Earlier this week, the New England Economic Partnership released its economic forecast for New England over the next few years.
In general, NEEP projects slower growth for New England than for the nation as a whole over the next four years. NEEP projects 2.2 percent annual growth in the region's economy through 2011, as compared with 2.7% for the nation over the period.
In looking more closely at the data, it becomes apparent that it is difficult to generalize about New England's prospects as a region - except perhaps that the whole region is particularly vulnerable to the effects of high oil prices. The region has pockets of high growth - New Hampshire - and areas of particularly low growth - Maine and Vermont. Southern New England is expected to come in somewhere between New Hampshire and the rest of northern New England.
The different parts of New England face different pressures. Massachusetts is constrained by its very economic success. In 2005, Massachusetts had the sixth highest gross state product per capita in the country. Massachusetts is a high wage - and high cost - state. This fact has been one reason that a large number of younger people - particularly college graduates - have been leaving the state in recent years. Even without high oil prices and a weakening housing credit market, Massachusetts faces some limits on how fast it can grow economically. While there are limits on economic growth in Massachusetts, it is not clear that there are limits on economic contraction - particularly if energy prices continue to spiral and the housing credit market continues to weaken.
Maine - separated from Massachusetts by only 16 miles of New Hampshire coastline - is a very different case from Massachusetts. In 2005, Maine was 43rd in gross state product per capita. Maine is a lower wage state - but not necessarily a lower cost one. Transportation costs factor into Maine's economy more severely than they do in the other five New England states. While real estate costs are not the factor in Maine that they are in southern New England, energy costs certainly loom large there. Maine's economy, with its relative reliance on manufacturing and tourism, is also more vulnerable to national economic swings.
Rhode Island faces different set of challenges from Maine and Massachusetts. In the short-term, the state's economy faces a significant challenge related to a projected state budget deficit. The Rhode Island state budget is around $7 billion; in an economy of around $45 billion, the state government makes up a little less than one-sixth of the state's economy. By contrast, in Massachusetts, the state budget is around 8 percent of the gross state product. Rhode Island concentrates many services at the state level that would be local or regional in other states. This is related to the fact that Rhode Island is in essence the size - in population and land area - of a large city. Thus, the Ocean State faces particular challenges related to its size.