The Rhode Island Economic Outlook Edinaldo Tebaldi, Ph.D. Assistant Professor of Economics RI co-forecast manager - NEEP.

The Rhode Island Economic Outlook

Edinaldo Tebaldi, Ph.D.Assistant Professor of Economics

RI co-forecast manager - NEEP

Changes in Nonfarm Employment, Rhode Island(thousands)

Significant job losses since Feb/07

Source: U.S. Bureau of Labor Statistics

NEEP forecasts that 5,000 jobs will be lost until mid-

2010

NEEP forecasts that 5,000 jobs will be lost until mid-

2010

39,500 jobs have been lost since the recession began39,500 jobs have been lost since the recession began

The Great RecessionCurrent economic conditions in RI are significantly worse than that in the 1970s, 1980s, 1990s and early 2000s’s recessions

Source: New England Economic Partnership (NEEP)

Unemployment Rates

ForecastForecast

Missing the late 1980s?

StateUnemployment

Rate, 2009Poverty Rates

Population Growth

2003-2008

Real GDP (2003-2008)Annual average

United States 10.2 13.2 4.69% 2.25%

Connecticut 8.8 8.1 0.81% 2.06%

Maine 8.2 12 1.00% 1.47%

Massachusetts 8.9 11.3 0.92% 2.02%

New Hampshire 6.8 7 2.57% 1.85%

Rhode Island 12.9 12.7 -2.04% 0.86%

Vermont 6.5 9 0.68% 1.93%

StateUnemployment

Rate, 1990(average)

Poverty Rates, 1990

Population Growth

1985-1990

Real GDP 1985-1990

Annual average

United States 5.62 13.5 4.53% 2.5%Connecticut 4.9 6 2.69% 4.2%Maine 5.28 13.1 5.59% 3.9%Massachusetts 6.33 10.7 2.31% 2.6%New Hampshire 5.65 6.3 11.29% 3.2%Rhode Island 6.11 7.5 3.56% 3.2%Vermont 4.92 10.9 6.17% 5.2%

CurrentCurrent

•Low unemployment•Low poverty rate•Strong pop. Growth•Strong GDP growth

•Low unemployment•Low poverty rate•Strong pop. Growth•Strong GDP growth

•High unemployment•High poverty rate•Population shrinking •Weak GDP growth

•High unemployment•High poverty rate•Population shrinking •Weak GDP growth

The current recession made RI’s fundamental economic problems more noticeable… but the state’s failure to

create new jobs is not a new problem

Source: New England Economic Partnership (NEEP), U.S. Bureau of Labor Statistics

RI Share of US employment

Total employment

knowledge-based economyknowledge-based economy

ForecastForecast

How Did We Get Here?Attracting and Retaining People

and Businesses

Infrastructure Taxes

Individual

Good school systemQuality in public servicesHealth Care quality Arts, Leisure, and natural resources

State income taxCapital gain taxesEstate taxesSales taxes

Business

Qualified labor forceAccess to Ports, Airports, connected highwaysAccess to an expedited business permit/license processInstitutional support for small business and for promoting access to global markets

Corporate taxesTax IncentivesManageable tax system

How did we get here?

Rhode Island failed to provide competitive tax and regulatory

systems, negatively affecting the incentives for attracting and

retaining people and businesses and promoting economic growth.

The State Ranks Poorly in Key Indicators

State

Best State For

Business, 2006

Best State For

Business, 2009

Regulatory Environment

2009a

Economic Climate

2009b

Business Costs 2009c

Labor2009d

Growth Prospects

2009 d

Quality Of Life 2009e

New Hampshire 20 19 46 26 41 5 5 4

Massachusetts 36 34 22 33 48 16 40 2

Connecticut 33 35 33 31 45 18 37 3

Maine 46 41 32 39 44 25 28 19

Vermont 36 47 44 49 43 13 42 9

Rhode Island 45 50 50 48 40 35 18 21

Source: Forbes

a Measures regulatory and tort climate, incentives, transportation and bond ratings. b Reflects job, income and gross state product growth as well as unemployment and presence of big companies. c Index based on cost of labor, energy and taxes. d Measures educational attainment, net migration and projected population growth. e Reflects projected job, income and GDP growth as well as business openings/closings and venture capital investments. e Index of schools, health, crime, cost of living and poverty rates. 

State-Local Tax Burden, 1977-2008

Source: Tax Foundation Source: Tax Foundation

RIRI

Small Business Survival Index, 2007

State Ranking

New Hampshire 23

Connecticut 38

Vermont 43

Massachusetts 44

Maine 47

Rhode Island 48Source: Small Business Entrepreneurship Council

…and more bad indicators

Indicator Source Rank

Utilization of digital technologies in state governments Kauffman 41

Technology in Schools Kauffman 45

Per Capita State Appropriations for Higher Education Milken 45

% university R&D from State and local gov't own 41

% university R&D from Industry own 40

Source: Author’s compilation

But we should not overlook the state’s strengths: Rhode Island Has strong Science & Technology Indicators

Indicator SourceRI

RankingRI

ScoreUS Average

Score2008 2008 2008

Business Climate For Technology-based Activity       High-Tech Industries with I.Q. Higher than 1.0 Milken Institute 11 9 -State Technology and Science Index Milken Institute 10 66.69 54Technology Concentration and Dynamism Milken Institute 13 66.44 54Industry Investment in R&D Kauffman 3 5.23 3.31R&D Inputs Composite Index Milken Institute 6 72.44 -

Cyberinfrastructure        Broadband Telecommunications Kauffman 2 8.7 5Health IT Kauffman 2 9.1 1.9Internet Domain Names Kauffman 30 3.52 5.09Online Population Kauffman 27 72.48 71.67

Source: Author’s compilation

Rhode Island’s has a significant pool of well-qualified workers

Indicator Source Ranking ScoreUS Average Score

Science & Technology WorkforceHuman Capital Investment Composite Milken Institute 15 62.1 52Immigration of Knowledge Workers Kauffman 23 12 11.4IT Professionals Kauffman 25 1.25 1.37

Migration of US Knowledge Workers Kauffman 6 14.1 13.1Percent of Age 25+ with Bachelors or higher Milken Institute 15 0.31 -Percent of Age 25+ with PhD Milken Institute 29 0.01 -S&T work force composite index Milken Institute 13 68.31 56

         University Based S&T Research        

Percent of Bachelor Degrees in Sci & eng Milken Institute 18 0.17 -Percent of Grad Students in Sci & Eng Milken Institute 10 0.02 -Recent PHD Degrees in Sci & Eng per 1,000 workers Milken Institute 10 0.3 -

Scientists and Engineers as a % of workforce Kauffman 5 0.49 0.34% university R&D from Institution funds own 13 27% 20%

Source: Author’s compilation

Attracting and Retaining People and Businesses

Infrastructure Taxes

Individual

Good school systemQuality in public servicesHealth Care quality Arts, Leisure, and natural resources

State income taxCapital gain taxesEstate taxesSales taxes

Business

Qualified labor forceAccess to Ports, Airports, connected highwaysAccess to an expedited business permit/license processInstitutional support for Small business and for promoting access to global markets

Corporate taxesTax IncentivesManageable tax system

The State needs a comprehensive plan to:Address its weaknesses;Build upon its strengths;

The State needs a comprehensive plan to:Address its weaknesses;Build upon its strengths;