R.I. records highest economic index value in 2 years in December

RHODE ISLAND'S ECONOMY ended 2016 with the highest reading of the Current Conditions Index in the last two years, but economist Leonard Lardaro warned against complacency when reviewing needed structural changes. / COURTESY LEONARD LARDARO
RHODE ISLAND'S ECONOMY ended 2016 with the highest reading of the Current Conditions Index in the last two years, but economist Leonard Lardaro warned against complacency when reviewing needed structural changes. / COURTESY LEONARD LARDARO

SOUTH KINGSTOWN – While Rhode Island’s economy ended the year with positive momentum, University of Rhode Island economist Leonard Lardaro is not quite ready to say the state is on a permanent road to recovery.

Lardaro’s Current Conditions Index hit 83 in December, a gain on November’s 67 as well as on December 2015’s 50. The CCI analyzes the findings of 12 indicators; a CCI reading greater than 50 suggests economic growth and a value less than 50 indicates contraction.
The CCI report noted that 10 of the dozen underlying economic indicators improved from their year-earlier values, with only two declining – retail sales (-2.1 percent) and employment services jobs (-1.9 percent), although Lardaro said that the jobs figure, especially in November and December, is subject to revisions more than any of the other indicators.

The four largest improvements came in single-unit permits, which increased 44.1 percent; unemployment benefit exhaustions, which declined 10.7 percent; U.S. consumer sentiment, which improved 6.2 percent in December; and manufacturing wage, which increased 6.1 percent.

The other six indicators that improved, with their value, were:

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  • Total manufacturing hours, +4.2 percent
  • Government employment, +1.5 percent, although Lardaro noted that it was largely due to a rise in federal government jobs
  • Private service-producing employment, +1.1 percent
  • Unemployment rate, -0.4 percent
  • New unemployment claims, -0.2 percent
  • Labor force, +0.2 percent

Despite the highest CCI value in the last two years, and the fact that the state stayed at 67 or above for the second half of 2016, Lardaro was not ready to say the state should abandon efforts to effect structural changes. “Rhode Island’s economy remains far too susceptible to downdrafts in national economic momentum,” he said.

Even the third quarter’s 3.6 percent increase in state GDP followed 0.2 percent growth in the second quarter, which averages to 1.9 percent for those six months of 2016, “not terrible,” Lardaro said, “but, as the saying goes, nothing to write home about.”

He concluded the report with this admonishment and reminder:
“If we wish to sustain our enhanced cyclical momentum, it will be necessary for us to continue reinventing our state’s economy, based on well-defined and sustained structural changes. Is our state government up to the task?”

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