Lardaro Report: RI Economy “Worse Than We Had Thought”
Monday, June 13, 2016
Just when it looked like Rhode Island’s economy was only faltering a little comes new data showing that it is actually performing quite a bit worse than we had thought.
The data have not been kind to Rhode Island over the past few years. Revisions to the labor market data for 2015 effectively cut the highs from our state’s perceived momentum last year. This year, it appeared that we were settling in at a pace comparable to the revised levels from last year - at least we were moving sideways, as the Current Conditions Index was range bound between 58 and 67.
Enter the April data. Based on this newly released information, the March CCI was revised lower from 58 (barely expanding), what I had previously referred to as an “ugly” 58, to 50, its neutral value. What could be worse? The April CCI fell to 42 - a level that indicates contraction. April’s value was the lowest CCI since October of 2011.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBoth the prior data and that for April data point to pronounced and ongoing deterioration in the performances of several key indicators, most notably those that had been generating much of our forward progress. So much for our state’s cyclical momentum!
The pattern revealed by the data is entirely consistent with declining cyclical momentum. In total, four of the five leading indicators contained in the CCI failed to improve in April, although three had difficult comps from a year ago. The single improving leading indicator, Single-Unit Permits, barely rose (+0.1% ). Employment Service Jobs, w hich includes temporary employment and is a prerequisite to employment growth, fell by a hefty 4 percent, its second consecutive decline. Manufacturing employment rose (albeit barely), but the workweek fell sharply, causing Total Manufacturing Hours, a proxy for manufacturing output, to resume its downtrend that began over a year ago. Along with this, New Claims, a leading labor market indicator that reflects layoffs, rose by 3.2 percent in April, in spite of a very easy comp one year ago. Finally, US Consumer Sentiment fell by a sizable 7.4 percent, its fifth consecutive decline.
Along with these new concerns, issues remain with the problematic indicators from the past few months. Retail Sales, the CCI’s star performer for a few years, declined by 3.3 percent, its worst performance in over a year. It has now declined for three of the past four months. Our state’s Labor Force continued to decrease. April’s decline of 0.6 percent was its twenty-third yearover-year decline. The result: Rhode Island’s Unemployment Rate continues to fall primarily for all the wrong reasons. Some here seem to be celebrating the fact that this rate reached 5.3 percent in April, far below its recent peak, to a level they view as comparable to those from 2007. However, any comparison between 2016 rates and those of 2007 is purely spurious, since the labor force participation rate at present remains far below where is was in 2007. Despite the preoccupation of persons here with this indicator, the Unemployment Rate is a lagging indicator - an inappropriate reflection of both where we are now or how well our state’s economy can be expected to perform in the future.
One pleasant April surprise was another increase in the Manufacturing Wage, w hich grew by 3 percent versus last April, only its second increase in a very long time. Private ServiceProducing Employment, an indicator w hose grow th rate had been accelerating of late, increased at a slower rate (0.8%) in April. Government Employment fell yet again, by 0.5 percent in April. At least the level of this indicator managed to remain above 60,000. Finally, Benefit Exhaustions, which reflects longer-term unemployment, fell by 9.8 percent. While this is still a very healthy rate of improvement, April’s value was its second slowest rate of improvement in the past eight months.
While the recent performance of Rhode Island’s economy is clearly concerning, it is imperative that we not jump to any unjustified conclusions at this point. Yes, our state’s recent cyclical momentum has been disappointing. The CCI shows very clearly that rates of growth here have been slowing since last August. But if the national economy accelerates, our state’s performance should also improve, hopefully ending this recent period of weakness. The key word, of course, is should. We only began to make meaningful structural changes to our economy recently. In light of our current cyclical weakness, it is imperative that we now accelerate these changes.
Related Slideshow: RI Business Rankings in US
See how Rhode Island stacked up.
_400_400_90_400_400_90.jpg)
_400_400_90.jpg)
_400_400_90_80_80_90_c1.jpg)
_80_80_90_c1.jpg)
Related Articles
- Leonardo Lardaro: Current Conditions Index for the RI Economy
- Lardaro Report: Sustained Economic Momentum
- Lardaro Report: RI Economic Recovery Doesn’t Keep Pace With National Growth
- Lardaro Report: Current Conditions Index Report Rises in December
- Lardaro Report: Rhode Island’s Momentum Both Mediocre and Disappointing
- Lardaro Report: Economic Momentum is Increasing
- Lardaro Report: A Potential Glimmer of Hope
- Lardaro Report: Good Economic News Becoming More Difficult to Find
- Lardaro Report: A Disappointing Year
- Lardaro Report: A Bounce Back
- Lardaro Report: Rhode Island’s Economy Continues to Flounder
- Lardaro Report: Rhode Island Economic Performance, Mediocre in February
- Lardaro Report: RI’s Economic Performance in March Improves Slightly
- Lardaro Report: RI Economy Rebounds in November
- Lardaro Report: Economic Conditions Fall to Lowest Value Since May
- Lardaro Report: RI Economy Slows in December
- Lardaro Report: Year-Over-Year Employment Growth Falls Below 1%
- Lardaro Report: Current Conditions Index Rises 9 Points From January
- Lardaro Report: Conditions at 2nd Highest Level in 2015 After 3rd Quarter
- Lardaro Report: August Current Conditions Index Surges to Highest Value Since 2012
- Lardaro Report: Current Conditions Index Drops 9 Points From February
- Lardaro Report: RI’s Economic Performance Goes Backwards in April
- Lardaro Report: Current Conditions Index Rises From 57 to 68 in May
- Lardaro Report: RI Economy Shows Strength in June
- Lardaro Report: Economic Conditions Remained Steady in July
