New England 'Teetering on Brink' Of Economic Recovery or Relapse
Pessimistic outlook seen factor in region's failure to rebound
UNLESS the national economy begins a recovery soon, New England, which has been the nation's hardest region, is poised to plummet further, economists forecast."I think we are teetering on the brink" between a recovery and a relapse, says Roger Brinner, executive research director of DRI/McGraw-Hill. Dr. Brinner predicts there is a 30 percent chance of the nation falling into a "double dip" recession. Brinner and other economists, financial analysts, and business leaders met at the New England Economic Project (NEEP) - a biannual conference to review and project the fiscal performance of the six New England states. At the national level, a pessimistic outlook among business leaders, reporters, and analysts may have thwarted an earlier rebound, thus delaying New England's recovery, says Brinner. In the first half of 1991, US housing starts, consumer outlook, and retail sales showed signs of improvement, Brinner says. But in late summer and early fall, that upward trend stalled.Skip to next paragraph
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Weak real estate market In New England, a weak real estate market, high unemployment, bank failures, and state budget crises have soured the economy since 1989. Within the last six months, 26 financial institutions have failed. NEEP economists predict the region will show signs of growth in late 1992, with the northern New England states climbing out of the recession sooner than Massachusetts, Connecticut, and Rhode Island. Unemployment will continue, say economists. While the national jobless rate, at 6.8 percent, is expected to decline slightly next year, economists say New England's unemployment rate will hover at 8.1 percent through mid-1992. The outlook for the New England states' hinges on the performance of the national economy: Maine. In the Pine Tree State, 30,000 jobs have disappeared, and the unemployment rate has doubled since the state slipped into recession in 1989. Laurie Lachance, corporate economist with Central Maine Power Company, forecasts employment to bottom out in the first quarter of 1992 and growth to resume at a snail's pace in 1993. Compared with past recessions, this one has been more painful for a larger number of people, she says. Upheaval in state government and greater job losses in the nonmanufacturing sector have affected more white-collar workers. New Hampshire. Leading the 50 states in consumer loan delinquency rates, New Hampshire also saw bank foreclosures double in the first half of 1991 compared to the first half of 1990. Dennis Delay, load forecasting coordinator for Public Service of New Hampshire, forecasts that the state will begin a slow recovery in early 1992. Businesses have an upbeat outlook. According to a survey by the New England Chamber of Commerce, 75 percent of respondents found the Granite State a good place to start a business, compared with only 46 percent who found the region as a whole a favorable location. The state's low taxes have helped foster a pro-business climate. Vermont. This state, which has experienced its worst recession in three decades, will begin to stabilize in the second quarter of 1992, predicts Jeff Carr, an economic consultant for Vermont. Tourism and the new trade opportunities between Vermont and Canada are two bright spots for the economy, Mr. Carr says. Massachusetts. In the Bay State, considered a bellwether state for the region, more than 10 percent of jobs have been lost. The delay in the national recovery may mean Massachusetts' and the region's economic performance won't improve until the second half of 1992, according to Peter Kozel, an economist at Babson College. But Mr. Kozel sees positive signs for the state's economy over the last six months. Spiraling unemployment has slowed somewhat and he notes increased activity in housing construction. In addition, wage rates have stabilized, and state revenues have increased. Connecticut. There is a 50 percent chance that Connecticut's economic downturn will end by the third quarter of 1992, according to Edward Deak, a professor of economics at Fairfield University in Fairfield, Conn. But a new state income tax and declining wages are expected to curtail consumer spending. Recovery will therefore be slow, with no promising sector for growth in sight. "We cannot identify an engine of recovery in Connecticut," Mr. Deak says.
Unemployment to peak Unemployment will likely continue in banking, insurance, defense, manufacturing, and government. The unemployment rate will peak at 7.2 percent in the third quarter of 1992, Deak says. Financial services have been particularly hard hit with 17 bank failures in 1991. Rhode Island. Over the past year, the Ocean State has endured its share of economic turbulence, including a state fiscal crisis, the collapse of Rhode Island Security and Deposit Indemnity Corporation - the state's private insurer for savings and loan banks, and increasing tension over high Worker's Compensation costs. In addition, unemployment will continue to rise and is expected to peak at 12 percent in the second quarter of 1992, according to Leonard Lardaro, associate professor of economics at the U niversity of Rhode Island. Mr. Lardaro predicts modest employment growth in 1993 and '94.