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 that unemployment in the region would rise to its highest level since 1992, hitting more than 8 percent by mid-2010. Connecticut’s jobless rate hit 6.5 percent in October.
The main culprit for steep job losses is the mushrooming impact of the global credit crisis. It has now 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 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 is expected to 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 will likely 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 a 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 1990…. 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.
Here is NEEP’s outlook for Connecticut:Â
The state will be hit hard by the restructuring of Wall Street and the financial services industry, resulting in slower job and income growth. Connecticut is unlikely to regain jobs lost in the recession until at least 2012. The state was also slower to feel the effects of the housing recession since it suffered less from overbuilding and reckless lending than other New England states did. But there are problems in the housing sector; the median sale price of an existing single-family home peaked at $326,800 in the fourth quarter of 2007, but may drop to a low of $232,200 in the second quarter of 2010. (AP)
