) Massachusetts is still 100,000 jobs below the peak employment level and ranked next to last in job creation between 2001 and 2006, besting only Michigan.

While Massachusetts accounted for only 2.5 percent of jobs in the United States at the start of the recession, it absorbed 7.3 percent of the net job losses from early 2001 through the beginning of the national jobs recovery in the late summer of 2003. The state’s share of the nation’s jobs fell from 2.53% to 2.38% between 2001 and 2006. The state’s share of the nation’s high-tech jobs dropped from 4.2% in 2000 to 3.9% in 2005, indicating other states are adding those jobs faster than Massachusetts.

“As an older state with a mature economy, Massachusetts should not expect to lead the nation in job creation, but concern is warranted when we trail our economic competitor states and all other New England states in our ability to recover after the recession,” said Andrew Sum, Director of the Center for Labor Market Studies at Northeastern University and the report’s lead author. “The lack of job creation has long-term consequences of constraining state revenues and encouraging out-migration, as residents seek opportunities out of state.”

Despite a net job loss, some sectors added new positions, and in doing so, changed the composition of the Massachusetts economy. The state has an increasingly “boutique economy,” one that is continuing to shift toward knowledge industries, such as health care and biotech, that often require highly specialized employees who hold at least a bachelor’s degree.

While suffering losses in manufacturing and high-tech, Massachusetts doubled the national rate in adding biotech jobs (15% vs. 7%) between 2000 and 2005. In that period, Massachusetts added 10,000 new biotech jobs, bringing the sector to about 75,000 jobs in Massachusetts, or 2.4 percent of the state’s payroll jobs. By comparison, manufacturing, despite large job losses, still accounts for about 9 percent of Massachusetts jobs, including some biotech manufacturing positions.

While Massachusetts trailed the nation in job creation, it was among the leaders in productivity, an important measure of economic health. The state’s level of labor productivity ranks 7th highest, and since 2001, it has grown faster than the nation’s (11.5% versus 10.6%). In 2005, the productivity level of an employee in Massachusetts was $94,150 in real output per worker, compared with $83,920 nationally.

“Massachusetts is leading the country in the transformation to a knowledge-based economy and is a leader in its level of productivity. This is partly the result of changes in the type of jobs and advances in technology, as well as the high education levels and skills of the workforce,” said Charles Baker, President & CEO of Harvard Pilgrim Health Care.

The report lays out four principles that could form an economic vision and agenda to be shared by the Administration, Legislature, business community, and labor community. The report recommends a long-term strategy that includes creation of export jobs, better workforce training to fill current vacancies, improvement to the business climate, and a regional approach to meet varying needs across the state.

“The key to invigorating our knowledge economy is an adequate workforce—and that means men and women with adequate skills and training,” said Paul S. Grogan, President and CEO of the Boston Foundation. “We have world-class economic assets here, but the essential element is the human capital.”

The report’s four recommendations are:

• The state should set a target goal for the number of new export-based jobs created. Because export jobs – those linked to selling goods and services out-of-state – bring revenue into the state and generally offer higher pay to workers, they embody the characteristics of “good jobs” in the economy. Export-based jobs and not specific sectors should be the emphasis of a long-term strategy.
• The job-growth strategy should include filling the existing vacancies. A Massachusetts job vacancy survey in late 2006 revealed more than 90,000 openings, the highest level since the survey began in 2002. The vacancies indicate a willingness of employers to hire more workers, but may also show the need to better educate and train a workforce that has the required skills to fill the slots.
• The state must create a more favorable business climate that streamlines permitting for business expansion across the Commonwealth and addresses expenses, such as energy costs and unemployment benefits and policies. Economic policy should encourage and assist Massachusetts companies looking to grow here.
• Because economic conditions and needs vary across the state, efforts to develop strategies must focus on regional strengths. The specific strengths will determine what growth opportunities are best suited for a region. State leaders should also develop an urban strategy for cities outside Greater Boston that are lagging the rest of the state in job creation.

“Our Gateway Cities, those mill and manufacturing centers, each possess strengths that they must capitalize on in order to adjust to the new knowledge-based economy. We cannot adopt a one-size-fits-all approach, or we will continue to see prosperity in Greater Boston while other urban areas continue to struggle,” said Robert Halpin, President & CEO of the Merrimack Valley Development Council.

