Is Rhode Island in a Recession?  The War in Middle East May Determine State’s Future

Is Rhode Island in a Recession?  The War in Middle East May Determine State’s Future

University of Rhode Island economist Leonard Ladaro has been tracking Rhode Island’s economic indicators for decades.

He tells GoLocal that Rhode Island’s economy is sputtering.

“I think RI is still in a recession, but not by a whole lot. There are positives, as noted in my report,” said Lardaro.

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“Over the next few months, our state’s economic fate will be determined largely by how events play out in the Middle East, especially oil prices and other increases in prices tied to the Strait of Hormuz (like food prices, etc.),” Lardaro said.

“Sadly, the tailwind from the tax package for lower- and middle-income persons is being largely negated by higher gasoline prices. So, statistically (on average), we will likely look like we are doing a bit better as we approach mid-year (assuming the truce holds), and hopefully beginning to emerge from this recession, many in our state will continue to struggle (lower and middle-income persons),” he adds.

 

Newest Report

According to his most recent report, released on Thursday (The Current Condition Index), he finds that the numbers in the jobs market vary significantly:

We have finally received the revised labor market data. There is good news and bad news. The good news first: Unlike the last few years, we weren’t savaged by the revised data. In fact, a number of key variables performed better in 2025 than we had been led to believe. The bad news: Cyclical momentum is based on rates of change, not levels themselves, so the overall macroeconomic picture isn’t very different from what it was prior to the labor market data revisions. Ironically, several of the revised economic indicators that had been higher for much of last year began to trend lower the second half of last year

 

 

Two Positives - Retail Sales and Manufacturing

According to Ladaro:

Two indicators that did well last year continued their momentum into 2026. Retail Sales, the star performer of the CCI indicators, has grown by just under 5 percent for the most recent two months, a clear acceleration from the prior two months. This is not an indicator subject to revisions. It is a key variable to follow in the coming months, given its importance as an economic indicator.

 

The other strong performer is Total Manufacturing Hours, which is a proxy for manufacturing output, reflecting the most cyclically sensitive part of our state’s economy. It rose by an annual rate of 9 percent in January following greater than 2 percent growth over the past three months. Along with this, the Manufacturing Wage, which had been declining with the original data, has been rising through most of 2025, before falling this month.