Economist: RI unemployment to peak near 14 percent

The unemployment rate in Rhode Island will continue climbing and peak at 13.8 percent next year even as layoffs taper off, an economist told state budget officials Wednesday.

Unemployment stood at 13 percent in September but will keep rising then crest sometime between April and June, said Andres Carbacho-Burgos, an economist for Moody's Economy.com. Afterward, unemployment will start receding but remain in double-digit territory into 2012.

Carbacho-Burgos said regaining the number of jobs reported in the state just prior to the start of current recession will likely take until late 2013. He credited a $787 billion stimulus plan backed by the Obama administration with staving off worse losses, but said that spending will eventually start to decline.

Just 496,400 residents were employed in September, a 9 percent drop from just before the start of the current downturn.

"In the absence of further fiscal stimulus and with a very poor job market right now, Rhode Island's recovery will be protracted," he said.

Carbacho-Burgos made his predictions during a twice-annual conference held by state budget officials tasked with estimating how much money Rhode Island's state government can expect now and in the coming years. Its final estimates are expected Tuesday. By law, Gov. Don Carcieri must use those projections when drafting the state budget.

Rhode Island began the year with a budget deficit caused in part by unmet savings goals and plummeting tax collections. It seems unlikely the financial situation will improve anytime soon. Soaring unemployment has cost the state millions of dollars as fewer people pay the state income tax or make purchases that contribute to the sales tax.

"From California to Maine, there has been a record loss of tax revenues," Carbacho-Burgos said.

He predicted home prices in Rhode Island will reach their bottom next year and start to rise slowly because of a glut of foreclosed properties on the market. Personal income for Rhode Island residents is also expected to rebound starting in 2010 but will lag behind the rest of the country.

Several budget officials on the panel seemed skeptical of the forecasts. House fiscal adviser Michael O'Keefe questioned whether consumer spending will return to previous levels even if home prices rise and credit markets unfreeze.

"It seems at odds about everything else I hear about savings rates going up and are going to stay up," he said.