A joint project of MassINC and the Center for Labor Market Studies at Northeastern University, Mass Jobs: Meeting the Challenges of a Shifting Economy is sponsored by the BNY Mellon Charitable Giving Program/Alice P. Chase Trust, The Boston Foundation, EMD Serono, Inc., Harvard Pilgrim Health Care, and the Merrimack Valley Economic Development Council, Inc.

Other key findings in the report include:

• In the first half of 2006, job levels in the counties of the Greater Boston region were still down 4 to 7 percent from the early 2001 peak.
• Massachusetts large cities suffered the greatest job losses, and four communities – Attleboro, Burlington, North Andover and Waltham – experienced job losses greater than 10%.
• The report documents how the job losses in the state have contributed significantly to high levels of domestic outmigration.

Mass Jobs: Meeting the Challenges of a Shifting Economy is available in its entirety at www.massinc.org.

About MassINC
MassINC (The Massachusetts Institute for a New Commonwealth) is a nonpartisan, evidence-based organization. Its mission is to develop a public agenda for Massachusetts that promotes the growth and vitality of the middle class. Its governing philosophy is rooted in the ideals embodied in the American Dream: equality of opportunity, personal responsibility, and a strong commonwealth.

About the Center for Labor Market Studies at Northeastern
University Northeastern University’s Center for Labor Market Studies is a research organization that analyzes national, regional, state and local labor market developments that are of interest to policy-makers, program administrators and the general public. Its work focuses on a range of issues related to workforce development, policymaking, planning, and program evaluation.

About The Bank of New York Mellon
The Bank of New York Mellon has more than 2,500 employees in greater Boston. Through its Charitable Giving Program, the company plays an active role making our communities better places to live and work. Since 1997, the program has invested more than $25 million in support of over 250 Boston-area community groups.

About the Boston Foundation
The Boston Foundation, Greater Boston’s community foundation, is one of the oldest and largest community foundations in the nation, with assets of almost $900 million. In 2007, the Foundation and its donors made more than $92 million in grants to nonprofit organizations and received gifts of $90 million. The Foundation is made up of some 900 separate charitable funds established by donors either for the general benefit of the community or for special purposes. The Boston Foundation also serves as a major civic leader, provider of information, convener, and sponsor of special initiatives designed to address the community’s and region’s most pressing challenges. For more information about the Boston Foundation, visit www.tbf.org or call 617-338-1700.

About EMD Serono, Inc.
EMD Serono, Inc. is a leader in the US biopharmaceutical arena, integrating cutting-edge science with unparalleled patient support systems to improve people’s lives. With more than 850 employees around the country and fully integrated commercial, clinical and research operations in the company’s home state of Massachusetts, EMD Serono’s US footprint is strong and growing.Through its focus on specialized therapeutic areas, including neurology, reproductive health, and metabolic endocrinology, as well as oncology and autoimmune/inflammatory diseases as emerging areas of expertise, EMD Serono is committed to discovering and developing innovative products that address unmet medical needs. With unique delivery systems and access support for many of its products, as well as educational resources across all of its therapeutic areas, including MS LifeLines®, Fertility LifeLines™, Connections for Growth® and SeroCare®, EMD Serono continues to improve the patient experience and help people live full and healthy lives. EMD Serono is an affiliate of Merck KGaA, Darmstadt, Germany.

About Harvard Pilgrim Health Care
Harvard Pilgrim Health Care is a not-for-profit health plan that provides a variety of insurance plan options and self-funding arrangements to more than 975,000 members in Massachusetts, New Hampshire and Maine. Harvard Pilgrim provides innovative approaches to health improvement and disease management, unique online tools that speed and simplify key transactions for employers and providers and personalized health support at www.harvardpilgrim.org.

About the Merrimack Valley Economic Development Council
The Merrimack Valley Economic Development Council is a private, non-profit, tax-exempt charitable organization, created in August 1999. The Council brings together over 100 public and private sector leaders to promote the economic interests of the entire Merrimack Valley region of Massachusetts, consisting of twenty-four communities, from Greater Lowell to the sea.