Tiny State, Huge Pain
R.I. Has Lost Jobs 11 Months in a Row

By Keith B. Richburg
Washington Post Staff Writer
Sunday, December 21, 2008

PROVIDENCE, R.I. -- Tiny Rhode Island, America's geographically smallest state and the first of the original colonies to declare independence from British rule, recently added another, less favorable distinction: It has the second-highest unemployment rate in the country.

Eleven straight months of job losses -- another 4,000 jobs disappeared between October and November -- have put Rhode Island's unemployment rate at 9.3 percent, higher than the national average and second only to recession-hit Michigan. While most of the country began to feel the economic downturn in recent months, this state has been in recession far longer, and the pain is deeper, according to Rhode Island economists, government officials and some of those struggling to find work.

"The company I worked for is moving to China," said Lois Dionne, a 53-year-old widow who in February lost her job as a receptionist at a rubber company. "It cost too much here. It's cheaper over there," she said.

Since she was laid off, she has been working "a few nights at J.C. Penney's" as a cashier, and spends her days on the computer, searching for jobs, filling out applications and occasionally interviewing. "You keep going," she said. "You don't give up."

Dionne was standing outside with hundreds of other job-seekers on a chilly afternoon, waiting to submit her application at a job fair for Pentair Electronic Packaging, in the town of Warwick, not far from Providence. Pentair announced an expansion and plans to hire 80 skilled workers -- welders, press operators, painters, assemblers and maintenance technicians, among others -- and 500 people showed up.

So how did little, picturesque Rhode Island become one of the most economically depressed parts of the country?

The answers are many and complex, and the slide has been long in coming, part of the general collapse of the old manufacturing towns of New England and Upstate New York. Rhode Island was the birthplace of the Industrial Revolution and was a major center for textile mills that long ago relocated to the South, as well as small factories making tools, silverware and fashion jewelry.

"Rhode Island and some of the other Northeastern states were really the cradle of the Industrial Revolution," said Edward M. Mazze, a professor of business administration at the University of Rhode Island. "This is where manufacturing began. . . . That worked well up until the 1960s."

For a long time, those factories provided good jobs for the state's blue-collar population. But today, many of those factories are no longer here, having either relocated south or gone overseas.

"Part of what's going on is like Michigan -- the hollowing out of the manufacturing industry," said Sen. Jack Reed (D-R.I.), who was in Providence with the governor to announce new federal aid to neighborhoods hit hard by foreclosures.

In previous years, Rhode Island was a main beneficiary of the nationwide housing bubble. Home prices shot up dramatically, in part because residents of Massachusetts and New York bought second homes here. "Rhode Island had one of the biggest housing booms," said Gov. Donald Carcieri (R) in an interview. "When the bubble burst, we went like that," he said with a snap of his fingers.

On Dec. 1, the National Bureau of Economic Research reported that the U.S. economy was officially in recession and had been since December 2007. Carcieri said that was not news here. "We were kind of the canary in the coal mine -- we felt it two years before," he said.

Compounding this state's problems are its size: just more than a million people living in an area 37 miles wide and 48 miles long.

"This is essentially a large metropolitan area," Reed said. Many residents work in neighboring Massachusetts and Connecticut, which also have been feeling the effects of the downturn. One of the largest employers, the Foxwood Resort Casino and MGM Grand in Connecticut, just laid off 700 employees, citing a decline in revenue with fewer gamblers showing up. Many of the employees who lost their jobs live in Rhode Island.

A big issue here is the state's tax rates. Many Rhode Islanders said the high tax burden has discouraged businesses from locating here and pushed others to leave. The most recent state-by-state comparison of business tax climate by the Tax Foundation put Rhode Island at 46 out of 50th, with only four states -- Ohio, California, New York and New Jersey -- having a less favorable business tax environment.

While other areas that have lost manufacturing jobs have worked to reinvent themselves -- Massachusetts, for example, has been trying to become a leader in biomedical research -- Rhode Island has been slower to make the shift. Critics say government has failed to invest enough in education to begin training workers to be competitive in more technically advanced fields.

"Connecticut and Massachusetts invested a tremendous amount in education, particularly higher education," said Mazze, the business professor. "Rhode Island has not been able to do that."

This state is broke. Rhode Island is facing a budget deficit of $357 million, which is the largest in the country when measured against the total spending. The bulk of that gap -- about $233 million -- is in lost revenue, with tax receipts falling as the unemployment rate has worsened. Education is facing huge cuts.

At the job fair last Tuesday in Warwick, many of those who showed up were not qualified for the specific skilled positions advertised; they simply needed work. Many others were overqualified; they wanted any work they could find.

"I've got a bachelor's degree in mechanical engineering," said Frederick Fagundes, 33, who was standing in line clutching a folder with his résumé and still in the dark suit and tie he wore to an earlier job interview. "I'm not an assembly or manufacturing person."

Fagundes works for an automotive supplier, and his job was supposed to end in a few days. He will get a few weeks' severance pay and was at the Pentair job fair "to be proactive," he said. He has two children, ages 5 and 6, and his wife was not working because of the high cost of day care.

Mason Briggs, 56, just lost his job as a field engineering technician for a wireless company. He spends his days on the Internet searching for jobs. Not planning on unemployment, he said he had little saved up.

"There isn't going to be much of a Christmas, I'll tell you that," Briggs said. "Maybe a dinner or a lunch. Stocking stuffers, that's about it." He said his wife, a school custodian, could get a small pine tree and they would top it with a $10 star he found at an electronics store. "We call it our Charlie Brown Christmas," he said.

Asked if he was worried, Briggs, who helps support his 17-year-old stepson, replied: "Worried? I'm just plain scared. I have no idea which way to turn."

The pain has started to appear in tangible ways besides job lines. More people are applying for food stamps. Homelessness is on the rise.

At the nonprofit organization Crossroads, which deals with the homeless, marketing vice president Karen Santilli said the group's headquarters building, at an old YMCA building, was never meant to be a homeless shelter. But about a year ago, she said, people began showing up with nowhere else to go.

In April, the group saw a surge in women, and it opened up a downstairs section as a dorm for 41 homeless women. Now 60 women sleep there every night, most in bunk beds but also in the area that was supposed to be the common living area.

"We see eight to 10 people new to homelessness every day," Santilli said. Some have been the victims of home foreclosures, she said. Some are immigrants. There are a few new mothers. The oldest woman is 89.

Santilli, summing up the view of many here, said: "The state is in a crisis."