Perspective on Advanced Industry Growth

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The Providence Journal headline proclaims the positive news that “R.I. ranks high in advanced industries job growth,” and it’s only a matter of time before Democrat Governor Gina Raimondo declares that her failing, big-spending, government-picks-the-winners strategy for moving the state’s economy “faux-wood” is working.  Even granting the entirety of the Brookings Institution’s methodology and the importance of these so-called “advanced industries,”some perspective on Rhode Island’s results is important.

The key is that this ranking is for growth, not relative size:

When comparing states, the researchers found Rhode Island ranked 17th in the nation for its rate of job growth in its advanced industries — better than all other New England states and the national rate of 2.46 percent. The Ocean State’s annual average growth rate for 2013-2015 was 2.7 percent, on a compounded basis, up from 0.7 percent for 2010-2013, based on Brookings’ analysis of Moody’s Analytics data.

To be precise, based on Brookings’s numbers, Rhode Islands compound annual growth rate (CAGR) over the two years (using 2013 as the baseline) was 2.70%, which is all of 0.24 percentage points above the national average.  One factor that has to be considered is that Rhode Island’s baseline was relatively low, with 38,008 such jobs in 2013.  Massachusetts, for comparison, had 386,837 (or 10 times) more.

Thus, Massachusetts added 18,560 and came in below the national average percentage increase, at 2.4%, while Rhode Island’s 2,083 is cast as a “high” rate of growth.  Just 190 fewer jobs (1,893 total), and Rhode Island would have been at the national average.

That brings up the fact that Rhode Island lags the average in the percentage of these jobs in its economy.  Brookings says 8.1% of all RI jobs count in this category, which is 27th in the nation.  Massachusetts’s share is 11.5%, or 4th in the nation.

So, while increasing numbers of jobs in any area (particularly one with relatively high pay) is a good thing, proper context is important.  The Projo’s positive story requires us to talk about the growth rate of a narrow collection of jobs determined by an organization with which the state has been working as a consultant, and the absolute size of the good news amounted to fewer than 100 jobs per year for two years — low enough that massive amounts of new government spending to subsidize specially targeted industries (that Brookings recommended) could have had an overly significant effect.

Whether that’s unadulterated good news or an example of gaming the system, I leave to readers to decide for themselves.



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