Report: R.I. growth solid in late ’16 but gap to U.S., region persists

THE LATEST PROJECTIONS from the Rhode Island Current Economic Indicator predict modest economic growth in early 2017 after a solid second half of 2016 in the Ocean State. / COURTESY BRYANT UNIVERSITY, RHODE ISLAND PUBLIC EXPENDITURE COUNCIL
THE LATEST PROJECTIONS from the Rhode Island Current Economic Indicator predict modest economic growth in early 2017 after a solid second half of 2016 in the Ocean State. / COURTESY BRYANT UNIVERSITY, RHODE ISLAND PUBLIC EXPENDITURE COUNCIL

PROVIDENCE – The quarterly Rhode Island Current Economic Indicator shows a state that experienced solid economic growth in the second half of 2016 but which also is not forecast to continue on a robust growth trajectory in the early part of this year.

Released Tuesday by the Center for Global and Regional Economic Studies at Bryant University and the Rhode Island Public Expenditure Council, the R.I. CEI shows third-quarter growth of the Ocean State’s gross domestic product reached 3.6 percent, with estimated fourth-quarter growth expected to hit 2 percent. The project projects first-quarter growth in 2017 of 1.9 percent.

While the second half of last year showed strong expansion, it was driven by “favorable regional and national economic conditions as well as improvements in the labor market,” according to a release by the authors of the report, who cited a Rhode Island unemployment rate of 5 percent. That figure was revised downward to 4.9 percent on Monday by the U.S. Bureau of Labor Statistics and the R.I. Department of Labor and Training.

The earlier part of the year was not so kind to the Ocean State, with second-quarter GDP recorded at 0.2 percent, which itself followed a 2.8 percent decline in the first quarter.
New England’s economic performance was much stronger than Rhode Island’s for the entire year. GDP growth in the fourth quarter for the six-state region was 2.3 percent, which followed 3.8 percent in the third quarter and 1.5 percent in the second quarter. The region’s economy contracted in the first quarter as well, although at a 1.4 percent pace, half the Rhode Island drop.

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Similarly, the United States growth rate continued to leave the Ocean State behind, coming in at 1.9 percent in the last three months of 2016, 3.5 percent from July-September and 1.4 percent in the second three months of the year. And unlike Rhode Island and the rest of the region, the U.S. recorded growth in the first three months of 2016 at a rate of 0.8 percent.

In analysis, the authors of the report believe that the gap between Rhode Island’s growth rate and that of the region and the nation can be laid at the feet of “structural problems related to the labor force (e.g. skills mismatch), the aging of the population compounded by the lack of population growth, and a costly business environment.”

“Now that we’ve regained our footing,” said RIPEC Executive Director John C. Simmons, it is time to reassess the state’s economic development strategy – leaders should focus on systemic reforms that will improve the underlying business climate in the state and gradually move away from the current strategy, which relies heavily on tax incentives and other one-off programs.”

Of the 11 CEI components, most of them related to employment in various industry sectors, five dragged down the state’s economic performance in the last three months of 2016. Employment in education and health services, financial services, information services and manufacturing all registered declines in the 2016 fourth quarter, at the same time that average weekly initial unemployment claims increased.

Offsetting those declines were increases in employment in construction; trade transportation and utilities; professional and business services; and leisure and hospitality services. At the same time, the regional GDP grew as did the national GDP, real wage and salary disbursements, and perhaps the most important of all the indicators, general sales and gross receipt taxes, which can be seen as a proxy for gross demand.

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