How is the Massachusetts economy doing?

On Beacon Hill and in city and town halls across the country, budget season is getting rolling. And this year, the overriding question is what the economic landscape is going to look like when the final decisions are made about who gets how much.

From a global perspective, things are uncertain. According to the International Monetary Fund’s latest World Economic Outlook

Downside risks dominate the outlook. A longer or broader conflict, worsening geopolitical fragmentation, a reassessment of expectations surrounding artificial‑intelligence‑driven productivity, or renewed trade tensions could significantly weaken growth and destabilize financial markets. Elevated public debt and eroding institutional credibility further heighten vulnerabilities.

Or, as the Financial Times’ Martin Wolf puts it:

For Massachusetts, this is worrying.

Beyond the attacks on our economy from the federal government, we could be heading for an economic slowdown or recession. When this election is over and, fingers crossed, I’m sworn into office in January 2027, we could be preparing not for what new programs to create, but how to protect what we already have.

But before we tackle projections of the next year, I want to start with a baseline of how we’re doing.

Are we heading into potential economic troubles from a position of strength, or falling behind already so that a recession would set us further back?

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How to judge an economy?

The difficult thing about macroeconomic analysis for public policy (and I say this as someone who first became a macroeconomic analyst in 2013) is that you don’t simply want to know what’s happening in the economy, but you want to compare it to what could be happening.

If one state is seeing GDP growth at 3% per year, but all of its neighbors have 5% growth, then you are probably doing something wrong and need to pass new laws. If a state is at 3% when most analyses says it should be at 2%, then either it’s doing something right that you should expand upon, or you’re on an unsustainable path that could course correct.

For Massachusetts, these kind of comparisons are difficult, because knowing who to compare us to is a question in itself. Should we hold ourselves against other New England states, high income states across the country, or the places that we hear residents and businesses are moving to? And what are the metrics that we should be using: income, unemployment, job growth?

This isn’t just academic. How we measure ourselves leads to different conclusions to how we’re doing. One set says we’re doing great, while others are flashing warning signs.

The good

Let’s start with the positives.

Massachusetts has the highest median household income in the entire country. If you lined up all the families or individuals in every state by how much money they make, the person smack in the middle in Mass. would be richer than the middle person in every other state.

Not only is that true, but it’s been true for a while.

As you can see in the below chart from the Federal Reserve, Massachusetts (the solid blue line) has been well above the national average (the dashed green line) for decades and, despite being caught by California around the time of the Dot Com and housing bubbles, took off post recession.

So when we say that Massachusetts is the richest state in the country, we’re not wrong. By the best measure of wealth, we’re #1 and we’re well ahead of states like North Carolina and Texas that we hear are booming.

The bad

As everyone knows, housing is expensive in Massachusetts.

But what’s worse than it just being expensive is that it is becoming more expensive relative to our income.

Below is a chart comparing the ratio to housing prices to median household income between the United States overall and Massachusetts. The charts are set to January 1, 1984 as the baseline, so we can see the relative change in each stat since then.

Across the country, the price of homes has risen faster than incomes have gone up over the last 42 years. In Massachusetts, that change has been more severe, with the distance growing particularly fast during the housing bubble and again post-COVID.

So while it is great that we are the wealthiest state in the country, a disproportionate share of people’s income is going to keep a roof over their heads and not circulating into the local economy.

The worrying

The above charts paint a mixed picture. Yes, we’re the wealthiest state in the country, but unfortunately we have a real problem on housing costs.

What worries me about the long term is that, since the pandemic, we’ve been lagging other states.

Our GDP compared to North Carolina, California, Texas, and New York is below, indexed to February 2021, to show the divergence since then.

We’ve grown more than California, though that could change soon as new data shows that the Golden State grew by 5% in 2025 and it could be the first winner of an AI boom. We’ve lagged New York and significantly lagged Texas and North Carolina.

To me, that is the biggest economic concern I have.

Yes, we are the richest state in the Union. But we’re losing ground to other states and one of our biggest problems - housing - doesn’t look like it’s being addressed by our government.

If we don’t have economic growth, then the government services that we’ve come to expect won’t be able to be funded. We’re already seeing this at the local level. The below slide from Somerville’s FY27 budget outlook shows what happens when revenues can’t keep up.

What can we do?

There are a number of actions that we can take to grow our economy. Over this campaign, I’ll be talking about them in greater detail.

But the most important thing, as I’m discovering in my newfound position as a candidate, is to push our elected officials to focus on this issue.

So far in the campaign, I’ve been asked about specific programs to fund or new programs to create. I’m much less frequently asked about how to generate the revenue to pay for them.

I get why that happens. New programs are more interesting to talk about and have a more concrete impact on people’s lives. But if we can’t pay for those programs, then none of our promises matter.

That might not be a great rallying cry to end a newsletter on, but a well-informed electorate that asks the toughest questions to its candidates is the foundation for good governance and, ultimately, that’s what politics is for.