RI Economy Now In Recovery
Monday, October 11, 2010
It’s official—the state economy is now out of recession and in recovery.
So says University of Rhode Island economist Leonard Lardaro, whose Current Conditions Index for August showed that for the third month in a row the state economy ranked a 58 on a scale of 0 to 100, with numbers below 50 showing a recession. The Index is calculated on the basis of a dozen factors, such as consumer sentiment, retail sales, and the unemployment rate. In August, seven of the dozen indicators improved. (Click here for more information.)
“I think it is safe to say by now we are in the early stages of a recovery,” Lardaro told GoLocalProv.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTHe said the improvements in retails sales, consumer confidence, and manufacturing wages give the economy something to build on.
What does ‘recovery’ really mean?
“The next thing becomes, ‘What does a recovery mean?’” Lardaro said. “It doesn’t necessarily mean a return to normal.” He said it could take years before Rhode Island’s economy gets back to where it was pre-recession.
That point is underscored by the fact that unemployment remains in the double-digits. According to the state Department of Labor and Training, the unemployment rate in Rhode Island was 11.8 percent in August. That’s a slight dip from 12.5 percent a few months ago. But behind that seemlying positive news is a dismal reality: as many people lose their unemployment benefits and stop looking for work, they are no longer being counted among the unemployed, according to Lardaro.
But… recession could come back soon
And there are storm clouds on the horizon: Rhode Island lacks strong growth sectors, like technology industries, that can help it recover. Plus, it will continue to face budget deficits and can expect to lose roughly $100 million to $200 million in stimulus funds by the end of 2011. As other, larger states struggle with the same problems, their economies could slip back into recession, dragging the national economy with them.
All of those factors combined could drive Rhode Island back into a double-digit recession in a year, Lardaro warns.
It’s a situation he says state leaders, especially the General Assembly, could have averted. “We didn’t do the planning during the recession,” Lardaro said. “The leaders didn’t reinvent us. They didn’t really plan ahead for the upcoming recovery.”
For example, the General Assembly passed a tax reform bill in the last session. But that won’t take effect until next January and will not have an economic impact until the end of 2011—when new deficits might create pressure to repeal it, according to Lardaro.
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