PROJO: Big growth in R.I. financial services? 2 different takes As originally appearing in The Providence Journal
By John Kostrzewa
Assistant Managing Editor
Sometimes experts agree. Sometimes they don’t.
Take Rhode Island’s jobs picture. Where should the state’s leaders put our limited resources? What policies should they change to create jobs and rebuild a stagnant industrial economy?
It depends on who you ask.
Last year, the New England Council, an old-line business advocacy group, put out a report that identified advanced manufacturing as a key opportunity for job growth. Such manufacturers produce precise, engineered-to-order, high-end products for the medical-device, defense and other industries.
The report dovetailed with an analysis by the Brookings Institution that pointed to several advanced industry sectors that drive economic growth: biomedical innovation, information technology, defense/shipbuilding, design/custom manufacturing and advanced business services.
Governor Gina Raimondo has used the Brookings report as one of the main guides in setting her economic agenda, including the awarding of an unprecedented amount of taxpayer incentives to companies that promise to create jobs.
Last week, the New England Council came out with another report. This time, the council focused on financial services, saying the sector make an outsized contribution to the region’s and Rhode Island’s economy and should be a target of job-creation strategies.
But when I reread the Brookings report, financial services was not considered a priority. The only reference I saw to financial services was buried in a section on the need for advanced business services to support growing companies.
So, did Brookings miss a beat or is the New England Council out of touch?
Here’s the argument in the New England Council’s report, done with help of PwC, the new name of the PricewaterhouseCoopers consulting firm:
The report analyzed three pillars of financial services — traditional banking, asset management and insurance — and found that while New England is home to 4.6 percent of the U.S. population, the same region holds 6.2 percent of the nation’s financial-services employment.
Also, New England’s financial-services industry accounted for 8.3 percent of total wages of the U.S. financial services sector. And the average wage in the industry in 2015 in New England was $157,674.
The same trend was evident in Rhode Island. The financial-services industry here contributed 9 percent of the state’s gross domestic product in 2015, the eighth highest in the country, and accounted for 13 percent of all wages.
The report also said the financial-services industry has been more resilient to recessions compared with other areas such as construction and manufacturing.
By the New England Council’s numbers, 58,520 Rhode Islanders worked in 2015 in financial services, either directly, indirectly through the supply chain that supports the industry or in other industries that benefit from the sector, such as restaurants.
More Video: Governor Gina Raimondo thanked construction workers building Citizens Financial Group’s corporate campus in Johnston.
Those numbers, however, differ from the narrower way the Rhode Island Department of Labor and Training counts jobs in financial services.
The DLT’s data shows the sector had 32,000 jobs at the end of last year. In 2006, the last full year before the start of the recession, the sector had 36,000 jobs.
Those findings suggest that job totals are still down from the peak years.
So, taking those numbers into account, where does the New England Council think future growth will come from?
In an interview, James T. Brett, president and chief executive of the New England Council, identified two areas:
He said the aging population, especially baby boomers, are going to require more financial services as they retire and live longer than their predecessors.
Also, he suggested the development of fintech — the term for financial technology that is changing the way banks interact with their customers — could be a job creator. He said that’s especially true in Rhode Island, which turns out top talent from its colleges and universities.
“The financial sector is one of the region’s strongest job-generating, growth-producing industries, with a tremendous footprint in each of the six New England states,” Brett said.
I agree that financial services is a mainstay of Rhode Island’s economy. The sector is relatively stable and the services it provides underpin the rest of the economy.
But I’m not sure there is a huge potential for growth here. I don’t see Providence becoming a mutual-fund hub like Boston or an insurance capital like Hartford. There may be some growth in fintech, but new technology tends to eliminate jobs, not add them.
Nevertheless, the New England Council’s report is valuable.
It provides fresh information and encourages public debate about the best strategy and use of resources to get more Rhode Islanders to work.
— John Kostrzewa is the Journal’s assistant managing editor/business, commerce and consumer issues. Reach him at (401) 277-7330 or email firstname.lastname@example.org. Follow his posts on facebook.com/JohnKostrzewa or @JohnKostrzewa on Twitter.