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April 28, 2008

Economists: R.I. 'picture of weakness' in Northeast

PROVIDENCE -- Rhode Island stands alone as the only Northeastern state “in recession,” according to economists who reported today that the state’s economy hasn’t been this bad in nearly two decades.

The Ocean State’s employment figures, its foreclosure rates, and personal income growth are worse than its neighbors and national averages.

Rhode Island is one of just nine states in recession -- the next closest is Ohio -- while Massachusetts, New Hampshire and Connecticut have growing economies, according to Steve Cochrane, senior managing director for Economy.com, which is owned by Moody’s Investors Service.

“Clearly, in the northeast, Rhode Island is a picture of weakness,” Cochrane said.

The somber news was delivered today in a State House committee room where a dozen budget analysts will convene for the next two weeks to pour through tax receipts, economic trends and state expenditures. The bi-annual event -- dubbed the Revenue & Caseload Estimating Conference -- is more important than the empty chairs in the audience would suggest.

Especially this year.

The governor’s budget office has projected a $384-million deficit for the fiscal year that begins in July, based on data collected the last time the budget analysts gathered in the fall. A growing chorus of state leaders has suggested recently that the massive deficit is actually larger than $384 million.

The analysts who gather in Room 35 will decide in the next two weeks exactly how much larger.

-- Steve Peoples of the Journal State House Bureau

The Revenue & Caseload Estimating Conference always begins with economic forecasts, because the regional economy has a direct impact on the state’s primary sources of money: income taxes, sales taxes, business taxes and lottery receipts.

Cochrane, of Moody’s, was joined today by economists from the international consulting firm Global Insight.

“Without a doubt, it was a very poor year for the Rhode Island economy,” Michael Lynch, of Global Insight, told the panel of budget analysts, who represented the House, Senate and the governor’s budget office.

Rhode Island was the only New England state to report negative employment growth between March 2007 and March 2008, Lynch said. The state’s unemployment rate grew to 6.1 percent as Rhode Island lost 7,200 jobs in the third quarter of 2007 alone.

Personal income growth in Rhode Island increased by 4.8 percent, but fell short of the national average of 6.2 percent.

And Rhode Island’s foreclosure rate was among the worst in the nation, according to Lynch. Approximately 2.4 percent of all home loans were in foreclosure in the fourth quarter of last year, which was the 7th highest rate nationally.

State officials expected today’s outlook to be bad. But they didn’t expect Rhode Island to be singled out as worse than its neighbors.

“I am disappointed that it’s looking like we’re kind of an outlier in terms of how bad it is in Rhode Island,” state budget officer Rosemary Booth Gallogly said. “I expected that this would be a recession that hit all of New England. It looks like we’re in worse shape.”

Why did Rhode Island fare so poorly, given that most of the country has been hurt by the subprime mortgage crisis and subsequent credit crunch?

Cochrane cited these primary factors:

Rhode Island is losing population at a rate that he likened to the exodus in Silicon Valley after the dot-com bust. People returned to Silicon Valley, he said. But there’s no evidence to suggest that Rhode Island will soon increase its pool of potential taxpayers and consumers.

Rhode Island’s size is also working against it, according to Cochrane. Most larger states have several metropolitan areas; when one area struggles, another may be doing well. On average, therefore, the state may show growth.

Rhode Island, however, is essentially just one metropolitan area, he said.

The economists had varying estimates for how long Rhode Island’s recession may last, but agreed that a slow recovery may begin at the end of 2008 into 2009. But even those predictions were based on major assumptions, such as lower oil prices and improving confidence among consumers and the business community.

State budget officer Gallogly said the good news, if there was any today, was that the economists suggested that a full recovery in state employment may require five years, compared to the 10-year recovery that followed the recession of the early 1990s.

Posted by Mike McKinney at 5:40 PM | Permalink

Comments

Do you suppose there is any chance our elected officials would consider cutting taxes to spur the economy?

It seems pretty clear to me that the high tax burden in RI is driving population out of our state and crippling our economy.

Tax cuts could stop the exodus, spur the economy and likely lead to higher tax reciepts.

