A look at recent economic data – along with an analysis of industry, technology and workforce trends – reveals that Rhode Island is falling behind and faces a steep road to full economic recovery. There is a path for Rhode Island to increase productivity and economic growth, however, and shift from falling behind to surging ahead.
We have a once-in-a-lifetime opportunity to tap into federal resources we can use to leverage collaboration between industry, education and community organizations to develop strategies, allocate resources, educate and train a workforce to meet market demands, and create a thriving economy that will benefit all.
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Not “V”, not “U.” It’s a square-root recovery!
Many economists and business leaders anticipated a “V” or “U” shaped recovery, but recent data suggest that both Rhode Island and the nation are experiencing a square-root-shaped recovery – a deep decline in GDP and employment, followed by a quick partial recovery and then slower growth to reach the same economic trend as before the pandemic. The data also show that the rate of job creation lags the rate of output growth in Rhode Island, New England and in the nation.
The pace of GDP and employment
GDP has returned to pre-pandemic levels in Rhode Island, New England and in the U.S. [See Figure 1]. The pandemic, however, created a “missed-growth” gap as shown by the trend line depicting what GDP would have been if the pre-pandemic growth rate [U.S. rate is used as a benchmark] had been sustained in 2020 and 2021. It is also worth noting that from Q1 2020 to Q1 2021, Rhode Island’s GDP increased 0.2% compared with an average GDP growth of 0.4% in New England and the United States. This pattern of relatively small, but slower difference in the pace of GDP growth has been observed over the last 20 years for Rhode Island. This has long-term implications for the economy and income creation. The state must break this cycle of relative slower growth.
Nonfarm employment is still below pre-pandemic levels in Rhode Island, New England and the United States. [See Figure 2]. In Rhode Island, total nonfarm employment was 507,200 in February 2020, declined to a trough of 399,200 in April 2020 and then started to recover, reaching 463,200 in January 2021 and 477,900 in August 2021. Like GDP, the pace of employment recovery has been slower in Rhode Island. As of August 2021, total nonfarm employment was still 5.8% below pre-pandemic levels in Rhode Island, compared with 5.5% in New England and 3.5% in the nation.
Improvements in economic activity supported job creation across most sectors of the economy, reducing the unemployment rate in Rhode Island. The unemployment rate decreased significantly from a high peak in March 2020, but rates are still significantly higher than those pre-pandemic, and the pace of decline has slowed dramatically in Q2 2021. In Rhode Island, the unemployment rate decreased from 17.4% in April 2020 to 7.2 % in January 2021 and to 5.8% in August 2021. Rhode Island’s current unemployment rate is, however, higher than the average of 5.3% in New England and 5.2% in the nation. Current unemployment rates are also much higher than those observed pre-pandemic, which ranged from 3.1% in New England to 3.6% in Rhode Island during Q1 2020.
The employment and GDP data above are encouraging, but they also show that there is a need to confront long-term structural problems that have held Rhode Island’s economy back. The focus should be on the root cause of long-term economic prosperity and productivity growth: workforce skills and innovation.
Pandemic-driven structural changes
Economist Joseph Schumpeter eloquently demonstrated that market-driven economies are dynamic and bastions of creative destruction. That means that people, businesses and governments must be attuned to and looking for new ways to operate, innovate and best position themselves to take advantage of opportunities created by inherent changes in markets.
Crises such as the COVID-19 pandemic, however, accelerate processes that eliminate less efficient businesses and organizations or those that, by force of changes caused by a crisis, become irrelevant or obsolete. This time is no different. We are just starting to see changes that will be felt for years or decades. Some noticeable changes that are taking place right now include increased supply of online public services, acceleration of consumer-behavior change toward online retailing and learning, and the shift in workforce location from on-site to working from home, with many businesses now choosing hybrid models.
Taken together, these changes will have a long-lasting effect in the workforce. More specifically, they have accelerated a fundamental change in skill sets demanded from workers that was already underway.
Effective communication and computer literacy became one of the most relevant talents/skills required from students and workers to perform their tasks and jobs. There is a huge role public sector and institutions of education [from kindergarten to higher ed] must play to ensure that students are prepared for this new economy. The future of education and economy will be a mix of 2019 and 2020. In the business sector, improving workforce skills and hiring workers with 21st-century skills will be critical for survival.
Workforce development opportunity
The analysis of over 218,000 unique job postings posted from January 2021 to August 2021 [see Figure 4] and workers’ profiles provide important insights on career pathways and areas to foster improved workforce skills in Rhode Island. The y-axis of Figure 4 shows the percentage of all job postings that a specific type of skill appeared on a job posting, which could be interpreted as the demand for a specific skill. The x-axis reports the percentage of times that a specific skill appears on the profile of workers seeking jobs, and thus, can be interpreted as supply of a specific skill. Key skills-focused areas that are located above the 45-degree line are listed in Figure 4. These skills are not only the most sought by employers, but the data shows that demand for workers with those skills surpasses current supply.
The areas identified as opportunities to improve skills for workers in Rhode Island are all linked to the skills for the 21st-century workforce: the ability to lead and innovate; problem-solving and analysis; interpersonal and communication skills; computer-based skills, including programming and data analysis; business management capabilities in finance, accounting, project management, budgeting and business processes; customer experience and sales; and health care competence, from nursing to caregiving to health care management.
Workers with these skills are in high demand and will benefit from significant wage growth. In addition, these skills are aligned with a much broader trend determined by a technology-driven economy.
This simple figure shows the dauting task that current and aspiring workers face to build skill sets needed to navigate and successfully build a career in the increasingly digital economy. It is not enough to have technical science, technology, engineering and math skills, coding or data-analysis skills. The workforce of the present and future must be innovative, understand business, be technically and computer competent and, more importantly, be capable of leading, innovating, analyzing and solving problems, and effectively communicating with peers.
What is clear from this analysis is that the workforce of the future will need a combination of business, liberal arts and STEM skills, including in health care.
The size of the bubble denotes (in relative terms) the number of times that a skill appeared in job postings. For instance, communication appeared in over 26,500 job postings, while health care-related skills appeared in approximately 8,000 job postings from January 2021 to August 2021 in Rhode Island.
Partnership for workforce development and economic growth
This is the time to invest in people to unleash innovation and foster job and income growth in Rhode Island. About two-thirds of Rhode Island’s labor force has no college education. This indicates an urgent need to find ways to retrain noncollege educated workers, as well as tap into the pool of college-educated workers to ensure that the entire workforce is prepared to contribute to and secure jobs in a highly competitive and dynamic labor market and increasingly digital economy.
It is time to leverage partnerships with our public and private institutions of higher education to provide the training that our workforce urgently needs. For example, professional certification can quickly improve skills and prepare workers for jobs in this highly connected economy. Let’s tap into over $1 billion in pandemic funds allocated by the federal government to provide meaningful training to Rhode Island’s workers.
Let’s not ask tech giants to do it again, but instead engage and task our institutions of higher education to develop and provide 21st-century training to our workforce.
(Edinaldo Tebaldi is an economics professor at Bryant University.)
