| For
the past several years, Rhode Island has enjoyed an enviable position
that it has only recently begun to relinquish – above-national rates
of job growth accompanied by unemployment rates below the national
average. The basis for this, I’m sorry to say, is not a vibrant
economy with a highly favorable business climate. On the contrary,
Rhode Island remains a high-cost, high-tax state whose economic
climate is anything but hospitable. The fact that we failed to attract
much of a high technology presence in the 1990s, as it turns out,
actually spared us from the severity of job loss that successful “high
tech” states experienced. Combine this with the fact that our primary
areas of employment (Health Services, Tourism, and Not-for- Profits)
are not exactly springboards of job growth, but that they did help us
sustain our job base in the last recession, and one of the great
economic ironies for Rhode Island emerges: our “negatives” have acted
as “positives” during this recovery. Up
until 2004, that is. Chart 1 shows payroll employment for Rhode Island
and the US expressed as percentages of their January 2004 values.
While US payroll employment was surging in March through
May, Rhode Island’s employment actually
declined for both March and April. While May brought a return to job
growth, the jobs added were barely enough to return employment to its
January 2004 value. Chart 2 shows that Rhode Island’s unemployment
rate has returned to the national rate in the last couple of months.
The basic problem for Rhode Island continues
to be that it has failed to define its dominant niche in the
information age. And, Rhode Island made the transition from a
manufacturing-based to a service and information based economy
in late 1987! What is desperately needed is an overhaul
of our tax system and cost structure. Hopefully, this will be done in
a systematic way, where changes to our tax system and cost structure
are consistent with the dominant niche(s) we decide to “hitch our
wagons” to.
In next month’s article I will look at the
economic initiatives that were funded (or not funded) in this year’s
State budget, and their impacts on future growth prospects and the
establishment of a niche. |
