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Rhode Island’s economy is improving, but progress is slow and the impact of the 2008 Great Recession is still felt.
The state’s economy is growing at a modest rate. The unemployment rate is 9 percent, the highest rate in New England. There were about 50,000 Rhode Islanders unemployed in October. From 2007 through 2012, median household income declined, and the poverty rate increased in the state.
As of the second quarter of 2013, 3.4 percent of all mortgages, including 12.2 percent of subprime mortgages, were in foreclosure in Rhode Island. Rhode Island’s population declined from 2007 to 2012. Young adults with college education are leaving to other states to obtain jobs.
According to a recent study by CareerBuilder and Economic Modeling Specialists International, Rhode Island was the only state in the United States that lost middle-wage jobs from 2010 to 2013 (middle-wage jobs are defined as those jobs that pay between $13.84 and $21.13 per hour). The study reported that Rhode Island also saw a decline in high-wage jobs during this same period, meaning all its job growth was in occupations that paid $13.83 an hour or lower.
The state’s economy does look better than in the 2008-2012 period. Net general sales and gross-receipt taxes – a proxy for state aggregate demand – steadily increased in 2013. The number of jobs based in Rhode Island increased from 459,100 in 2010 to 468,100 in August 2013, and real gross state product expanded 1.4 percent in 2012 (compared with no growth in 2011). Thus the overall economic outlook is mixed with an array of indicators showing that the state economy faces significant challenges in the years ahead.
Rhode Island’s real GSP is forecast to reach $45.2 billion in 2014, an increase of 1.8 percent compared with 1.6 percent growth from 2012 to 2013. From 2012 to 2017, real GSP is expected to increase on average by 2 percent. This rate is lower than the 2.8 percent growth expected for both the New England region and the U.S. economy during the same time period.
Between 2002 and 2012, Rhode Island experienced growth rates significantly lower than that of New England and the rest of the nation.
Similarly, real per capita income is expected to increase 1.4 percent to $38,349 in 2014 from 2013. In 2017, real per capita income is expected to be $41,278, with the annual growth rate of real per capita income expected to be 1.6 percent from 2012 to 2017 compared with 0.8 percent from 2007 to 2012.
More jobs, fewer workers
Nonfarm employment in Rhode Island was 468,300 in the third quarter, an improvement on the 465,700 jobs a year earlier as well as the 462,000 jobs in the 2011 third quarter. These figures show that the Rhode Island labor market has improved at a moderate rate over the last two years. The forecast, unfortunately, suggests that Rhode Island’s job market will continue trailing job creation in the rest of the nation.
From 2012 to 2017, the annual growth rate of employment is forecasted to be 1.2 percent in Rhode Island, compared with 1.3 percent in New England and 1.4 percent in the U.S. Total nonfarm employment is forecast to be 472,800 in 2014, 480,900 in 2015 and 493,200 in 2017.
The Rhode Island labor force is forecast to be 559,000 in 2014 as compared to 558,000 in 2013, an increase of 0.1 percent. By 2017, the labor force is forecast to be 570,000, with an annual growth rate from 2012 to 2017 of 0.3 percent, compared with an annual decline of 0.5 percent from 2007 to 2012.
After several months of decline, the unemployment rate ticked up in July 2013 and reached 9.1 percent in August. This rate is significantly lower than the peak rate of 11.9 percent in the first quarter of 2010 but considerably higher than the rates observed in the late 1990s and early 2000s.