BOSTON – The nation’s lingering credit crunch and housing slump will slow an economic turnaround in New England with the region expected to post slightly slower overall economic growth than the nation over the next five years and much slower jobs growth.
Despite Friday’s largely bleak long-term assessment from the New England Economic Partnership, the panel of economists from the region’s six states highlighted one positive. Thanks mostly to Massachusetts, the group predicts New England will narrowly avoid sinking into the brief recession that the economists predict for the nation as a whole this year. A slow regional recovery is forecast to start in the second half of this year.
“The resiliency of the regional economy can be attributed to the Massachusetts economy, which accounts for over 50 percent of the regional economy,” said Ross Gittell, the organization’s vice president and a professor at the University of New Hampshire. “No other state in the region is expected to avoid decline in gross state product in the first two quarters of 2008.”
The group said Maine is expected to see a very mild and short recession with a loss of fewer than 2,000 jobs. The national housing slump has hurt Maine’s lumber industry, and construction employment has dropped amid a decline in home building. Rising oil prices have hit Maine harder than most states because of its dependency on oil for home heating and because energy costs account for a large portion of overall expenses at employers such as Maine’s paper and shipbuilding industries. Jobs growth is expected to fall below already-slow levels forecast a year ago, which will hurt population growth. The state’s unemployment rate is expected to remain above the national average in coming years.
The group predicts the region’s economic growth to be largely flat through 2012. The organization’s latest twice-a-year update of the region’s economic outlook cited “the broadening effects of the national credit crisis and economic vulnerabilities extending from the housing market to other sectors of the economy.”
The group predicts gross regional product growth – the value of products and services and the broadest measure of economic performance – will remain below the national average through 2012. New England’s current total of about 7 million jobs is expected to grow by 177,000, or 2.5 percent, over the next five years – just half the expected national jobs growth of 5.1 percent, the forecast group said.
New England is expected to see a decline in jobs in four sectors: construction, manufacturing, financial activities and trade.
The region’s personal income is expected to grow at an annual rate of 1.5 percent per year compared with 1.9 percent for the nation.
During the five-year forecast period, Massachusetts is expected to post its strongest performance relative to the national economy in this year. While the nation’s economy posted gross product growth of about 0.6 percent in this year’s first three months, Massachusetts grew at a more robust 2.9 percent. For the full year, Massachusetts is expected to see 2.5 percent growth compared with 3.2 percent last year – a slowdown, but not as sharp as for the nation as a whole or for other New England states.
The housing slump, credit troubles and rising prices for gasoline and food have been offset in Massachusetts by continued growing demand for the state’s technology products, especially from overseas customers who can more easily afford to import U.S. goods because of the weak dollar.
Over the forecast period, Massachusetts, Vermont and New Hampshire are expected to lead the region in average annual growth in gross state product at an annual rate roughly equal to the nation’s 2.8 percent. Connecticut, Maine and Rhode Island are expected to see gross state product growth below the national figure, according to the forecast from the New England Economic Partnership, a 37-year-old nonprofit forecast organization with members from private industry, government and academia.
Its latest forecast comes as the nation’s economy teeters on the brink of a possible recession. The nation has yet to see a recession based on one rough definition: two consecutive quarters of a shrinking gross domestic product. A panel of experts at the National Bureau of Economic Research that determines when U.S. recessions begin and end uses a broader definition, taking into account income, employment and other barometers. The bureau’s finding is usually made well after the fact.
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