R.I. outlook in December still ‘abysmal’

KINGSTON – “Rhode Island’s economic performance in December was much the same as it had been throughout all of 2008: abysmal,” University of Rhode Island economist Leonard Lardaro wrote in his monthly report.
His Current Conditions Index (CCI) was steady at eight points in December, the same as most of last year. The exceptions were June and August, when the index hit its absolute low of zero. (The index – designed to predict the direction of the Rhode Island economy – has a maximum of 100 points. Scores above 50 points indicate the local economy is expanding, while lower values indicate a contraction.)
Lardaro cautioned that, “as I have stated several times throughout 2008, not all CCI scores of eight are alike.” The index is based on comparisons with a year ago – and the local economy’s downward spiral began in 2007, when the CCI fell to 33 points in August, 25 in September and 17 in October and November, before recovering briefly to 33 in December. Given the diminished year-ago values on which the comparisons are based, “the fall in a host of CCI indicators is alarming,” he said. “But there are a few bright’ spots, if you want to call it that.”
The local manufacturing wage rose – as it did in nine of 12 months last year – edging up 0.6 percent compared with December 2007. That increase “reflects the existence of some skill shortages, as hard as that might be to contemplate, and contraction of the lower end of our manufacturing sector,” Lardaro said.
“What makes it remarkable,” he added, “is that it occurred as total manufacturing hours here plunged by 9.8 percent,” after posting a year-over-year decline of 9.2 percent in November, “based on sharp declines in both employment and the length of the work week. Clearly, the manufacturing sector here is in a near free fall, as it is nationally.” (READ MORE)
His other “bright spot” was in retail sales, which fell 0.9 percent compared with a year ago, “far less than its [10.3 percent] decline in November.” (READ MORE)
Sharper declines were seen in the remainder of the index’s 12 state and national economic indicators, led by the local jobless rate.
The Rhode Island unemployment rate rose 92.3 percent compared with December 2007, despite a local labor force that shrank 1.8 percent compared with a year ago, “which actually helped our recorded jobless rate.” New claims for jobless benefits were up 6.5 percent. But benefit exhaustions, a measure of long-term unemployment, were up 39.2 percent.
Private service-producing employment fell 3.7 percent compared with a year ago, while government payrolls in the state shrank by 3.3 percent. Employment services jobs, a category that includes temporary workers, “continued its string of double-digit declines, falling by 28.1 percent” compared with December 2007, Lardaro said.
The mood of U.S. consumers, measured by the Reuters/University of Michigan Consumer Sentiment Index, fell 20.2 percent, hinting at more dark times for the retail trade. And the number of single-unit permits issued statewide for new residential construction – a leading indicator for the homebuilding industry – fell 24.9 percent, slowing from November’s decline.
Revised labor-market data due out later this month may improve the picture somewhat, Lardaro said. “The sharp jumps in our state’s unemployment rate will be smoothed out, resulting in lower official values,” he predicted.
“So, rates for the entire second half of 2008 – all of which were spikes of 50 percent or more compared to year-ago values – should be reduced,” and the state’s December jobless rate probably will be downwardly revised from the 10 percent reported last month. (READ MORE) “We’ll still have numerous opportunities in 2009 to actually hit that level, though.”
The bottom line, Lardaro said, is that “when 2008 and 2009 are viewed together … it is very likely that we will have surpassed the economic misery of 1991,” when Rhode Island was reeling from a national recession, defense cutbacks and the state banking crisis. But, he added, “At least 2008 is now officially behind us!”
The Current Conditions Index, created by University of Rhode Island economist Leonard Lardaro, measures the strength of the state’s economic climate. The index – based on 12 key economic indicators related to housing, retail sales, the employment situation and the labor supply – attained its maximum value of 100 points several times in 1984 and 1986. Additional information, including historical data back through 1980, is available at members.cox.net/lardaro/current.