Forecast sees slow economic growth in New England
BOSTON -- Sluggish economic growth will continue in New England, with much of the region not seeing a return to pre-recession employment levels until 2015 at the earliest, according to a forecast released Wednesday.
The four-year forecast developed by the New England Economic Partnership suggests that Massachusetts, New Hampshire and Vermont will fare best over that period, while Rhode Island’s unemployment rate will remain the highest in the region.
Maine and Connecticut will also struggle to reach pre-recession jobs levels by the end of 2016, the economists said.
The forecast sees average employment growth of 1.5 percent for the entire six-state region, and average overall economic growth of 3.3 percent over the four-year period. The economists said 2 percent growth would be needed to make a significant dent in unemployment.
The conclusions stem from the likelihood that the global economy will continue to sputter for the foreseeable future. New England has already experienced a disproportionate drop in exports to Europe.
The forecast also hinges on one key assumption.
"This assumes, of course, that we are not going to fly over the fiscal cliff, that there will be some agreement to keep us from experiencing the worst parts of that," said Alan Clayton-Matthews, a Northeastern University economist.
But if President Barack Obama and Congress fail to broker a deal by Dec. 31 to stave off tax increases and massive spending cuts, New England will suffer harsher consequences than the nation as a whole, the economists said.
In fact, according to an analysis by Moody’s Analytics, four New England states -- Connecticut, Massachusetts, Rhode Island and Vermont -- would be among the seven hardest-hit states if the nation goes over the fiscal cliff, and all six states in the region would be among the top 20 in expected job losses.
The primary reason for this, the economists said, is that the expiration of the Bush-era tax cuts would have a greater impact on New England because of its relatively high per capita income.
The consortium of regional economists, which planned to formally present its findings at a conference of the business-backed New England Council on Thursday, pointed to wide variances in the forecast on a state-by-state basis.
"Massachusetts, Vermont and New Hampshire are expected to recover their jobs lost during the recession period and add jobs by the end of our forecast period," said Ross Gittell, a University of New Hampshire economist and the partnership’s forecast manager.
The same was not true for other states.
"Rhode Island had the most significant employment decline and it’s going to take longer to recover," Gittell said. "Maine didn’t have as significant an employment decline as Rhode Island or a couple of the other states ... but Maine’s economy is very flat and showing no growth."
Connecticut may return to pre-recession job levels by 2016, but just barely, Gittell added.
Housing was a bright spot in the forecast, with economists citing increases in both sales activity and median prices in most of the region. Vermont and Massachusetts were expected to see the sharpest rises in median housing prices over the next four years, Rhode Island and New Hampshire the lowest.
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