RI’s Economy Now Stuck in Neutral
Monday, January 10, 2011
After a rough-and-tumble year, Rhode Island’s economy sputtered into neutral in November, according to University of Rhode Island economist Leonard Lardaro.
That's actually good news - after the economy briefly stopped growing in October.
Lardaro's monthly read on the state of the economy—known as the Current Conditions Index—shows that it was a flat 50, on a scale of 0 to 100, in November. Below 50 is a recession; above that level shows economic growth. The Index is calculated on the basis of a dozen factors, such as the unemployment rate, building permits for homes, and consumer confidence.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe number for November is actually a bit of good news—in October, the economy shrank back to a 42, after four straight months of being at 58. “We’re still hanging in. I still believe the economy is in a recovery,” Lardaro said. But he warned that his assessment could change if the state doesn’t climb back above 50 very soon. “Then you have to wonder if we’re in a recovery—did we surge a little but then just fade because we couldn’t sustain it?”
Half of indicators improved
In November, six of the 12 indicators saw improvement (see below chart). Retails continued to improve and, significantly, consumer sentiment went up after two back-to-back months of a decline. Manufacturing hours and wages also rose, while the unemployment rate went down slightly.
Indicators that did not do well included new permits for single-unit homes, which dropped by nearly half, and new claims for unemployment benefits, which jumped up by about 15 percent.
Reasons for hope and concern
There is reason for both hope and concern. On the hopeful side: Lardaro says the U.S. Department of Labor next month will revise many of the labor figures for 2010—that could result in a positive increase in some of the numbers.
On the other hand, the numbers were so bad in November 2009 that it didn’t take much for the economy to show some improvement by November 2010. “[S]o the index’s rise from October to November might not indicate that we are ‘out of the woods’ yet, in terms of sustaining this recovery,” Lardaro said.
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