Is RI’s Economy on the Rebound?
Monday, February 11, 2013
University of Rhode Island economist Dr. Leonard Lardaro issued his monthly report of the CCI today and his analysis says the Ocean State has posted a impressive mark of 92 out of 100 possible points for December of last year, the state’s highest monthly total since November of 2003.
The news comes following a report last month that Rhode Island’s economy had its most momentum since early 2011 and Lardaro called the latest results “an incredible way to end 2012.”
“It is now abundantly clear that Rhode Island’s economic performance during the fourth quarter was its strongest in terms of overall momentum (not levels, though) for quite some time,” he said.
High Scores (Nearly) Across the Board
For December, Rhode Island saw improvement in 11 of the 12 indicators measured in Lardaro’s report, which charts 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.
The only category where the Ocean State didn’t see progress was in Government Employment, which Lardaro says is an effect of “ongoing fiscal consolidation.”
“While that indicator hasn’t improved since August of 2010, it might soon bottom if the momentum gains registered in the fourth quarter are sustained,” he said.
All told, Rhode Island’s recovery is now 34 months old Lardaro says and that the latest data proves the gains aren’t “one month wonders.”
“What we saw unfolding was a trend of more broadly based economic activity that continued to increase our state’s economic momentum,” he said. “It is now safe to conclude that as 2012 ended, Rhode Island’s economy shifted into a higher gear.”
A Noticeable Difference
What makes Lardaro’s report stands out is the noticeably positive tone it has taken in the past two months compared to the pessimistic nature of the numbers during 2011.
But while thinking are getting much better, he says, some concerns still exist.
Lardaro’s report focuses on the state economy’s “momentum” and, as such, current levels can differ, which is why he believe the state’s unemployment rate continues to stagger along.
“The levels of key variables like payroll employment remain well below the values they attained during the last recovery,” he said. “We remain about six percent below our last employment peak, which explains the persistence of high unemployment here.”
The good news is, however, that based on the state’s fourth-quarter performance, Rhode Island is rapidly approaching that prior peak.
Retail sales, for instance, grew 3.2 percent compared to last December for its 12th increase in 14 months.
US Consumers were even feeling more positive about the national economy, with the Consumer Sentiment marker rising 4.2 percent.
Even a category like Benefit Exhaustions, which is a good indication of how many of the state’s residents have had longer-term unemployment, has continued on a downward pattern.
New Home Construction on the Rise
The biggest and most remarkable improvement in December was the category that measures Single-Unit Permits.
This category is a good test of new home construction in the state and, according to the CCI report, it rose by 35.1 percent from November to December.
The overall number is still low compared to historical charts, but Lardaro says that’s partly because Rhode Island’s population has declined,
If nothing else, it’s still enough to validate claims that the housing market has reached its bottom.
Other Signs of Progress
Perhaps even more positively, it appears that new claims for unemployment insurance are declining as well as the category fell 4.9 percent from a brief increase in November.
That, coupled with year-over-year improvements in critical categories like the Labor Force, Private Service-Producing Employment, and Employment Service Jobs have Lardardo feeling bullish about the state of the Ocean State.
Things aren’t perfect, he said, but they’re getting better.
“Ironically, as Rhode Island turned in its best quarterly performance in quite a while, its jobless rate became tied for highest in the nation,” Lardaro said. “Governor Chafee’s budget proposals, many of which were investment oriented, constitute a critical first step in helping Rhode Island end its association with such horrendous statistics. They are, however, only a first step.”
Lardaro says that in order for Rhode Island to keep its momentum up and keep the good news flowing, the General Assembly needs to pitch in with some of the suggestions Chafee has posed in recent weeks.
“Ironically, we have yet to take this step since our legislature hasn’t passed any of these measures, even as Massachusetts continues to make competitive changes to its economy,” he said. “Sustaining our positive momentum will require us to change.”
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