SOUTH KINGSTOWN – Paralleling economic activity nationally, Rhode Island performed significantly better than expected in the second quarter of 2013, according to University of Rhode Island economist Leonard Lardaro. But that doesn’t mean the state is out of the woods yet.
Lardaro, who released his Current Conditions Index Monday, said June registered 75 on his index, a “very good” rating. A CCI indicator greater than 50 indicates economic growth, while a value below 50 suggests contraction.
At the same time, June was the first month this year in which the CCI did not exceed last year’s figure. Since the second half of 2012, with the exception of July, showed particularly strong signs of growth, Lardaro said, “this is not likely to be the last time this phenomenon occurs.”
Nonetheless, May’s CCI came in at 83 and April’s rating hit 75, showing some positivity in the second quarter as a whole.
In explaining June’s mostly healthy but mixed results, Lardaro said it is important to remember that current levels of economic activity depend not only on past levels but on rates of growth.
“This is where Rhode Island finds itself in such a frustrating situation,” he said. Hit hard in the Great Recession, the level of economic activity “fell far, if not farther than just about any other state. Therefore, rates of growth applied to the highly depressed level of economic activity here have resulted in relatively small changes in the actual level of economic activity.”
For June, nine of 12 indicators improved, including single-unit permits, a leading indicator of housing, up 25.1 percent, and employment service jobs, up by a healthy 4.6 percent, and increasing consistently since April. U.S. consumer sentiment also improved for the fifth month in a row and retail sales remained strong.
Perhaps most notably, new claims for unemployment insurance were down 19.2 percent. New claims are considered the most timely measure of layoffs. That drop in particular shows that layoffs have “now moved back into a clearly established downtrend, which is critical if Rhode Island is to continue improving as we move into the third quarter,” Lardaro wrote.
Some of the problematic measures included total manufacturing hours, which failed to improve based on a large drop in the workweek, although manufacturing wages rose by 4.5 percent, and private service-producing employment, which has been stuck below a rate of one percent for seven of the past nine months.
And despite the good news about layoffs, the unemployment rate remained unchanged for June, while government employment continued a lengthy decline.
Despite the overall strength of the second quarter, Lardaro said the sustainability of that momentum will be tested by rising gasoline prices and interest rates.
“My greatest concern moving forward,” he states in his report, “is that Rhode Island has failed to do the hard work required to reinvent itself and to make its economy more competitive. The organizational changes during the last legislative session are good, but they fail to deal with our state’s most pressing problems …, leaving our long-term weaknesses to fester.”
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