RI Economist: First Quarter A “Disappointment”
Monday, May 16, 2011
After showing signs of growth in the final two quarters of 2010, Rhode Island’s economy appears to be slowing according to Leonard Lardaro, one the state’s leading economists.
Lardaro’s “Current Conditions Index,” a monthly breakdown of the state’s economy based on 12 vital indicators, valued the month of March at a 58 (out of 100), the state’s lowest index since February of 2010. Lardaro said the entire first quarter of the New Year was disappointing in terms of economic growth.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“Rhode Island ended the first quarter on a down note,” Lardaro said. “Actually, the entire first quarter qualifies as somewhat of a disappointment, based on the economic momentum we witnessed during the second half of 2010. The Current Conditions Index for March fell to 58, as only seven of 12 indicators improved.”
Comparisons Become Tougher
But Lardaro (lower left) says the numbers are par for the course in an economic recovery that is now 13 months old. He said March’s index doesn’t necessarily indicate overall weakness.
“While the March value might seem to indicate overall weakness, it actually does not, as six indicators had exceptionally strong ‘comps’ to beat a year ago, and even in spite of that, two of those improved,” Lardaro said. “Actually, this is a fairly common occurrence during recoveries, as easy-to-beat values in the early stages of a recession soon disappear, giving way to more difficult comps. Further momentum then becomes predicated on beating these ever-stronger comps.”
Lardaro’s monthly analysis takes into account 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.
According the index, retail sales (up 1.1 percent), private service-producing employment (up .7 percent), total manufacturing hours (up 3.2 percent), manufacturing wage (up 3.7 percent), benefit exhaustions (down 18.1 percent), new claims (down 14.3 percent), and the unemployment rate (down .8 percent) all show improved value in the month of March.
Some Basis For Disappointment
Still, Lardaro said there is some basis for disappointment. He said there is no question Rhode Island's economic growth taken a hit since the middle of 2010. He blamed a number of factors for the momentum shift.
“Part of this has been driven by the adverse effects of higher food and energy prices,” he said. “Also, our ongoing budget ‘balancing act’ has continued to mitigate some of our state’s underlying cyclical momentum. Fortunately, though, we had a margin for error in the first quarter, derived from the fact that our recovery is now 13 months old.”
Among the factors that failed to improve was single-unit permits (new home construction), which fell 17.2 percent from a year ago. Lardaro said the large decrease is reflective of the state’s “roller coaster behavior of new home construction.”
Government employment, consumer sentiment, employment services jobs, and labor force also showed no improved value, according to Lardaro.
Rhode Island Faces A New Question
With the index facing its lowest numbers in over a year, Lardaro’s findings suggest there is no question the state’s economic recovery appears to be slowing.
Now, the economist said, Rhode Islanders have a new problem on their hands.
“Rhode Island’s recovery, now 13 months old, appears to be losing some of its momentum. CCI values in the first quarter of 2011 were clearly lower than they were in either of the prior two quarters, especially the third quarter of 2010,” Lardaro wrote in his monthly briefing. “Headwinds exist, most notably the adverse effects of food and energy prices and balancing our state’s budget. The question for now shifts to how Rhode Island deals with the possibility of a slowing economy.”
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