Forecast: New England faces slow economic recovery

New England will continue to experience a slow economic recovery until well into 2013 due in part to weaknesses in the national and global economies, an economic forecaster said Thursday.


The forecast came a day before the New England Economic Partnership was scheduled to hold its fall conference in Manchester.

"Of significant concern looking forward is how the New England 'states will be affected by the European debt crisis.

The European market has been an important trade partner and investor in New England, and a weak European economy will have economic implications for the region," Ross Gittell, the partnership's New England forecast manager, said in a statement.

Gittell said the region is not expected to return to pre-recession employment levels until the second quarter of 2015.

In addition, fiscal challenges at the state and federal level, low consumer and investor confidence will affect the region, added Gittell, a University of New Hampshire economist.

Gittell said regional employment is expected to remain at its current level and not grow at an annual rate above 1 percent until the middle of 2013. He said most economists believe a 1 percent growth in employment is needed just to keep unemployment at existing levels.

He said the region's rate is about half that, which means the economy is stagnant. The regional jobless rate is expected to rise slightly from 7.8 percent in the last quarter of 2011 to 8.2 percent in early 2013, then gradually decline to 6.7 percent by the end of the forecast period.

Gittell said there will be significant variations in economic performance among the states, with Vermont and New Hampshire expected to have the strongest job growth over the forecast period that runs to 2015. He said Vermont is the only state expected to have employment growth at a rate exceeding the national average.

Maine and Connecticut are expected to have the lowest job growth, and Rhode Island, which has a 10.5 percent jobless rate, is expected to continue to have the highest unemployment in New England.

Mark Zandi, chief economist with Moody's Analytics, said the national outlook may be improving with growth appearing to have stabilized and the risk of recession receding. But Zandi said the rate of growth is not enough to reduce the high 9 percent national unemployment rate.

"Though the odds of another U.S. downturn are lower, they remain uncomfortably high. They won't recede substantially until it is clearer whether European policymakers are able to contain their debt crisis," he said.

He also said recession remains a significant threat unless — at the very least — Congress comes up with a deal to make $1.2 trillion in deficit reductions over 10 years that do no harm.

Maine economic forecaster Charles Colgan said his state is expected to continue to experience job losses through next year.

"Although the losses will be small, the trends take the Maine economy closer to the levels at the bottom of the recession rather than to recovery," he said. Growth is expected to resume at a faster pace in 2014 and 2015, he said. He said he did not foresee recovery to pre-recession levels within the forecast period.

The organization's report said the national malaise should stall Connecticut's job and income growth. Gittlell said Connecticut's economy is affected by its proximity to the New York financial markets and Wall Street.

Rhode Island's outlook for 2012 is expected to be difficult as the state struggles to create jobs, resolve state pension and budget problems and streamline its regulatory system, according to the report.

Edward Mazze, a professor of business administration at the University of Rhode Island, and Edinaldo Tebaldi, assistant professor of economics at Bryant University, said the state also could lose gambling revenue to Massachusetts, which is expected to legalize casinos.

Rhode Island's unemployment is expected to remain above 10 percent until the end of 2012 and not drop to 8 percent until 2015.

Massachusetts economic forecast manager Alan Clayton-Matthews said his state's economic growth also is expected to be weak through mid-2013.

"Massachusetts will avoid a recession, but output will grow slowly enough so that some job losses are expected for the remainder of this year and the first quarter of next year," he said.

He predicts unemployment will rise by one-half a percentage point and economic recovery won't begin until the second half of 2013. The state's jobless rate for October was 7.3 percent.

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