URI Economist: RI Economy Is Moderating
Monday, September 12, 2011
Rhode Island’s economy is in the best shape it has been in since February, but is still worse off than it was a year ago, according to University of Rhode Island Economist Leonard Lardaro.
Each Month, Lardaro’s “Current Conditions Index (CCI)” offers a breakdown of the state’s economy based on 12 vital indicators. He valued the month of July at a 67 (out of 100), which ties for the highest rating of the year, but also marks the fifth consecutive month the economy has failed to improved compared to last year. Lardaro said the third quarter of the year kicked off on a “mixed note.”
“Make no mistake about it, though, Rhode Island’s economy continues to grow as it has through all of 2011,” Lardaro said. “This recovery will be eighteen months old in August. As I noted last month, the positive economic momentum this has afforded us will provide us with some margin for error in dealing with whatever weakness lies ahead. ‘The’ question, however, continues to be what will happen nationally — will the US experience a double-dip recession?”
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Lardaro’s monthly analysis factors government employment, US consumer sentiment, single-unit housing permits, retail sales, employment services jobs, private service-producing employment, total manufacturing hours, manufacturing wage, labor force, benefit exhaustions, new claims, and the unemployment rate.
In July, eight indicators showed improved performance while government employment, consumer sentiment, employment services jobs and the labor force all suffered setbacks. One of the glaring downturns has been in the labor face, a number that has been decreasing dating back to last year, Lardaro said.
“Our Labor Force has now declined or failed to improve on a yearover-year basis for the last six months,” he said. “Worse yet, on a monthly basis, the decline extends all the way back to last December. This, of course, casts doubt on the validity of the “signal” provided by recent declines in our Unemployment Rate. At this point, I recommend not attempting to gauge the overall strength of Rhode Island’s economy by the behavior of our state’s Unemployment Rate. Not only is this indicator losing some of its statistical meaningfulness, it is a lagging indicator as well.”
Manufacturing Numbers On The Rise
Still, Rhode Island’s economy also has its share of favorables. Lardaro pointed out that total manufacturing hours has improved every single month for more than one year. The manufacturing wage has also skyrocketed since last year.
“Fortunately, not everything is moving toward unfavorable trends,” the report says. “The spectacular and (to me at least) unexpected ongoing strength in our state’s manufacturing sector continued in July. Total Manufacturing Hours (+3.2% in July) has now improved for the last thirteen months. Both employment and hours rose in July. Growth in the Manufacturing Wage went parabolic in July, rising by 12.8 percent compared to a year ago.”
Lardaro also noted that while private service-producing employment was on the rise last month, the numbers were offset by a continued decreased in government jobs.
RI Economy Dependent On National Economy
Lardaro said Rhode Island’s economic recovery is still relying on the national economy to dictate most of the trends, a sign the state has failed to learn from the last economic downturn.
He said it is clear the state’s growth is “moderating.”
“Rhode Island’s recovery continued in July, although it has become increasingly apparent that our state’s rate of growth is moderating,” he said. “Not only is this reflected in the overall CCI results, which are geared to indicator performance relative to a year ago, but on a monthly basis as well, as the values of a number of indicators have plateaued over the past five months. Sadly, since Rhode Island never used the past crisis to reinvent itself, a reacceleration of growth here is almost entirely dependent on heightened national and global growth.”
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