Too bad the clowns on Capitol Hill cannot seem to understand this concept.

dennis | April 28, 2008 6:38 PM link

Does this really surprise the spend it all forever general assembly? They have added layer and layer to the state payroll, without any thought to the cost. We need a payroll cap at $90,000 for any department head. A freeze on any new hires, and the state to take over all the state teachers, Yes all. There should be one wage scale for all the towns and cities. this will only happen with term limits for the general assembly. Then there will be enough money to fix potholes and do upkeep on bridges.

unclestu | April 28, 2008 8:01 PM link

The great give away to retired city and state employees will haunt Rhode Island for many years to come.

Bill Anderson | April 28, 2008 8:57 PM link

The great give away to retired city and state employees will haunt Rhode Island for many years to come.

Bill Anderson | April 28, 2008 8:58 PM link

I'm pretty sure the problem lies with the meathead governor and all his buddies. He has destroyed the state, but hey he's still making money.

amusing | April 28, 2008 9:52 PM link

AS LONG AS WE HAVE A ONE PARTY SYSTEM AND OLD BOY NETWORK WITH POLITICIANS INTRENCHED FOREVER, RHODE ISLAND WILL CONTINUE TO DECLINE BECAUSE OF THE INEPTNESS OF THE POLITICAL PARTIES AND VOTERS AT LARGE.

Richard A. Mottola | April 28, 2008 11:29 PM link

My self, my husband and three children have just recently moved to RI form AZ and love it here. The weather is much better than its neighboring states, it seems to be more family friendly and the many local farms make it much easier to live a healthy green lifestyle.

The one major draw back seems to be the unrealistic housing prices. When compared with the salaries and prices five years ago there is a huge bubble. According to citidata.com the median home price doubled in the last five years when a healthy increased rate of value is about 4% a year. Meanwhile salaries have not kept up with this rate of inflation.

The other set back I see is a lack of willingness to embrace the future, While RI has many positive attributes which make it unique there does seem to be an underlying lack of willingness to consider new ideas. My husband who was one of top performing mangers in a nationwide company, breaking many records and increasing employee retention and satisfactions has been forced to work out of state and commute because of a prevalent attitude here that time spent with a company is more important than performance. We were warned by a few lifers here that unless you knew someone it was very difficult to break into the RI job market. This has proven to be the case for us and a few other transplants I have met. Thus restricting innovative thinking and sending taxable income out of state.

There are may things I have grown to appreciate and enjoy about this about this state including its very welcoming people, great food, wonderful scenery and the ocean. We do intend to stay for the long haul it just seems more difficult for the average family to survive here.

Priscilla Hampton | April 29, 2008 4:14 AM link

No surprises here. A legacy of corruption that pervades government and business--combined with an attitude of entitlement that cuts across all socioeconomic groups--is a formula for economic failure.

I moved back here for family reasons after living and working in NYC for 20 years. Five years later, I commute 170 miles a day to a job that could never exist in this sad little state. I wonder how much longer I can justify staying here.

Peter | April 29, 2008 5:35 AM link

Being a native of Rhode Island it truly breaks my heart to see my home state destroy itself. The high taxes, the high price of real estate, and an unending legacy of liberal mismanagement will continue to keep people like me from ever returning home.

Mark McGinn | April 29, 2008 7:05 AM link

We have a governor who is stymied at every attempt to better the state by the inept, corrupt, self-serving legislature and the still powerful unions. I was a member of a union for 35 years and all the union officers cared about was the union. This mentality of entitlement for both the legislators and the unions must end. A part-time state senator or representative costs the state more than $16,000 a year for health benefits. THIS IS WRONG. A fireman can retire on disability because of any kind of cancer. THIS IS WRONG. When are we going to wake up and send every incumbent packing? Let's vote them all out and start from scratch. New faces in the state house can certainly do no worse than the greedy buffons now in the legislature. I, for one, am certainly fed up with the present situation and if I had the means would look at Rogues Island in my rear view mirror.

Henry | April 29, 2008 9:22 AM link

April 28, 2008

Economists: R.I. 'picture of weakness' in Northeast

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