Colin A. Young
State House News Service

Bay State economists are expecting to learn in April that employment growth has been slower than originally estimated across Massachusetts as they flag weaknesses in the state labor market.

Massachusetts real gross state product increased at an annual rate of 1% in the last quarter of 2025 as consumer spending slowed and a government shutdown reduced federal spending, MassBenchmarks reported Tuesday. U.S. GDP increased at an annual rate of 1.4%, according to the U.S. Bureau of Economic Analysis.

The fourth quarter numbers reflect a slowdown. In the third quarter of 2025, Massachusetts and U.S. GDP grew at annual rates of 3.3% and 4.4%, respectively, according to the BEA.

According to editors of the economic journal published by the University of Massachusetts Amherst Donahue Institute in cooperation with the Federal Reserve Bank of Boston, Bay State growth was held back by labor force and demographic challenges, like an "older population profile, lower levels of international immigration following changes in federal immigration policy and enforcement, and elevated net domestic outmigration related in part to the state’s high cost of living."

Relative to the same quarter of 2024, employment in Massachusetts was unchanged in the fourth quarter of 2025 while the nation experienced 0.2% employment growth, MassBenchmarks said. 

"This likely understates the state's relative weakness," the journal editors wrote. "The national figures incorporate annual revisions to the employment data, which lowered estimated employment growth since March 2024 by roughly one million persons. State data revisions are expected in April and are likely to show that employment growth in Massachusetts was weaker than originally estimated."

The Executive Office of Labor and Workforce Development said last month that Massachusetts added 4,600 payroll jobs in December. The state's unemployment rate of 4.8% has remained higher than the national rate, which was 4.4% in December. A year prior, both rates stood at 4.1%.

"The state's unemployment rate is typically lower than that of the U.S. due to its more highly educated labor force, so this higher rate indicates some relative weakness," Alan Clayton-Matthews, a senior contributing editor to MassBenchmarks and an economic professor often relied upon by Beacon Hill policymakers, said. "This relatively greater rise in the state's unemployment rate partially reflects the ongoing difficulty recent college graduates have had in this low-hire/low-quit labor market."

The state's jobs and employment situation has taken on fresh relevance in an election year as Massachusetts has experienced a recent raft of large layoffs that have raised concerns about the state's competitive edge while policymaker are also grappling with affordability challenges in housing, health care and energy. The usual buzz over an election-year jobs bill has also yet to develop on Beacon Hill. 

Looking ahead, the MassBenchmarks Leading Economic Index projects Massachusetts GDP growth of 1.3% in the first quarter of 2026 and 0.8% in the second quarter.