RI Economic Recovery: Better Than Expected
Monday, March 14, 2011
Revised data in the labor market indicates that Rhode Island's economy is in a "typical" recovery in terms of cyclical momentum, according to University of Rhode Island economist Leonard Lardaro.
His most recent analysis of the state of the economy -- the Current Conditions Index (CCI) -- not only shows growth for the month of January, but also significantly higher CCI values for 2010 than had been previously calculated. The index currently puts the state economy at 67 on a scale of 0 to 100 -- up 25 points from this time last year.
Figures above 50 indicate economic growth and figures below that signal a recession. The index is calculated based on several factors, including the change in the unemployment rate, retail sales, consumer sentiment, and permits issued for single-family homes. 67 is 16-point decrease from December 2010's 83, but consistent with September and October values of the CCI.
‘Took me by surprise’
"Let me confess, the magnitudes of the job gains in newly-released data took me by surprise" said Lardaro. "What we now see is that CCI values for all of 2010 were substantially higher than what the existing data throughout last year had led us to believe. Furthermore, these data points quite clearly to a change in the date for the beginning of Rhode Island's current recovery, from June of 2010 to February."
Eight of twelve economic indicators improved, according to Lardaro's January report. Employment Service Jobs, "our latest 'star'" increased 2.8 percent -- continuing a year-long trend of increase from 2010. Private Service-Producing Employment rose 0.4 percent, and, according to Lardaro, these two indicators "accounted for most of the revised CCI increases."
‘Stubbornly high jobless rate’
The report shows modest gains in U.S. Consumer Sentiment (up .2 percent), Total Manufacturing Hours (up .5 percent — its eighth increase in nine months), Labor Force (up .8 percent), and Unemployment Rate (down .5 percent — but still above 11 percent overall), while Manufacturing Wage (up 4.1 percent) and New Claims — a leading indicator measuring layoffs — (down 12.9 percent) showed significant improvement.
The remaining four indicators failed to improve. Retail Sales declined .8 percent in January as did Government employment (down 1.3 percent). Benefit Exhaustions rose 16.5 percent and Single Unit Permits — "a very volatile indicator of late" — plunged 52.7 percent.
Despite these decreases, Lardaro noted that "January was another good month for Rhode Island." However, he added that "our state's sluggish job growth and stubbornly high jobless rate point to the sad reality that major structural impediments continue to counteract our state's cyclical momentum... Removing structural impediments should be our job #1."
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