LINCOLN, R.I. — Larry Miller believed he would retire from the auto parts manufacturer where he first got a job as a newly married 26-year-old.

That was two factory closings ago.

"The word 'loyalty' is gone," said Miller, shaking his head while sitting at his kitchen table. Since then he found a new job in Massachusetts, but his wife and his friend are still looking.

"Someone in this state needs to be proactive," Miller said. "Without jobs, this country's nothing."

Jobs are painfully lacking in Rhode Island, where unemployment stood at 9.3 percent in November, just behind the national leader Michigan. To the dismay of state leaders, this tiny state has persistently been a leader in joblessness as the recession deepens.

Rhode Island has been hurt by the same ills hammering the rest of the nation: falling housing prices, mortgage defaults and the credit crisis. But a combination of unique factors has deepened the pain. Long dependent on the shrinking manufacturing sector, Rhode Island never found a replacement as nearby states courted biotech and computing firms.

Its work force remains geared for manufacturing-era jobs that no longer exist. Meanwhile, the state's population peaked in 2004 and has shrunk ever since. It's also getting older. While the state Department of Labor and Training expects growth in nursing homes, it fears the aging population could hurt other sectors.

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In addition, the state has a large percentage of small employers, making it more vulnerable to downturns that stretch the resources of small firms. Multiple surveys fault the state for its heavy tax burden, and a long-running budget crisis has business owners worried about tax increases.

Workers like Miller know the trouble firsthand. Manufacturing began a long-term decline more than two decades ago and never recovered.

Economists worry that Rhode Islanders are not being trained for what comes next. While the number of jobs for high-school graduates is shrinking, Rhode Island lags the U.S. in the awarding of college degrees. Only 40 percent of jobs pay above the national average wage of $42,400.

As manufacturing declines, many remaining positions are in health services, tourism or nonprofits, frequently low-paying fields. The nonprofit Lifespan hospital network was Rhode Island's largest employer in December 2007. The state and federal governments came next, followed by another hospital chain and the Roman Catholic Diocese of Providence.

"I would summarize Rhode Island's economy as information age, hold the information," said Leonard Lardaro, an economist at the University of Rhode Island.

Like Rhode Island itself, the size of private employers here tends to be tiny. Federal surveys show Rhode Island is among the top fifth of states in the number of employers with less than 20 workers. In Rhode Island, those small firms represent nearly 90 percent of private employers.

Right now, small companies are feeling the squeeze.

Christine Cunneen, chief executive officer of Hire Image, said she plans to move her headquarters to Florida to take advantage of a better economy and lower tax rates.

Her small company screens employees hired by other firms for criminal records and other red flags in their backgrounds.

After surviving a fire that wrecked her headquarters, Cunneen had to deal with a national recession that cut her sales more than 20 percent. By itself, the slowdown was manageable, Cunneen said. But then lenders stung by the national credit crisis began eliminating or reducing the loans that Cunneen considered a safety net for tough times.

American Express tried shutting down her $50,000 line of credit because it was clamping down on small business lending. After several phone calls, the company relented _ for a limited period.

The tanking housing market also affected her credit access. Like many small employers, Cunneen had a line of credit tied to her home. When the real estate bubble popped, Bank of America cut Cunneen's $90,000 credit line to $20,000. She already tapped $10,000 for home improvements.

The credit problems make Cunneen gun-shy just as she hopes to expand her business. Gov. Don Carcieri plans to put forward legislation to make it less risky for banks to lend to small firms here.

"The reason I have that line of credit open in the first place was not to go out, you know, on vacations or buy new, fancy cars," Cunneen said. "That really was a safety net for my business."