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Lardaro Report: Economic Conditions Improve in 4th Quarter, But Issues Warning

Monday, December 11, 2017


Rhode Island began the fourth quarter with what appears to be good news about its economic performance: The Current Conditions Index rose from its September value of 75 back to 83, the value it has remained at for most of 2017. In a sense this is a “win,” in that we improved from last month’s CCI value, which failed to exceed its year-earlier value for the first time this year, to once again moving beyond last year’s value in October. But as wins go, this was not terribly pretty. I won’t go as far as saying this was an ugly win, but it was disappointing, nonetheless.

Looking at both national and Rhode Island trends, there are several developments that I am becoming increasingly worried about. At the national level, the yield curve, the difference between longer and shorter-term interest rates has flattened noticeably of late. Historically, this signals that a slowing in the rate of national growth will occur in the future. Its predictive record is excellent. The fact that so many in the financial media are convinced that “this time is different,” further heightens my concern, as their consensus almost always proves to be wrong. Why does this concern me? Because, as the result of Rhode Island’s elected officials doing so little to meaningfully reinvent our state’s economy over the years, we remain FILO - first in, last out of national weakness. Historically, Rhode Island falters a year or longer before the national economy does. So, we might be seeing the beginning of weakness here. Based on what? First, payroll employment here has now declined on a monthly basis for three consecutive months. Second, income-related tax receipts have begun to disappoint. Third, welfare-related caseloads have begun to rise. That three-part combination is a “text book” pattern for slowing economic activity. As I noted last month, it is quite possible that recent payroll employment declines are spurious. We won’t know that until the labor market data revisions are released in February. Remember our state’s motto!

At the risk of sounding like a commercial, “Wait, there’s more.” Employment Service Jobs, an indicator that includes temporary employment and is a leading indicator of future employment, barely improved in October (+0.1%), for only the second time since March of 2016. It remains in a downtrend, which bodes badly for future job gains. New Claims, the timeliest measure of layoffs, rose again in October by 3.1 percent, even with an easy comp from a year ago. It has now risen for two consecutive months, threatening its downtrend. Ending a string of eight improvements in the prior ten months. This combination - less employment and higher layoffs might be where we are heading! Finally, our state’s employment rate, the percentage of the working-age population that is employed, has now fallen for the past three months, hardly a healthy sign. Worse yet, Rhode Island’s labor force participation rate, the percentage of working age Rhode Islanders who are in our labor force, decreased again in October, as it has been doing of late. These trends cast doubt on the validity of our unchanged October Unemployment Rate.

In assessing the October CCI performance, four of the five leading indicators contained in the CCI improved, and all had relatively easy “comps” a year ago. As stated earlier, Employment Service Jobs barely improved. Fortunately, both goods-producing leading indicators contained in the CCI improved again. Single-Unit Permits, which reflects new home construction, rose at a double-digit rate, 28.6 percent, thanks in part to an easy comp last October. Total Manufacturing Hours, a proxy for manufacturing output, the other goods-producing indicator, rose by 5.2 percent (also a very easy comp). Finally, US Consumer Sentiment improved in October (+15.1), its twelfth consecutive increase. Sustaining momentum in our state’s goods-producing sector appears to be the primary bright spot in this month’s data.

Government Employment was unchanged from a year ago, although its level remained above 60,000. Private ServiceProducing Employment growth remained sluggish again in October (+0.4), continuing its recent deceleration. Retail Sales rose by a healthy 6 percent, its third consecutive increase after either being flat or falling in recent months. Benefit Exhaustions, which reflects longer-term unemployment, fell by 3.2 percent in October, its weakest improvement since June. Finally, our Labor Force trend, Rhode Island’s train wreck, barely managed to improve in October, now eight in a row.


Related Slideshow: GoLocal: Benchmark Poll, October 2017

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Sponsor: GoLocalProv

Sample: N=403

Rhode Island General Election Voters Margin of Error: +/- 4.9% at 95% Confidence Level

Interviewing Period: October 9-11, 2017

Mode: Landline (61%) and Mobile (39%)

Telephone Directed by: John Della Volpe, SocialSphere, Inc.

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Are you registered to vote at this address?

Yes: 100%

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When it comes to voting, do you consider yourself to be affiliated with the Democratic Party, the Republican Party, Moderate, or Unaffiliated with a major party?

Unaffiliated: 49%

Democrat: 32%

Republican: 15%

Moderate: .4%

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Next year, in November of 2018, there will be a statewide general election for Governor and many other state offices. How likely is it that you will vote in this election?

Will you definitely be voting, will you probably be voting, are you 50-50...

Definitely be voting: 78%

Probably be voting: 13%

50-50: 9%

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In general, would you say things in Rhode Island are headed in the right direction or are they off on the wrong track?

Right track: 39%

Wrong track: 45%

Mixed: 10%

Don't know/Refused: .6%

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What would you say is the number one problem facing Rhode Island that you would like the Governor to address?

