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Economists see R.I. last New England state to recover

01:00 AM EST on Wednesday, November 11, 2009

By Cynthia Needham

Journal Staff Writer

BOSTON — As the rest of New England slowly claws its way toward economic recovery, Rhode Island will struggle to keep up, economists at the New England Economic Partnership predict.

“Rhode Island stands out as having the weakest economy by a significant degree in the region,” Ross Gittell, the organization’s vice president and a University of New Hampshire professor, told economists and state leaders from around New England at the group’s fall conference in Boston on Tuesday.

The signs that point to a leveling off or an upturn in other local economies have not emerged in the Ocean State. Job losses here continue, housing prices are still sliding and while unemployment rates in the remaining New England states are not expected to reach 10 percent, Rhode Island’s could peak at 14.1 percent next year.

“That’s different than in other states where we see some stabilization or slight improvement from the spring outlook six months ago,” Gittell said. “I think that’s because there are more foundational economic issues in Rhode Island that are not present in other New England states.”

Rhode Island’s most dire problems, economists on Tuesday concluded, are its lack of appeal to businesses and its over-reliance on old-line manufacturing jobs that other states started moving away from years ago.

The news is hardly upbeat elsewhere in New England. The region has lost an estimated 346,000 jobs since early 2008, with that number expected to break the 400,000 mark before the bleeding stops toward the end of 2010, according to the latest outlook by the nonprofit forecasting agency.

Economists estimate it will take at least another year before employment anywhere in New England begins to pick up again, and, even then, most local states will experience a sluggish job recovery.

But there are positive signals.

For Massachusetts, the presence of a major city could help. NEEP Director Alan Clayton-Matthews, associate professor of public policy and urban affairs at Northeastern University, said larger metropolitan areas are expected to recover faster, in large part because of their high concentrations of growth sectors such as health care, education and technology –– all of which have excelled in Boston.

That scenario, together with a relatively small fall-off in housing prices should poise Massachusetts for a slow-but-steady recovery, economists predict.

Connecticut may have a harder time bouncing back given its close ties to the financial sector in New York. Connecticut is now widely believed to have the second-worst economic picture in the region.

Economists agree that both Massachusetts and Connecticut were slower to enter the recession, which will likely make them slower to emerge from it.

The region’s northern states have seen lower unemployment rates and, in some cases, fewer related problems. Maine and New Hampshire are the only states in New England where the percentage of total job losses sustained since the beginning of the recession is expected to fall below the national average. But they, too, will have a hard time recovering, in part because of their dependence on the tourism industry and the vacation-home market.

Still it was Rhode Island that was the undisputed loser at Tuesday’s conference. Economists agree that it faces, by far, the greatest challenges moving forward.

“Coming out of this, businesses are going to have options about where to locate and where to grow their businesses, and if they find that the environment in Rhode Island is not attractive, there are a lot of states that are going to want them there,” said Gittell. “That puts Rhode Island at risk if it doesn’t put its basic economic development and regulatory infrastructure in place and correct some of these issues.”

cneedham@projo.com

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