N.E. forecast: 250,000 jobs in jeopardy

PROVIDENCE, R.I. – New England is sliding into a “significant recession” and is expected to lose a quarter-million jobs by the end of the decade.

Economists at the New England Economic Partnership forecast Thursday that unemployment in the region would rise to its highest level since 1992, hitting more than 8 percent by mid-2010.

The main culprit for steep job losses is the mushrooming impact of the global credit crisis. It now has spread from the housing market to construction, the financial sector, retail trade and other sectors of the economy.

The group of economists, which released its forecast at a conference in Boston, described a cycle of decline that could leave New England facing an even slower recovery than the rest of the nation once the recession ends.

The predicted 250,000 job loss is about 3.6 percent of the region’s employment, which will decline for the rest of the decade and then flatten out through 2011.

But spiking unemployment rates also mean yet more reduction in already lowered levels of consumer and business confidence, which contributes to further spending cuts, more layoffs and an overall slower recovery.

While the economists examined a period from early 2008 to the end of 2011, the bulk of the job losses in New England were expected to hit by mid-2010.

Overall, New England likely will have lost a total of 157,000 jobs from early 2008 until the end of 2011.

But while the predicted unemployment rate is grim, it’s still expected to be lower than the national average, according to Ross Gittell, a professor at the University of New Hampshire and forecast manager for NEEP.

And the region has survived similar recessions before, Gittell said.

“You can say the bad news is we’re in a recession,” he said. “The good news is this recession is going to be similar in some ways to the early 2000s and some ways the early 1990s. … We’ve been through that and we recovered.”

Among the six New England states, economists are seeing a wide degree of differentiation with jobless numbers.

“There are varying degrees of economic stress and economic forecast” across the region, Gittell said.

Rhode Island is expected to continue to see the highest unemployment rates in the region, peaking at 10.3 percent.

“The challenges facing job growth and economic development in the state continue to be a lack of leadership in both public and private sectors, high tax rates, an unfriendly business, environment, dependence on public jobs rather than private employment and a poorly performing education system,” Edward Mazze, professor of business administration in at the University of Rhode Island and the state’s forecast chair, wrote in a summary of the report.

Maine could be next in line, with a projected peak unemployment rate of 8.7 percent.

Connecticut and Massachusetts would land in the middle with each at 8.3 percent. And New Hampshire could peak at 7.4 percent with the lowest spike in unemployment in Vermont at 6.9 percent.

Even so, forecasters in Vermont said the state faced hard times.

“The current economic recession in Vermont will be the most significant state economic recession since World War II, except for that very difficult 1989-91 downturn,” wrote Jeff Carr, vice president of Vermont’s Economic and Policy Resources, Inc.

In every state in the region but Vermont, housing prices have been dropping. Even so, the decline is not as great as some housing markets in California, Florida, Nevada, Arizona and the Midwest.

NEEP releases its economic forecasts twice a year.