EMBARGOED until May 31, 2012 at 9:00 a.m. MEDIA CONTACT: Emily Heisig (NEC) (617) 723-4009 office (617) 365-2647 cell The following information is embargoed for release until 9:00 a.m. Thursday, May 31, 2012. US Economic Outlook - Summary The U.S. economy continues to grow at a solid if less than exciting pace. Looking past temporary and technical factors such as the record warm winter, real GDP growth remains near 2.5% annualized. With productivity growth slow, this will be enough to expand U.S. employment by more than 2 million jobs this year and next. And with slow growth in the labor force, this will be sufficient to push the U.S. unemployment rate below 8% by the end of 2012, and closer to 7% by the end of 2013. The foreclosure wave at home and the debt crisis in Europe still threaten to disrupt the recovery. Source: Mark M. Zandi is chief economist of Moody s Analytics, where he directs economic research. Moody s Analytics, a subsidiary of Moody s Corp., is a leading provider of economic research, data and analytical tools. New England Economic Outlook - Summary The forecast for the region is for the economy to continue to grow slowly, with employment growth averaging 1.3 percent per year and overall economic growth (regional gross product) averaging 2.8 percent per year over the forecast period (through the end of 2016). This is below the growth of 2 percent in employment and 3 percent in the overall economy required to significantly reduce unemployment and substantively expand economic opportunity in the region. The expectation is that the region will not return to its pre-recession employment level until 2015. After a relatively strong first quarter of 2012 with 1.6 percent annualized growth in employment, employment growth in the region is not expected to be above 1 percent again until the middle of 2013, and then it is expected to rise only slowly and remain under 2% throughout the forecast period. The regional unemployment rate is expected to remain below the U.S. average, but remain at above 6% until 2015. Weakness in the housing market is anticipated to remain a deterrent to economic recovery. Declining or flat median housing prices are expected to continue in New England until mid-2013 and then increase only modestly.
All the states in the region are expected to have employment growth below the U.S. average over the forecast period. Contributing factors include lower labor force growth than the U.S. average. There will continue to be significant variation in economic performance across the region. Rhode Island, New Hampshire and Vermont are expected to have the highest employment growth in the region over the forecast period. While Rhode Island is expected to have the highest rate of employment growth, the Ocean State will continue to have the highest unemployment rate in the region throughout the forecast period as it recovers from the most significant percentage employment decline in the region during the last recession. As the national economy improves, albeit slowly, and some global markets expand and with it demand for manufactured products and high value added services, the region s economic outlook will be strongly influenced by the matching of workforce capabilities and skills with the emerging needs of industry employers. This is the focus of the conference theme. Recessions and recoveries are typically periods of significant reallocation in the economy and in the labor market, and the current period in New England is no exception. The speed of employment recovery in the region will depend in part on the degree of alignment between the characteristics of available workers and the growing industries and newly available jobs. In 2012 the fastest growing sectors on a percent change basis in New England include high tech (2.1 percent), professional and business services (2.0 percent) and private education and health care services (1.7 percent). These industries are expected to continue to increase employment at a faster rate than other industries over the forecast period. They include concentration of employment in many of the occupations that are expected to grow the fastest in percentage terms and in numerical growth nationally over the next decade including biomedical engineers, market research analysts and marketing specialists, nurses, personal care aides, home health aides, physical therapists and post-secondary teachers. Manufacturing employment in the region is growing and this is good news after a long period of extended decline. The growth, however, is slower than in some other sectors at.5 percent in 2012, and slower than it would be if there were not labor skill mismatches in manufacturing. The economy requires not only available workers to support employment growth, but also an available workforce with the appropriate skills to meet the needs of employers in a position to hire new workers. Nationally, nearly one-third of manufacturing companies are suffering from some level of skills shortages. There have been specific reports across the region of advanced manufacturers with increasing global orders for their products who want to expand production and hire more workers but are limited in their growth by a shortage of skilled machinists, computer and numerical control operators and engineering technicians and the retiring of older skilled workers. There is reported lack of education and training in job-specific skills and basic skills and shortage of middle skilled workers with more than high school but less than bachelors level education. Rapid increases in technology have left workers illprepared and new and changing technology will likely be cause for future mismatches unless better alignment can be achieved between training and available jobs. All of the above will be increasingly relevant in other important industries in New England including health care, high technology and professional business services. Many of the New England companies that have survived the recession are well positioned to grow as the national economy improves, but will require appropriately skilled workers. For more information on the New England economic outlook, contact NEEP New England forecast manager: Ross Gittell Vice President and Forecast Manager, New England Economic Partnership
