Rhode Island’s economy is trying to turn itself around. These are dangerous times for Rhode Island – a growing state budget deficit, no real population growth in the last few years, an aging population, poorly funded public colleges and universities and no or slow growth in many employment sectors. Added to this is a national housing correction currently taking place which has had a major impact on Rhode Island. The total delinquency rate for first mortgages in Rhode Island is higher than the U.S. rate. One out of every six first mortgage loans in Rhode Island in 2006 was interest only. If the housing market were to rapidly decline, this would lead to a large number of foreclosures.

A total of eight hundred new jobs were created in February in the educational services, retail trade, financial activities, wholesale trade, information, professional and business services and arts, entertainment and recreation employment sectors. For the first time since May 2005, the state’s unemployment rate was lower than the national unemployment rate.

Manufacturing, construction, government and transportation and utilities had job losses. Rhode Island’s manufacturing base continues to shrink. When compared to the U. S. average, the state is losing its competitive advantage in manufacturing which continues to lose jobs at almost a 4% pace. Manufacturing real wages have declined below the U.S. average. The residential construction industry lost jobs due to the lack of demand for new housing.

House-price appreciation in Rhode Island has been high when compared to income growth. Rhode Island housing is still considered unaffordable as compared to other New England states based on average income, cost of living factors and high prices. There is not enough industry growth in the state to sustain the high costs of housing which means that the Rhode Island market has been more adversely affected from the general housing down cycle than many other states.

The employment gains in education were due to the return of student workers and other staff at the state’s private colleges and universities following the winter recess. The increase in retail employment was due to the opening of new stores in Providence.

There has been little growth in the professional/technical services sector due to the difficulty of restructuring the State’s industry mix to include more high-tech industry. This sector is important for the creation of better paying jobs.

Rhode Island’s international business sector is strong with manufacturing accounting for 60% of total exports to countries such as Canada, Mexico, United Kingdom, Germany and Hong Kong. Among the items being sold abroad include manufacturing commodities, computer and electrical products, waste and scrap, machinery and chemicals. The outlook for export growth is good. However, manufacturers are increasing labor force productivity rather than creating jobs.

The opening of Twin Rivers at the end of March, formerly known as Lincoln Park, will create new jobs in the leisure and hospitality industry. Twin Rivers is a destination gambling facility that includes new restaurants and entertainment facilities to take business away from Foxwood and Mohegan Sun in Connecticut and increase the state’s revenue from gambling.

There is still every reason to believe that Rhode Island government is committed to making the state more attractive for keeping businesses and creating new jobs. The risk of recession is low in spite of a housing correction that is taking place where the median existing house price has been declining and homebuilders are working off inventories.