Boston, MA

The Massachusetts economy hit a significant slowdown in the first quarter of 2022 as another wave of COVID-19, sky-high inflation rates, and persistent supply chain problems combined to bog down growth.

Real GDP in Massachusetts decreased at a 1% annualized rate in the first quarter, nearly as steep as the 1.4% dip in national GDP. The sharp slowdown in growth in the first quarter reflects the impact of the omicron variant of COVID-19, continued supply chain problems, the effect of inflation on purchasing power, and weakening consumer and investor confidence. As the growth-dampening effect of omicron waned in late winter and early spring, the outbreak of war in Ukraine gave an added boost to inflation, particularly for energy and food prices. At the same time, the labor market continued to exhibit strong gains in employment and wage growth, falling unemployment, and record-low layoffs. Wage and salary growth per worker, however, continued to lag inflation, dampening aggregate spending power, and slowing real economic activity. Inflation accelerated from 6.6% in the fourth quarter of 2021 to 10.8% in the first quarter of 2022 for Greater Boston, a much more significant increase than the jump from 7.9% to 9.2% percent nationally.

Despite facing several challenges, such as the Russia-Ukraine war, high gas prices, and the pullback in the S&P 500, we expect positive GDP and employment growth and an elevated Consumer Price Index (CPI) through 2023. Boston’s hotel sector is on the upswing, posting higher occupancy and ADR rates in 2022, a trend that is set to increase as the city attracts more leisure demand, group demand, and corporate travelers.

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* Other structures include religious buildings, amusement, government communications, and public recreation projects.
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