Massachusetts' job market is treading water, and it's all thanks to the healthcare sector. But here's where it gets controversial: remove the healthcare and social assistance sector from the equation, and the state would have lost over 20,000 jobs, nearly one-fifth of the positions added in the previous two years.
What's happening is a rare divergence. While the economy is expanding, hiring has dried up in many sectors. This disconnect has occurred before, after the 2008-2009 financial crisis and the dot-com bust, but those episodes followed recessions. Today, the economy has been growing steadily since 2020, yet employers are hesitant to hire, citing various reasons like trade policy uncertainty, the impact of AI, high borrowing costs, and low consumer confidence.
Massachusetts is among the first states to experience this so-called jobless expansion, a dichotomy between weak employment and healthy growth, which the country is now facing for the first time since World War II. The US added a mere 181,000 jobs last year, and without healthcare and social assistance, employment would have declined by over half a million jobs.
Massachusetts has long benefited from a mix of high-paying, interrelated jobs in healthcare, medical research, higher education, professional services, and finance. However, over the past two years, these economic engines, excluding healthcare and social assistance, have seen little to no employment growth.
The professional services sector lost 8,000 jobs, mostly among scientific and technical workers. Private education shrank by 2,200 jobs, and hiring in colleges and universities slowed dramatically. Employment in financial activities remained unchanged.
While there were modest job gains in a few other sectors, healthcare and social assistance were the state's biggest job generators. The US Bureau of Labor Statistics' annual revision of state-level employment, scheduled for April, is likely to show worse job losses in Massachusetts than currently reported.
The healthcare sector added 15,600 jobs in 2024-2025, most in direct patient care, accounting for 17.6% of all Massachusetts employment at the end of last year, nearly 3% above the national average.
The jobless expansion is expected to continue this year, with healthcare being the notable exception due to strong demand fueled by the needs of aging baby boomers. Niyum Gandhi, CFO at Mass General Brigham, the state's largest health system, said, "We continue to need more patient-facing staff to meet the growing demand for clinical services."
However, the state's reliance on a single sector is not sustainable. While healthcare employment has historically been recession-resistant, it is not immune to policy changes. Proposed cuts to Medicaid and potential reductions in federal health and research spending could impact the sector's ability to maintain its hiring pace. If healthcare hiring slows and other sectors don't step up, the labor market will have no fallback option.
The deeper concern is what this concentration reveals about the rest of the economy. Employers in other sectors are hesitant to hire, pushing the state's unemployment rate to 4.8% in December from 4.1% a year earlier. This hesitation is influenced by cyclical downturns in tech, pharma, and biotech, as well as uncertainties created by shifting US trade policies, the Trump administration's higher education reforms, and the rapid advancement of AI.
Economist Alan Clayton-Matthews warns that Massachusetts is losing momentum, and the shifting economic landscape is affecting consumer and business psyches. He predicts that Massachusetts will face headwinds from Trump's immigration restrictions and mass deportations, combined with an aging population, which could shrink the labor force.
The "Massachusetts Miracle" of the 1980s, when the state transformed its economy, is a distant memory. Now, we're struggling to stay afloat, and at some point, we'll need more than one sector to carry us forward.
What do you think? Is Massachusetts' reliance on the healthcare sector a sustainable strategy? Share your thoughts in the comments.
