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The year 2012 shapes up as a difficult year for the Rhode Island economy.
Since the end of the Great Recession, Rhode Island has been unable to re-energize its economy and spur job creation. Slow real gross state product growth and a sluggish job market have caused a significant number of Rhode Islanders to drop out of the labor force and kept the number of employed people hovering at just greater than 500,000 in 2011.
Unfortunately, this gloomy scenario is not expected to change significantly in the short term. The New England Economic Partnership Fall 2011 forecast indicates that Rhode Island’s real GSP will grow at an annual rate of 2.1 percent from 2010 to 2015. This rate is smaller than the expected growth of 2.5 percent for the New England region during the same period.
Even for those with jobs, the annual change in real average wages and salaries is forecast to be just over 0.4 percent from 2011 to 2015. Per capita personal disposable income was $39,582 in the third quarter of 2011, which represents a 1.4 percent increase compared with the 2010 third quarter. Adjusting for changes in the cost of living, real per capita disposable income is expected to decline from 2010 to 2015 at a rate of 0.2 percent
The sluggishness of wage growth in Rhode Island is not a surprise, given the past few years’ employment figures as well as the projections for joblessness over the next four years. The NEEP forecast shows expected job growth from 2010 to 2015 of 1.4 percent per year on average, well below the national expectations.
For example, the total number of jobs based in Rhode Island will stay roughly constant from the 2011 third quarter until the end of 2012. The state is expected to add jobs starting in 2013. Average total nonfarm employment in 2011 was 461,800 and is forecast to be 462,200 in 2012, and 467,600 in 2013. From 2012 to 2015, it is forecasted that 28,900 new jobs will be created in the state.
While the number of jobs based in Rhode Island stayed roughly constant over the last 12 months, the unemployment rate decreased from 11.8 percent in the 2010 first quarter to 10.6 percent in the 2011 third quarter. The drop in the unemployment rate is explained by a decrease in the size of the labor force – it dropped from 576,000 in the 2010 second quarter to 562,000 in the 2011 third quarter – as well as an increase in the total number of Rhode Islanders who had jobs either in state or out of state.
Since job creation will be weak in the next couple of years, the unemployment rate is expected to remain greater than 10 percent until the end of 2012, and only reaching 8 percent in 2015.