BOSTON – Growth prospects for the New England economy look slightly brighter than they did six months ago, forecasters said Wednesday, but they warned the regional recovery will still lag behind the national one in the coming years.
Annualized economic growth will be about 4.5 percent in the first quarter of 2003, according to biennial state-by-state and regional forecasts by the New England Economic Project, a nonprofit forecasting group, before leveling off to about 3 percent in the following years.
Six months ago, NEEP forecast a slightly higher 5-percent annualized growth rate next year but a lower long-term rate of 2 percent.
Both are significantly below growth rates of 5 percent the region enjoyed in the late 1990s and early 2000.
“Just like the U.S. economy as a whole, the New England economy has been resilient post 9-11,” said Ross Gittell, NEEP’s forecast chair and a professor at the University of New Hampshire. “That said, it’s going to be a very slow recovery for the region.”
The latest numbers show that overall, at least compared to the previous recession in the early 1990s, this recession affected New England only slightly.
But considerable regional variation continues. Rhode Island and Maine, which are not heavily dependent on technology, hardly fell into recession at all. Massachusetts and Connecticut, meanwhile, still are being held back by the same dependency on technology that created high growth rates during the 1990s.
And in Vermont, layoffs at big employers like IBM caused forecasters to lower the forecast from what they offered six months ago.
The forecasters cautioned the general recovery is tentative, pointing out that while consumer spending brought the economy into recession, that may weaken due to rising energy prices, few mortgage refinancings, and fewer discounts by retailers.
Among the forecast’s state-by-state findings:
. Maine was barely affected by the recession, with unemployment still well below national rates due to strong gains in non-manufacturing jobs. However, University of Southern Maine economist Charles Colgan said the state still needs more people. “The state cannot easily match even the relatively slow economic growth rates of the 1990s without either more population or a major increase in productivity,” he said.
. New Hampshire will continue to outpace the region, though even by 2006 there will still be fewer manufacturing jobs than before the recession began. Employment is expected to increase 2.2 percent this year.
. Massachusetts’ slow recovery is dragging down the entire region. Recovery is expected to begin this quarter, said forecaster Alan Clayton-Matthews of the University of Massachusetts at Boston, but will remain below 1 percent through the fourth quarter.
. Rhode Island lost just 2,200 jobs in the recession. Employment will rise 0.6 percent this year, about the same as 2001, and accelerate to a 1.9 percent increase next year.
. Connecticut’s employment rate will remain essentially flat through this year. “The recovery should pick up some momentum as it heads into 2003, fed by continued monetary ease, the revival of capital investment expenditures and the local effects of slightly higher defense expenditures,” said forecaster Edward Deak, an economist at Fairfield University.
. Layoffs at IBM, Blodgett Corp. and Ben & Jerry’s Homemade Inc. have weighed heavily on Vermont’s economy. Forecaster Jeff Carr of Economic & Policy Resources, Inc. in Williston, Vt., lowered predicted growth rates for gross state product, job growth and personal income growth compared to what he offered last year. The state’s economy won’t be expanding until the third quarter of calendar 2003.
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