Chancellor, Community College System of New Hampshire James R Carter Professor, Whittemore School of Business and Economics, University of New Hampshire 603-271-2739 rgittell@ccsnh.edu Massachusetts Economic Outlook - Summary The Massachusetts economy has been in an expansion phase since the summer of 2009. The pace of expansion appears to have slowed from the robust growth in 2010, although in 2011 it appears that the state s economy grew moderately, with growth as least as fast as the nation s. The labor market improved throughout 2010 and 2011, with moderate employment growth and declining unemployment rates. Since the employment trough in November 2009, Massachusetts has gained back 81,500 of the 143,000 jobs it lost during the recession. Between December 2009 and April 2012, the Massachusetts unemployment rate fell from 8.7 percent to 6.3 percent. The broader U-6 unemployment rate also fell substantially over this period of time, from 16.4 percent to 12.2 percent. The Massachusetts economy is expected to continue to expand at a moderate pace. This assumes that the effects of the economic crisis in Europe and the slowing Chinese economy will be more than offset by growing demand within the U.S., and that the looming fiscal austerity scheduled to begin in 2013 will be softened by post-election compromises in Washington. Payroll employment is projected to grow 1.2 percent in 2012 and 1.0 percent in 2013, on a fourth-quarter to fourth-quarter basis, to accelerate moderately to about a 1.5 percent annual rate in 2014 and 2015, and then to slow in 2016 as retiring baby-boomers slow the growth of the labor force. Growth in income and output will essentially follow the same profile as employment. Real gross state product growth will average 2.3 percent per year over the forecast period, while nominal personal income growth will average 5.2 percent and nominal wage and salary growth will average 5.8 percent over the five year forecast horizon. The state s unemployment rate is expected to rise somewhat, to 7.0 percent by mid-2013, as improving job prospects entice workers who have given up looking to re-enter the labor force. Thereafter, the unemployment rate is expected to fall steadily to just over five percent by the end of 2016. The residential housing market may finally be at its bottom. Sales and permits are expected to reach prerecession levels in 2015, while prices will rise at an average annual rate of nearly three percent between the end of 2013 and the end of 2016. By the end of the forecast, the median existing home price will still be 13 percent below its peak in 2005. Despite the present high unemployment, there are two long-term challenges for the development of the Massachusetts workforce: 1. The distribution of skills demanded in the future is shifting towards STEM and other highskill, high-knowledge occupations. 2. The aging workforce and impending retirement of baby-boomers a generation of highskilled workers could result in a massive shortage of skilled workers.
For more information on the Massachusetts economic outlook, contact NEEP Massachusetts forecast manager: Alan Clayton-Matthews Associate Professor, School of Public Policy and Urban Affairs, and Economics Department Northeastern University 617-373-2909 a.clayton-mattehws@neu.edu New Hampshire Economic Outlook - Summary New Hampshire continues its slow, steady emergence from the recession of 2008-09, having fared better than most of the rest of the country. The state s unemployment rate stood at 5 percent in April 2012, well below the 8.1 percent national rate. Job growth remains slow. New Hampshire had 650,000 nonfarm jobs in 2008, as the recession began taking hold, and the state will not see that many jobs again until the second quarter of 2014. Meanwhile, a more long-term trend stands to have a profound impact on New Hampshire s economy. The state has experienced net domestic out-migration in the last four years, a break from the traditional trend of net in-migration. New residents have provided the state with a highly educated workforce, because the educational attainment of people moving into New Hampshire had typically been higher than those moving out. This change in the direction of migration has broader implications for future economic growth, because an educated labor force is the foundation of New Hampshire s competitive advantage over other states. As in many other parts of the country, New Hampshire s economy is also grappling with the so-called skills gap, or the supposed mismatch between employers labor needs and skill levels among the labor force. From a public policy perspective, there is very little actual data that frames this issue. It is not clear whether unemployment is high because workers lack the necessary skills, or because employers are reluctant to hire in a still weakened economy. While there may never be a perfect match between the needs of employers and the skill sets in the labor force, public policy does attempt to close the gap, through subsidizing employer job training and helping the unemployed acquire new skills to return to the work force. For more information on the New Hampshire economic outlook, contact NEEP New Hampshire forecast manager: Dennis Delay, New Hampshire Center for Public Policy Studies Concord, NH 603-226-2500 ddelay@nhpolicy.org Maine Economic Outlook - Summary After two years of being basically flat at a job level near the bottom of the recession, the Maine economy may show some signs of life in 2012. First quarter figures are promising, though first quarter promises have been broken in the past. The household survey employment levels, which include self-employment, have been more promising having shown moderate growth even while wage and salary jobs were flat. This early promise, plus a shift by NEEP to a faster recovery forecast for the U.S. economy, leads Maine to a recovery of pre-recession jobs by 2015, compared with 2017 in the previous NEEP forecast.
