R.I. lags but focus on manufacturing would help a lot

THESE RHODE ISLAND industries have shown job recoveries since the deepest part of the Great Recession, with more growth forecast.
Source: New England Economic Partnership
THESE RHODE ISLAND industries have shown job recoveries since the deepest part of the Great Recession, with more growth forecast. Source: New England Economic Partnership

Rhode Island remains behind other states in New England when looking at major economic indicators such as growth of the gross state product and the unemployment rate. However, the state economy is slowly regaining momentum.
For example, seven of the state’s 13 employment sectors experienced growth in 2013. The unemployment rate fell from 10.6 percent in March 2012 to 9.1 percent in March 2013. Tax revenue has seen a robust increase.
The New England Economic Partnership spring 2013 forecast, when compared to the NEEP fall 2012 forecast, shows that the long-term prospects for both the unemployed rate and nonfarm employment has improved, causing the unemployment rate to decrease much faster than expected in the fall of 2012. The long-term outlook has, thus, improved.
Still, these positive signs are short of the positive story in the overall U.S. economy. The Real Gross State Product, which measures the total economic output of the state, is estimated to have increased 1.8 percent in 2012. The Rhode Island Current Economic Indicator for the first quarter of 2013 increased at an annual rate of 1.6 percent.
Rhode Island’s RGSP is forecast to reach $44.9 billion in 2013, an increase of 1.1 percent compared with 2012’s $44.5 billion. By 2017, RGSP is forecast to be $49.7 billion, producing an annual growth rate of 2.2 percent from 2012 to 2017 compared with 0 percent from 2007 to 2012. This growth rate is, however, slower than the 3.2 percent growth rate for the New England area and 3.3 percent for the United States.
Real per capita income is expected to increase 0.5 percent to $39,110 in 2013 and reach $44,796 by 2017, for an annual growth rate of 2.9 percent from 2012 to 2017 compared to 0.3 percent from 2007 to 2012.
Where the jobs are
Revised employment figures released by the U.S. Bureau of Labor Statistics and the R.I. Department of Labor and Training show that total nonfarm employment in Rhode Island was 466,900 in the 2013 first quarter, compared with 465,300 jobs in the 2012 first quarter, and 459,500 jobs in the first quarter of 2011. And while the revised figures show that the Rhode Island labor market performed slightly better than previously reported, there is still a long way to recover the jobs lost during the 2007 recession.
The employment levels in manufacturing, construction, information, trade, transportation and utilities have significantly declined since the recession hit the economy in 2007. In addition, the forecast indicates that any job creation that will take place in these industries will not be enough to lift the employment levels back to pre-recession levels until 2017. Manufacturing employment is expected to hover around just 41,000 by 2015/2016, compared with 50,800 in 2007. Construction is forecast to employ 15,200 workers by 2014 and 16,700 by 2016, compared with 22,200 in 2017. Employment in trade, transportation and utilities is forecast to hover around 75,000 between 2015 and 2017, compared with 79,800 in 2007.
The information industry also has experienced a decline in employment levels since the 2008 recession and the growth prospect is not encouraging in this sector, declining from 10,600 workers in 2007 to an expected just under 10,000 by 2015/2016.
Employment in education and health services, on the other hand, increased from 99,200 in 2007 to 103,600 in the 2013 first quarter, with expectations of hitting 109,700 in 2017. New England, however, will outperform Rhode Island in terms of employment growth in education and health services at a forecasted growth rate of 1.7 percent from 2012 to 2017, compared with a 1.1 percent growth rate in the Ocean State.
Employment in leisure and hospitality has returned to pre-recession levels. In 2007, 51,500 workers were employed in leisure and hospitality, compared with 51,900 in this year’s first quarter. Employment in leisure and hospitality services is forecast to grow at an annualized rate of 2.2 percent between 2012 and 2017, making it among the fastest-growing industries in Rhode Island.
Economic activity in professional and business services also has returned to pre-recession levels, with employment at 56,900 workers in the 2013 first quarter, compared with 56,100 in 2007. Annual growth is expected to average 2 percent from 2012 to 2017. This represents an increase of 4,800 jobs during the forecast horizon.
In Rhode Island, financial services employed 32,100 workers in this year’s first quarter, compared with 34,900 workers in 2007. The number of jobs in this sector is forecasted to be 34,400 in 2016 and 35,100 in 2017, an annualized rate from 2012 to 2017 of 2.1 percent.
In Rhode Island, the high-tech industry shrank by about 1,000 jobs since the 2008 recession. The NEEP Forecast, however, suggests high-tech jobs will increase from 22,000 in first quarter of 2013 to 24,300 in 2017, for a growth rate of 1.7 percent, compared with 1.9 percent in New England. Why manufacturing matters
Manufacturing represents about 9 percent of all jobs in the state and about 8 percent of the total output of the state. The average wage of a job in manufacturing was $66,629 in 2011 as compared with the average wage with all other jobs at $46,375. In 2013 there are 40,100 people employed in manufacturing. By 2017, it is forecast that there will be 40,800 people working in manufacturing.
Manufacturing played an important part in the growth of the U.S. economy after the recession. But this did not happen in Rhode Island. Manufacturing jobs in Rhode Island decreased from 50,800 in 2007 to 40,300 in the first quarter of this year. The decline in jobs was due to a number of factors, including the lack of skilled workers, the high cost structure in the state and companies leaving the state due to poor economic conditions.
The state legislature is considering a number of initiatives to support manufacturing. They include:
• Innovate RI – to provide technical assistance to small companies to compete for federal grants and matching grants and loans.
• Manufacturing internships and apprentices – to allow students to train during school hours in approved programs.
• Capital expansion manufacturing jobs credits – to allow companies that make major capital investments to be paid back a portion through credits on new jobs. These initiatives may not be enough, however, to create the manufacturing jobs needed to revitalize the sector.
States with a focused approach to revitalizing manufacturing and that are willing to make the investment of time and financial resources have been able to retain and grow their manufacturing businesses.
There are two sides to using public funds as incentives to attract and retain businesses. The advantage is that the incentives add jobs for specific industries. The downside is that the funds may be used to better the economic situation for everyone in a state.
To make Rhode Island a center for manufacturing will require raising the skill level of the work-age population as well as having a more business-friendly entrepreneurial environment. •


Edward M. Mazze is the distinguished university professor of business administration at the University of Rhode Island. Edinaldo Tebaldi is an assistant professor of economics at Bryant University. This piece is adapted from a presentation they gave at the New England Economic Partnership’s May 2013 economic-outlook conference.

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1 COMMENT

  1. Instead of creating manufacturing interships, ad campaigns and other window dressing, it would be more productive if the General Assembly would focus on the REAL problem FIRST:

    “… the high cost structure in the state and companies leaving the state due to poor economic conditions.”