Scott MacKay Commentary: RI Faces Uncertain Economic Future

Nov 17, 2017

With Thanksgiving coming up, it’s time to think about things we’re grateful for. RIPR political analyst Scott MacKay says we can all be thankful that Rhode Island’s unemployment rate is down to its lowest in years. But the "Smallest State’s" economy still faces some big hurdles. (Advance copy of commentary scheduled to air Monday).


The cliché is that Rhode Island is the first state in and the last out of a recession. That has again been the case in emerging from the doldrums of the economic downturn that ended in 2010.

There is good news – the state has recovered more than 93 percent of the nearly 40,000 jobs lost in the recession sparked by the Wall Street crash of 2008. The unemployment rate has declined from 9 percent in 2013 to 4.2 percent today, which is at the national rate.

Yet, while manufacturing has flourished around the country in the last year, Rhode Island’s manufacturing employment has been stagnant. There are some bright spots: submarine building at Quonset and expansion at smaller technology firms such as Cranston-based TACO, which last week purchased a leading Swiss tech company.

United States manufacturers have added 156,000 workers since last November. That’s a turnaround compared to thousands of manufacturing jobs lost the year before. Rhode Island manufacturing continues to lag. The state had 46,000 manufacturing positions in 2008; that figure is down now to about 40,000. The state has lost nearly 4,000 jobs in the just the last three months.

Some of the manufacturing decline has been replaced by jobs in tourism and related industries, says John Simmons, executive director of the Rhode Island Public Expenditure Council. Those positions don’t pay as well as manufacturing, and the benefits tend not to be as generous.

Another headwind is soft hiring in the largest job category: health care. That sector is bloated, says Rick McIntyre, chairman of the economics department at the University of Rhode Island. “Employment in health services is likely to shrink,” he says.

Competition from Boston hospitals and consolidation within the industry doesn’t bode well for the Ocean State. Memorial Hospital in Pawtucket is closing. Partners, the big Boston-centered hospital system, plans to purchase the Rhode Island’s Care New England hospitals.  That eventually means the shift of top decision-making to Massachusetts and a squeeze on operations in Rhode Island.

The state is also expected to lose retail jobs, which is part of a national trend. Rhode Island has lost seven percent of its retail jobs over the last decade. Consumers buy more with the click of a computer mouse than at brick-and-mortar stores nowadays.  A recent victim of the new retail order?  The closing of the Benny’s retail chain.

A more existential factor is the Republican tax plan winding its way through Congress. It is tilted toward the wealthy and red states with oil in the ground and large manufacturing economies. Homeowners in states like Rhode Island and Massachusetts would lose local tax and mortgage deductions. Colleges and universities with large endowments and flourishing graduate programs would be hit hard.

Rhode Island and Massachusetts are net importers of college students. It’s a large industry. But what happens if the provision, already approved by the House, which taxes graduate student stipends, survives? Rhode Island fares pretty well on the educational levels of the workforce. Yet the state stands behind Massachusetts and Connecticut in this measure. Rhode Island is still having difficulty keep the educated young.

Gov. Gina Raimondo, a reliable cheerleader for Rhode Island’s economy, is frustrated by the tax plan. She says it will hurt the state’s economy while mainly helping the wealthy.

John Simmons, of RIPEC, says that the spill-over from the bustling Massachusetts economy inside the Interstate 495 belt is already helping Rhode Island. There has been an uptick, he says, in people working in the Bay State but living in Rhode Island, where housing is less expensive.

No matter where we live, those of us with jobs have much to be thankful for as we sit down to our Thanksgiving tables. Let’s all hope that we can withstand the future economic headwinds lurking on the horizon.

Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:45 and 8:45 and at 5:44 on All Things Considered. You can also follow his political reporting and analysis at our “On Politics” blog at RIPR.org