The outlook for 2012 does show some growth for the first time, ending the year at about 598,000 jobs. This implies a growth of about 5,000 jobs on a quarterly basis over 2011Q4, though only about 3,000 jobs on an annual average basis. Beyond 2012, job growth accelerates along with the national economy in 2013-2016 to a rate of 1% per year or more, a growth rate not seen in Maine in more than a decade. The forecast accelerates the period of recovery to pre-recessionary levels from 2017 in the previous NEEP forecast to 2015; this change is primarily the result of the shift in the underlying national forecast scenario. The job picture in Maine is a little more robust if one shifts attention from the establishment survey to the household survey. The household survey shows that there has been some employment growth over the past two years; even as the establishment surveys (CES and QCEW) showed flat employment, the household survey showed growth from the end of 2009 to the beginning of 2012 of about 19,000 jobs. When the job growth from the trough of the recession to the end of the forecast period is compared to the change in the composition of the Maine economy (measured by employment), the structural changes in the economy that are an inevitable part of recession-recovery cycles become clear. While sectors such as manufacturing, construction, and trade, transportation & utilities will recover jobs, the recovery will in these sectors will not be enough to bring them back to pre-recession peaks. In addition to the net loss of government jobs, there will be net reductions in construction, manufacturing, trade, transport & utilities, and information. The structural mismatch as an explanation for the lagging job recovery has an element of truth in it, but it is in fact a very old story of changing from goods-related to service-related occupations, which has been an issue in good times and bad for forty years. This cycle the shift is made more difficult by the fast growth, sharp decline, and slow recovery in construction jobs. But there are other job types, like office workers, where there have been major job losses and little to suggest a skills mismatch. For more information on the Maine economic outlook, contact NEEP Maine forecast manager: Charles S. Colgan Professor of Public Policy & Management Muskie School of Public Service University of Southern Maine 207-780-4008 colgan@maine.edu Vermont Economic Outlook - Summary Vermont s proportionally better performance relative to the U.S. and New England economies during the 2008-09 recession and the subsequently slow national and regional recovery has Vermont on a historically slow labor market recovery track. While a slower rate of recovery should be expected for a state that is recovering from a shallower economic trough, it is of little comfort to the still too many Vermonters that remain un- or under-employed. The outlook for the Vermont economy over the calendar year 2012-16 period is for moderate recovery followed by moderate growth in the out-years of the forecast. If this forecast holds, the state economy will re-capture all of the statewide payroll jobs lost during the 2008-09 recession by the 2012:Q3. This recovery is expected to be fueled by a revival in the global economy, good niche positioning by major Vermont firms to take advantage of that growth, a return to normally functioning financial markets, and eventual resumption of positive price movement in Vermont s residential and second home markets.
The payroll job recovery and eventual resumption of payroll job growth will be historically slow and uneven averaging only about 1.3% per year over the forecast period. Improvement in the state s unemployment rate will continue at a faster pace than either the U.S. and New England economies as a whole. Positive job gains are expected in all NAICS super sectors under this Spring 2012 NEEP outlook revision for Vermont including the Business and Professional Services sector (at a +3.1% percent annual average over the calendar year 2012-16 period) and the Construction sector (at a +1.1% percent annual average over the calendar year 2012-16 period). Near-term economic prospects and the pace of economic recovery and the eventual resumption of growth will also continue to be impacted by the lingering effects of Tropical Storm Irene, which hit Vermont at the end of August 2011. For the greater part of three decades, policy in Vermont has tried to address what many believe has been a significant skills mismatch in Vermont s labor markets. While it is true that the educational attainment of the over 25 years population in Vermont has been high and continues to rise, this has apparently done little to assist many state employers with filling the type of jobs employers report as in demand and vacant. Instead, attainment appears to be on the rise more because a highly educated, older population is continuing to choose to reside in Vermont, while younger, newly graduated college degree holders appear to be moving away. For more information on the Vermont economic outlook, contact NEEP Vermont forecast manager: Jeffrey B. Carr, President, Economic and Policy Resources, Inc. 