Nicholas S. Perna is managing director of Perna Associates, a firm that specializes in economic analysis and forecasting. He has been an economic advisor to Webster Bank since 2001. Perna has 40 years of experience as an economist. Until recently, he was a member of the Yale University Department of Economics, where he taught a seminar on financial markets.
He has appeared numerous times on the PBS Newshour and he has been cited by the Wall Street Journal and Business Week as one of the top economic forecasters in the U.S.
He is a member of the American Economic Association and the New England Economic Partnership.
Perna has a bachelor’s degree in economics from Boston College and a PhD in economics from Massachusetts Institute of Technology.
PBN: Looking ahead into 2014 and even into 2015, what’s your view of economic conditions for the Rhode Island and the New England region overall?
PERNA: With a little luck, 2014 should be the best year in close to a decade for the region. Thanks mostly to the pull from a faster rising national economy, jobs will pick up and so will incomes. These better economic conditions mean population will stabilize after years of decline. However, Rhode Island will not return to pre-recession levels of unemployment until 2017 - about three years after the nation. It will take that much time, or longer, for Rhode Island’s unemployment rate to fall back to the pre-recession level of 5 percent.
PBN: Jobs are always at the top of the list when ask Rhode Island business and government leaders and residents what’s most needed in the state. How does job growth look in the next couple of years, based on your research and other independent forecasts?
PERNA: Last year, Rhode Island added a bit more than 5,000 jobs, during the November 2012 to the November 2013 time frame. According to the New England Economic Partnership, the state is expected to add about the same number this year and close to 9,000 in 2015. The unemployment rate is projected to fall from roughly 9 percent at year-end 2013 to about 7.5 percent at the end of 2015. By way of perspective, this leaves the Rhode Island unemployment rate two percentage points above the national average and well above the pre-recession low of 5 percent in 2005. Job growth over the next several years is expected to be strongest in these sectors: professional & business services, leisure & hospitality, high-tech, education and health services, and financial activities.
PBN: Business leaders frequently complain that Rhode Island isn’t business-friendly and the cost of doing business in the state discourages new companies from locating here. Do you see changes or improvements down the road in terms of making Rhode Island more attractive to business?
PERNA: I’m not an expert on competitiveness, but I think education stands out as an area where Rhode Island could benefit from additional attention. Median household incomes are about 15 percent lower than in Massachusetts. In Rhode Island, 30.8 percent of those aged 25 and over had bachelor’s degrees or above. While this is somewhat greater than the national average of 28.5 percent, it is well below Massachusetts a 39 percent. More education means more productivity, greater value-added and so on.
PBN: From your position as an economic advisor to Webster Bank, what do you see as the bank’s biggest challenges in the next year or two? The biggest opportunities?
PERNA: I think the biggest challenges faced by the financial services industry comes from government, especially at the national level. While improved regulation is important for avoiding another financial crisis, the onus seems to fall harder on small- and medium-sized institutions, which were far less responsible for what happened than the behemoths that collapsed or came close to it. How we deal with this without harming our customers is a major challenge, but I we think we can succeed. As for opportunities, there are plenty. This will be a year of further improvements in loan demand for commercial and retail customers. It will also be a period where credit quality continues to get better both nationally and locally. Let me give just one indicator of this. Rhode Island personal bankruptcies will be down for the fourth year in a row in 2014, to a level that’s close to half the 2010 peak. Better credit quality means more funds are available for loans – which is very important when interest rates are rising.
PBN: What trends do you expect to see in the national economy in the next couple of years?
PERNA: The U.S. economy starts 2014 with the best set of conditions we’ve had in some years. Congress seems to have settled down after the fiascos of the past couple of years. Even the monetary seems fairy calm. At long last, the Federal Reserve has started reducing its purchases of bonds. Although this has led to some increase in bond yields, they are still very low by any yardstick. Short-term interest rates are widely expected to stay flat for at least another year. And for the inflation worry warts, 2014 is likely to be another year of very small price increases, with the Consumer Price Index rising only about 2 percent. All in all, things are looking up and the real GDP should increase 3 percent this year, compared to 2 percent in 2013. This should be enough to reduce the unemployment rate from 7 percent at the end of last year to 6.5 percent by the close of 2014.
Managing director of Perna Associates talks about the economic and labor outlook for Rhode Island.