BOSTON – New England’s six states are leading the U.S. in a “slow and precarious” economic recovery threatened by deep cuts to government spending, economists said.
The region’s economy, which in the first quarter of 2009 shrank more than 10 percent, will expand at an annualized rate of more than 5 percent by the end of next year, led by job growth in Massachusetts and New Hampshire, the New England Economic Partnership said in a report on Thursday. The U.S. recovery will be slowed by weak housing markets outside New England, with gross domestic product achieving a growth rate of more than 5 percent by 2012, the economists said.
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Deep spending cuts or a change in federal economic policy could derail the rebound, they said. Government employment in the states — Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont — is forecast to drop 2 percent, according to the report. That’s equal to 21,000 jobs during the next year as states, cities, and the federal government cut jobs to combat budget deficits, the Walpole, Mass.-based forecasting group said.
“The recovery in the New England states is expected to be slow and precarious,” the economists wrote in a report released Thursday at an annual conference at the Federal Reserve Bank of Boston. “It is dependent on continued aggressive federal economic policy and a sustained recovery in the national economy.”
The unemployment rate in New England peaked at the beginning of this year at 9.1 percent and will fall to 8.6 percent next year, below the U.S. average of 9.9 percent, according to the report.
Rhode Island, the first state in the region to begin slipping into recession in 2007, will struggle to recover, with its jobless rate having touched 12.7 percent this year, the economists said.