400 Cornerstone Drive, Suite 310 P.O. Box 1660 Williston, Vermont 05495-1660 800-765-1377 jbc@epreconomics.com Matthew L. Cooper, Economist, Economic and Policy Resources, Inc. 400 Cornerstone Drive, Suite 310 P.O. Box 1660 Williston, Vermont 05495-1660 800-765-1377 mlc@epreconomics.com Rhode Island Economic Outlook - Summary Through April of 2012, Rhode Island continued to have the second highest unemployment rate in the United States. The state s seasonally adjusted unemployment rate for April 2012 was 11.2 percent, a onetenth of a percentage point increase from the March 2012 rate. A double-digit unemployment rate is forecasted for Rhode Island in 2012 and 2013. The Rhode Island labor force totaled 556,259 in April 2012, down about 1,000 from March and down 7,820 from April 2011. This is the lowest labor force level since March 2005. Rhode Island has lost 33,100 jobs since 2006. Rhode Island s total nonfarm employment is forecasted to be 460,200 in 2012, the same number observed in 2011. The lack of job creation in the short term is the outcome of a struggling local labor market. The annual growth rate of employment is forecasted to be 1.6 percent from 2011 to 2016 as compared to -1.4 percent from 2006 to 2011. The average unemployment rate in 2012 is expected to be 10.8 percent and by
2016 be 6.6 percent. From 2012 to 2016, the unemployment rate is forecasted to be above the average rates in New England and the nation. The median price of a home was $203,600 in 2012 Q1 and is expected to be $222,300 in 2013. By 2016, it is forecasted that the median price of a home in Rhode Island will be $246,400 compared to $280,500 in 2006. It is forecasted that there will be 955 housing permits issued in 2012 as compared to 685 in 2011. From 2011 to 2016, the annual growth rate in housing permits is expected to be 23 percent as compared to -22 percent from 2006 to 2011. The challenges to turn the economy around are significant including reducing the overall costs of doing business and changing the perception that Rhode Island is an unfriendly place to do business. In addition, the state also faces a mismatch of talent with job needs. In 2011, 40.8 percent of Rhode Island residents 25 years and older had an associate degree, or BA degree, or graduate degree, compared to just under 50 percent in MA, CT, and NH. In addition, over 45 percent of the Rhode Island population 25 years and older holds only a high school degree. Workers with only a high school education are facing increasing difficulties to find and retain jobs in a global and highly competitive economy. The demand for high-skilled labor in Rhode Island will increase in most employment sectors over the next decade. For more information on the Rhode Island economic outlook, contact NEEP Rhode Island forecast manager: Edward M. Mazze Distinguished University Professor of Business Administration College of Business Administration The University of Rhode Island Kingston, Rhode Island 401-295-5801 emazze@uri.edu Edinaldo Tebaldi Associate Professor of Economics Department of Economics Bryant University Smithfield, Rhode Island 401-232-6901 etebaldi@bryant.edu Connecticut Economic Outlook - Summary The modest recovery is expected to continue for the Connecticut economy in 2012 but the national budget struggle may limit Connecticut job and income growth for 2013. High quality, high paying jobs were lost in finance, business services, and construction. Wall Street still appears to be retrenching, along with possible job cuts in defense. An eventual rebound is expected in the banking, insurance, construction, and professional services sectors in 2014 and beyond. But the health of the U.S. economy along with the number, timing, and nature of these new jobs will significantly affect the pace of the Connecticut recovery.
The Connecticut 3/12 unemployment rate at 7.7% was below the 8.2 % U.S. rate. It should average 7.5% in 2012, 7.2% in 2013, and fall to 6.6% in 2016. The Connecticut economy was late into and will be slow to recover from the recession. The restructuring of the U.S. financial services industry including Wall Street, insurance, commercial and investment banking firms cut Connecticut financial service jobs by 12,700 from 2007:1 to 2012:1. Further downsizing is possible potentially reducing income and sales tax revenue gains in Connecticut. Despite an absence of overbuilding, excessive reckless lending, and a later arrival of the housing recession, the decline in Connecticut housing industry has been severe, and some foreclosures are expected to continue through 2013. In almost every national survey, Connecticut is rated highly in the quality of its workforce. However, from 2000-2010, Connecticut dropped from 4th to 7th in terms of the number of adults over the age of 25 with postsecondary degrees. Connecticut is now ranked 34th in the rate of growth (3.4%) of persons aged 25-34 who hold an associate's degree or higher. For more information on the Connecticut economic outlook, contact NEEP Connecticut forecast manager: Edward J. Deak, Ph.D. Professor of Economics, Fairfield University Fairfield, Connecticut 203-254-4000 x-2866 deak@fairfield.edu and