Despite 3% growth in 4Q, R.I. economy can’t catch U.S., region
THE STATE'S ECONOMIC activity grew at an annual rate of 3 percent during the fourth quarter of 2013 and is expected to grow at an annualized rate of 2.7 percent during the first quarter of 2014, according to the Rhode Island Current Economic Indicator Index released by the Rhode Island Public Expenditure Council and Bryant University.
COURTESY BRYANT UNIVERSITY AND RHODE ISLAND PUBLIC EXPENTITURE COUNCIL
PROVIDENCE – Rhode Island’s economic growth accelerated in the final months of 2013, bolstered by improved employment in the state, according to the Rhode Island Current Economic Indicator index released Monday by the Rhode Island Public Expenditure Council and Bryant University’s Center for Global and Regional Economic Studies.
The CEI for the fourth quarter of 2013 rose to 3 percent from a revised 2.7 percent for the third quarter. The leading indicator, projecting the CEI growth rate for the first quarter of 2014, is forecast at 2.7 percent.
The quarterly CEI combines several “key gauges of economic activity” in a single statistic to measure the overall current economic conditions in Rhode Island. It is calibrated to grow at the rate of the real gross state product and can be interpreted as the underlying growth rate of the state economy, according to RIPEC and the Bryant center.
“Improvements in regional and national economic outlooks have contributed significantly to boost internal economic conditions and, thus, foster job and income creation in Rhode Island,” the report stated. “Overall, the state’s economy looks better now than it has over the last few years because of both sustained job and income growth since 2012.”
However, the state’s high rate of unemployment, the skills gap evidenced in the labor force, and a struggling housing market remain among the factors preventing Rhode Island’s economy from catching up with the faster-growing national and regional economies.
“The recent trend of New England’s regional economy buoying Rhode Island’s has diminished over the past two quarters,” said John Simmons, executive director of RIPEC, in the report. “The exception to this is the strength of the Massachusetts economy, which grew robustly in the fourth quarter of 2013, and continues to contribute to Rhode Island’s growth.”
Simmons pointed out that Rhode Island’s Current Economic Indicator has consistently trailed the U.S. economy, which grew at an annualized rate of 3.2 percent in the fourth quarter compared with Rhode Island’s 3 percent.
Although the New England economy’s fourth-quarter growth rate of 2.6 percent lagged Rhode Island, with RIPEC and Bryant projecting a drop back down to 2.7 percent for Rhode Island in the first months of 2014, it is unlikely the performance gap between the Ocean State and the regional economy will narrow, the report said.
“The state’s biggest economic challenges lie with its changing labor force, misalignment of labor supply and demand, and long-term structural deficits,” the report stated. “In addition to focusing attention on these challenges, the state must strategically plan to develop ways in which it can nourish high-paying industries and their associated jobs.”
While challenges remain, RIPEC and Bryant reported that six of seven internal factors positively affected the Rhode Island CEI in the fourth quarter. Although the state’s 9.1 percent unemployment rate in December was the highest in the country, average weekly initial unemployment claims declined overall by 8.1 percent in the fourth quarter.
The Rhode Island labor market is slowly improving, according to the report, with 8 percent growth in construction employment, 7.9 percent growth in leisure and hospitality employment, and 3.5 percent growth in professional and business services employment.
The only internal component to negatively affect the fourth-quarter CEI was general sales and gross receipt taxes, which dropped a seasonally adjusted 2.8 percent during the three months ended in December after three consecutive quarters of growth.