During the COVID-19 pandemic, University of Rhode Island economist Leonard Lardaro says he noticed businesses in the South County region of the state posting jobs offering wages up to $17 an hour.
Over time this fell to $15 per hour, then $13 until one night in December, Lardaro saw a sign posted on a business’s door that read “starting pay above minimum wage.”
This is the very kind of anecdotal evidence that Lardaro, who creates a monthly Current Conditions Index report, says he likes to consider when assessing Rhode Island’s economy.
Though Lardaro acknowledges that this evidence is far from scientific, he says this evolution of job postings is a sign of a softening labor market in 2024.
And others agree. Many are forecasting that the unemployment rate in Rhode Island will climb upward this year. After all, it can’t go much lower than it did last year, when joblessness hit a historic low of 2.6%.
Just how much higher isn’t clear, but nevertheless the forecasts will be welcome news to many employers who have struggled to fill positions in a tight job market.
Indeed, unemployment might already be higher than the data indicates.
Lardaro dubs the jobless rate published by state and federal labor officials as a “naïve rate” because it doesn’t paint a full picture of Rhode Island’s economy and fails to account for the state’s falling labor participation, the number of people working or looking for work.
To account for this, Lardaro includes a participation-adjusted unemployment rate in his monthly report, which he says was 4.5% in December, when the official unemployment rate was 2.8%.
Lardaro said that as unemployed people are returning to the labor force, it causes the unemployment rate to rise because they are now being counted among the jobless.
Looking ahead, Lardaro says it’s possible the unemployment rate could go as high as 3.5% or 4% by the end of 2024, an outlook he has because of expectations that Rhode Island’s labor force will continue to grow while the number of jobs declines.
Those expectations appear to be playing out.
Rhode Island’s labor force increased by 7,900 between January and November of 2023 to 574,200, according to the R.I. Department of Labor and Training. In the same period, the DLT data shows total nonfarm jobs in the state increased by just 200 to 496,900.
The national labor landscape is going through similar shifts. Allison Kaminaga, a professor of economics at Bryant University, points out that the Federal Reserve’s economic projections released in December showed that the unemployment rate is expected to go from 3.7% recorded in November to 4.1% in 2024.
But, when it comes to forecasting, Timothy Howes, an associate professor and department chair of accountancy and finance at Johnson & Wales University, says there’s always an “X factor,” a detail that may not be on the radar of analysts right now.
This year’s X factor could lie in real estate. Howes says that real estate values have remained high because of an insufficient supply of properties on the market. And recently, higher interest rates may have further limited that supply as those with low-interest mortgages are less motivated to sell, Howes says.
But a big slowdown in the real estate industry could ripple across related sectors resulting in less spending and higher unemployment, he says.
“Rhode Island has very low unemployment, historically speaking. So usually when something’s low, it has nowhere to go but up,” Howes said.
Though lower unemployment is often a marker of a strong economy, economists and forecasters agree a higher rate will be welcome news for many Ocean State employers.
“I would expect for companies, it’s going to be a bit easier than it has been in the past to find workers,” Kaminaga said. “It’s still going to be a strong labor market, but I definitely think it’s cooling in 2024 compared to where we are today.”
Businesses have been feeling the effects of staffing shortages since the pandemic-spurred phenomenon known as the “Great Resignation,” in which employees left their jobs in droves and sat on the sidelines.
Howes says many businesses were in trouble, especially in 2021 as they tried to ramp up following the slowdown in the depths of the pandemic a year earlier. For example, he says, travel bounced back much quicker after the pandemic than employers within the hotel and lodging industries expected. These companies had already laid off employees who had moved on, leaving the employers scrambling to fill roles.
Elizabeth Catucci, president of the Northern Rhode Island Chamber of Commerce, also saw the staffing struggles of companies in the hospitality industry, as well as those in manufacturing and finance.
“People would be surprised to hear how many industries are still facing staffing issues,” Catucci said.
Although labor shortages have shown signs of subsiding, companies also have grown accustomed to working with fewer employees.
“I think they have adjusted and will continue to adjust,” said Howes, who also works at a consulting firm assisting franchising companies.
Among the methods Howes has noticed include employees taking on the responsibilities of two or three people and businesses’ growing use of automated technology. Catucci also says some businesses have outsourced work, relying less on full-time employees, adding this is a prevalent practice within human resources departments.
But overall, Catucci says employers seem cautiously optimistic that the labor market will ease in 2024.
