Lardaro: R.I. economic momentum ‘hangs by a fingernail’
ONLY SIX OF THE 12 indicators comprising Rhode Island's Current Conditions Index showed improvement in June, contributing to a CCI of 50 that suggests the economy neither grew nor shrank during the month. Among the negative factors in June were higher unemployment claims and benefit exhaustions.
SOUTH KINGSTOWN – Downgrading Rhode Island’s economic momentum from “precarious” to “tenuous,” University of Rhode Island economist Leonard Lardaro said June’s Current Conditions Index “shatters the notion” of economic progress the state seemed to be making.
The June index measured in at 50, significantly lower than May’s CCI of 67 and last June’s high of 83, Lardaro reported. On top of that, April’s CCI, previously recorded at 58, was revised downward to 50, because retail sales did not improve as originally thought, Lardaro said.
The Current Conditions Index measures the state’s economic performance, or momentum, using a dozen different metrics. A CCI indicator greater than 50 indicates economic growth, while a value below 50 suggests contraction.
“Perhaps the most pressing issue now,” Lardaro speculated, “is whether Rhode Island has begun to decouple from the accelerating national economy. Apparently, Rhode Island’s negatives are finally catching up to its positives, increasingly diminishing overall momentum.”
While an index of 50 is a “neutral” value, implying neither growth nor contraction, only six of the 12 indicators that comprise the index improved in June.
Contributing to a lower CCI value for the month were new claims for unemployment, which rose 21.8 percent year over year, a rate Lardaro called “alarming.” Benefit exhaustions, which reflect longer-term unemployment, climbed 10 percent over the year despite two consecutive months of double-digit improvement before June, he wrote.
The stagnation of the state’s economic momentum is happening, Lardaro noted, despite a 23.7 percent increase year over year in single-unit permits in construction, a 4.3 percent increase in total manufacturing hours, and a 3.4 percent increase in retail sales.
“If Rhode Island’s economic momentum is hanging on by a finger nail, apparently that finger nail is its goods-producing sector,” Lardaro wrote. “Who would have ever thought that our state’s goods-producing sector (housing and construction) would be carrying us at a point in time when we have been a post-manufacturing economy for so long (since late 1987).”
The CCI values of 50 for April and June could be aberrations, he added, but the best indicators of positive economic momentum for the state will continue to be those CCI monthly values that show improvement over the CCI values for the same month a year prior.