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The Associated Press November 17, 2010, 5:01PM ET

Fiscal woes seen slowing New England economy

New England's economy, which is struggling to recover as the U.S. economy remains weak, is hindered by looming government fiscal crises, according to a management professor at the University of New Hampshire.

Ross Gittell released his fall 2010 economic forecast Wednesday at a New England Economic Partnership conference at the Federal Reserve Bank in Boston.

"The looming federal and state fiscal crises present a dark shadow over the New England regional economic outlook," Gittell said. He said the impact of the fiscal problems will first hit government employment and then affect other sectors of the economy, public services and infrastructure.

Employment in government is expected to fall 2 percent until the middle of next year, a loss of more than 21,000 jobs in New England, he said. The employment loss occurs at time when the region is limited in how it can absorb falling employment, he said.

Gittell forecasts that New England's economy will grow slowly for nine to 12 months and then pick up some strength. The region's overall economy is not expected to grow faster than 4 percent until the middle of 2011.

Massachusetts and New Hampshire are expected to have the strongest economies in the region and Rhode Island the weakest.

"Unlike previous recessions, during the great recession of 2008-09 the New England decline was less than (the) national decline," Gittell said.

In the next year, employment growth in New England is expected to be above the U.S. average, but below the U.S. average after 2011.

"This makes for a long road to employment recovery in the region," the report said.

The return to peak employment levels of the first quarter of 2008 is not expected until the third quarter of 2013, three months after the expected U.S. employment recovery. Unemployment in New England is expected to remain higher than 8 percent until about mid-2012.

As the nation exited the recession, New Hampshire was the first state in the region where employment rose in the last quarter of 2009, Gittell said. Maine followed in the first quarter of 2010, followed by the other New England states in the second quarter.

In 2007, Rhode Island was the first state in the region where employment fell "and will struggle out of the deepest recession in the region."

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