WESTBOROUGH, Mass. – New England’s growth is expected to lag that nationwide through the end of the decade, and Rhode Island’s to lag the regions, according to forecasts released today by the New England Economic Partnership (NEEP) at its Fall Economic Outlook Conference.
NEEP forecasters stated that over the forecast period, none of the New England states is expected to achieve exceed the national growth rate in overall economic activity, total employment or per-capita income. The region’s strongest economies are expected to be those in Massachusetts and New Hampshire – a turnaround for Massachusetts, which has lagged the region in recent years but now is expected to outpace it for the rest of the decade.
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Employment growth in the region is expected to lag that nationwide through 2010, NEEP said, expanding at an average rate of 0.8 percent per year, well below the national forecast of 1.3 percent for the same period. New England’s employment is not expected to return to its first-quarter 2001 peak of 7.083 million until the fourth quarter of 2008.
The region’s overall economic activity (gross regional product) is expected to average 2.3 percent per year for 2005 to 2010, compared with the forecast rate of 3.2 percent nationwide. Real per-capita income in New England is expected to grow at 2.5 percent per year through the end of the decade, as the national average rises at 3.4 percent per year.
Rhode Island analysts, led by Edward M. Mazze, NEEP’s Rhode Island forecast chairman, and the dean of the University of Rhode Island’s College of Business Administration, wrote that they predicted “turbulent times ahead for the Rhode Island economy, with the state expected to lose jobs as a result of companies downsizing, shutting down or leaving the state.”
For 2006, they set the state’s employment growth at 0.5 percent, down from the 1.4 percent forecast in May.
Looking ahead to 2007, they wrote, “early forecasts indicate employment in Rhode Island will grow by 0.4 percent or 2,000 jobs.” The state’s GSP is expected to grow 1.4 percent, to $39.2 billion, from this year’s $38.7 billion, a rate exceeding that in Maine but lagging that in New Hampshire and Vermont.
“Rhode Island has serious economic problems,” Mazze wrote. He said the state “needs to take advantage of its geographic location and transportation network to retain and attract high-wage, high-margin and high-growth businesses.”
Several NEEP analysts warned that their forecasts should be interpreted in light of possible risk factors that could further slow regional growth.
“There is a relatively high downside potential of the forecast, mostly influenced by uncertainty in the housing market,” said NEEP forecast manager Ross Gittell, the James R. Carter professor at the University of New Hampshire. “A weaker and longer-to-recover housing market nationally and in the region than that in the forecast would have a significant negative influence on the New England regional economy.”
Nationwide, said Mark Zandi, chief economist for Moody’s Economy.com, who prepared the forecast for the U.S. economy as a whole, “The below-potential economy will forestall further monetary tightening, and indeed, odds are that some modest easing will be necessary early next year. The risks to the expansion remain skewed to the downside, with an estimated one in four possibility of recession in the coming year. This is well above the one in 10 probability that prevailed at the start of this year. Recession risks will remain elevated as long as the housing correction continues to unfold.”
Yet a more optimistic note was sounded by NEEP President Michael Goodman, director of economic and public policy research at the University of Massachusett’s Donahue Institute, who said that, if it “can successfully promote entrepreneurial activity and small-business development, the New England region may be able to beat the forecast.”
The New England Economic Partnership, a nonprofit economic forecasting organization, has been tracking the regional economy since 1971.