Jobs and economy:  21%

Education: 12%

Taxes: 12%

Roads: 12%

State budget: 9%

Corruption/Public integrity: .8%

Healthcare: 3%

Governor: 3%

Homelessness: 2%

Immigration: 2%

Other: 7%

Don’t know: .9%

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Over the past three years or so, would you say the economy in Rhode Island has improved, gotten worse, or not changed at all?

Changed for the better: 35%

Changed for the worse: 16%

Not changed at all: 43%

Don't know/Refused: 5%

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Over the same time, has your family's financial situation improved, gotten worse, or not changed at all?

Changed for the better: 26%

Changed for the worse: 19%

Not changed at all: 54%

Don't know/Refused: 1%

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Recently, a proposal has been made to permit the issuance of $81 million in bonds by the State to build a new stadium for the Pawtucket Red Sox. If there was an election today on this issue, would you vote to approve or reject issuing $81 million in financing supported moral obligation bonds to build the stadium?

Net: Approve: 28%

Definitely approve: 15%

Probably approve: 14%

Net: Reject: 67%

Probably reject: 19%

Definitely reject: 48%

Don't know: 4%

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Could you please tell me your age?

18-24: 7%

25-34: 15%

35-44: 15%

45-54: 20%

55-64: 17%

65+: 25%

Don't know/refused: 1%

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What was the last grade you completed in school?

0-11: 2%

High school grad: 16%

Technical/Vocational school: 1%

Some college: 23%

College grad: 34%

Graduate degree: 24%

Don't know/refused: 1%

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The next question is about the total income of YOUR HOUSEHOLD for the PAST 12 MONTHS. Please include your income PLUS the income of all members living in your household (including cohabiting partners and armed forces members living at home).

$50,000 or less: 27%

More $50,000 but less than $75,000: 13%

More $75,000 but less than $100,000: 13%

More $100,000 but less than $150,000: 17%

$150,000 or more: 13%

Don't know/refused: 17%

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What particular ethnic group or nationality - such as English, French, Italian, Irish, Latino, Jewish, African American, and so forth - do you consider yourself a part of or feel closest to?

American/None: 21%

English: 13%

Italian: 13%

Irish: 12%

Black or African American: 6%

Latino/Hispanic: 6%

French: 6%

Portuguese: 3%

Jewish: 3%

German: 1%

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Would you say that Donald Trump has done an excellent good, fair or poor job as President?

Excellent: 13%
Good: 12%
Fair: 14%
Poor: 57%
Never heard of:  0%
Cannot rate: 3%

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Would you say that Jack Reed has done an excellent good, fair or poor job as a United States Senator?

Excellent: 22%
Good: 29%
Fair: 23%
Poor: 15%
Never heard of: 6%
Cannot rate: 6%

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Would you say that Sheldon Whitehouse has done an excellent good, fair or poor job as a United States Senator?

Excellent: 17%
Good: 22%
Fair: 21%
Poor: 28%
Never heard of: 6%
Cannot rate: 7%

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Would you say that David Cicilline has done an excellent good, fair or poor job as a Member of Congress?

Excellent: 9%
Good: 29%
Fair: 21%
Poor: 27%
Never heard of: 6%
Cannot rate:  8%

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Would you say that James Langevin has done an excellent good, fair or poor job as a Member of Congress?

Excellent: 7%
Good: 30%
Fair: 20%
Poor: 18%
Never heard of: 13%
Cannot rate: 11%

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Would you say that Gina Raimondo has done an excellent good, fair or poor job as Governor?

Excellent: 6%
Good: 28%
Fair: 30%
Poor: 31%
Never heard of: 1%
Cannot rate: 3%

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Would you say that Daniel McKee has done an excellent good, fair or poor job as Lieutenant Governor?

Excellent: 3%
Good: 16%
Fair: 21%
Poor: 8%
Never heard of: 26%
Cannot rate: 25%

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Would you say that Peter Kilmartin has done an excellent good, fair or poor job as Attorney General?

Excellent: 3%
Good: 20%
Fair: 28%
Poor: 17%
Never heard of: 13%
Cannot rate: 19%

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Would you say that Seth Magaziner has done an excellent good, fair or poor job as General Treasurer?

Excellent: 4%
Good: 18%
Fair: 24%
Poor: 13%
Never heard of: 21%
Cannot rate: 21%

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Would you say that Nellie Gorbea has done an excellent good, fair or poor job as Secretary of State?

Excellent: 5%
Good: 21%
Fair: 21%
Poor: 10%
Never heard of: 20%
Cannot rate: 23%

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Would you say that Jorge Elorza has done an excellent good, fair or poor job as Mayor of Providence?

Excellent: 4%
Good: 24%
Fair: 24%
Poor: 22%
Never heard of: 9%
Cannot rate: 15%


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