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The Providence Journal, Commentary Page, April, 2001

Perhaps the most surprising news of late concerning Rhode Island has been the results of the most recent census. Statistics on Rhode Island’s demographics since the 1990 census have been less than encouraging. Annual estimates for the years following the 1990 census showed Rhode Island’s resident population declining every year over the 1991 to 1997 period. Think about this for a moment: seven consecutive years of decline, six of which occurred during a recovery! Even those not used to following the economy and a state’s demographics should quickly realize that six declines in a row during a recovery (which began in 1992) is hardly a healthy situation. As a natural outgrowth of this published statistical data, just about everyone in this state, especially those of us who analyze and forecast Rhode Island’s economy, came to believe that when it came to future growth in areas such as retail trade and housing, Rhode Island simply didn’t have adequate demographics to sustain anything other than short-term boosts in momentum.

In order to appreciate just how surprising the new census data are, consider that prior to the recent release of 2000 Census data, the US Bureau of the Census’ estimate of Rhode Island’s resident population, that for July 1999, was 990,819. This is a rather depressing contrast to Rhode Island’s 1990 Census figure of 1,003,464. Naturally, I, and probably everybody else who follows such statistics, braced ourselves for a new census value that was at best a resident population of one million persons. The only question seemed to be whether Rhode Island ended up in last place for population growth since the last census.

Then, after much anticipation, and more than a little trepidation on my part, the new population figure was finally released. The April 2000 Census of Rhode Island’s population was 1,048,319, a 4.5 percent increase (yes INcrease) from the last Census figure. My first reaction was relief, and perhaps a bit of vindication. Back in the “old days” when I forecasted Rhode Island’s economy for a regional group, I stated in all of my forecast presentations following the last Census that annual population changes for Rhode Island were not statistically significant, and that it was not inconceivable that our resident population was still at or above 1,000,000. While I was correct, let me be honest: I never imagined that our population would have been this far above one million.

The importance of this new population figure extends well beyond what many persons realize at present. The “Providence Journal” discussed in detail the fact that Providence is now the second largest city in New England, surpassing Worcester, and how Rhode Island’s population has become ever more diverse, especially in terms of the number of Hispanics who live here. Let me point out areas that the Journal has not yet covered.

First, the existing series of population estimates, which show seven consecutive annual declines, making Rhode Island appear to be an economic “basket case,” will be substantially revised in about a year. I expect Rhode Island’s resident population to have declined at most for three consecutive years in the early 1990s (1991 - 1993). If my guess proves to be accurate, annual population growth rates for the most recent years will be larger than anything we have seen for many years. Consider that if there were no population declines and population rose at a constant annual rate from the 1990 to 2000 census values, average annual growth would have been approximately 0.44 percent. So, if population did decrease in any of these years, some years would have to experience growth above this 0.44 percent constant (no population decrease) rate.

Second, Rhode Island’s labor force, like that of every other state, is tied to its resident population. According to currently available data, Rhode Island’s resident labor force fell in 1990, 1991, 1993, 1994, 1995, and 1998. Given my presumption that our resident population only declined during the 1991 to 1993 period, I strongly suspect that the labor force decreases for 1994, 1995, and 1998 will be revised away as well, in about a year or so, when the labor force data are tied to the new population data.

Third, both resident employment and the number of unemployed are linked to the labor force, which, in turn, is tied to a state’s population. Based on the sheer increase in our resident population relative to what we thought it was, I expect resident employment to be revised higher, while the change in the number of unemployed is more difficult to ascertain. Speculation about specific job market changes is complicated by a set of “labor market identities” that the data must obey. Revisions to the unemployment rate, as well as changes in resident employment relative to the number of unemployed, will ultimately be determined by the ways (if any) in which annual labor force participation rates and employment rates are revised.

Fourth, the spectacular performance of retail sales and existing home sales throughout much of the 1990s since the last census is far easier to comprehend given our correct demographics. Actually, the performance of Rhode Island in both of these areas, which is derived from non-survey-based monthly data, was the underlying basis for my suspicion about all the population decreases in the first place. In spite of the common belief prior to the release of the new census data, Rhode Island does have the demographics to sustain momentum in both retail sales and housing beyond the short-term.

There is one area of housing that I am at a loss to explain the recent performance of, however: new home construction. Since last April, single-unit permits for Rhode Island have been decreasing at double-digit rates. Given our rising (yes, get used to it!) population, perhaps at rapid (for us) rates of growth, other factors are at work here. I seriously doubt that monetary tightening by the Federal Reserve is largely responsible for this. Their tightening cycle ended last May, and there is approximately six to nine months of lag time between the FED raising interest rates and the slowing of interest-sensitive spending like new home construction. Growth caps and limited space are certainly a part of this slowing. But, the question remains: why April, and why double-digit declines?

So, as Rhode Island entered the new millennium, it was greeted by several pleasant surprises. Its population grew far more than anyone here had been led to believe. Recent strength in housing and retail trade should therefore be viewed as neither a complete surprise nor as an anomaly. Providence has become the second largest city in New England, capping many years of successful changes that have been made there. Rhode Island’s population has become increasingly ethnic. This increased diversity promises to move us from “traditional” ways of doing things here to newer and more promising ways in the future. And, while I have not discussed it here, Rhode Island’s job growth for 2000 finally surpassed the 2 percent annual rate that had eluded it for so long. This was the first year since 1992 that Rhode Island’s job growth outpaced the nation.

Many forces have combined to make Rhode Island’s entry into the new millennium a happy one. Several of what I view as prerequisites for our sustaining this momentum, even as our economy slows, are not directly economic. Prominent on my “wish list” for the future of Rhode Island are the separation of powers and term limits for our legislature. Both of these are empowering changes: separation of powers for the governor; and term limits, which holds the promise of ensuring that our legislature will reflect Rhode Island’s increasing diversity. We started this millennium with a “bang.” Let’s not fool ourselves, however. Unless we change fundamental aspects of the way things here are done, much of this decade will end up being a “whimper.”   

by Leonard Lardaro

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