KINGSTON – August was “difficult” for Rhode Island and the nation, University of Rhode Island Prof. Leonard Lardaro wrote in his monthly report on the state of the state’s economy. “Nationally, overall economic activity that had been fairly good in July clearly deteriorated in August. That wasn’t the case here.
“For Rhode Island, July was a month of mediocre economic activity as the Current Conditions Index value only reached 50, its neutral value.” In August, Lardaro continued, the state’s economic performance not only deteriorated, “it fell significantly into its contracting range.”
The CCI plunged 17 points in August, to match the July 2006 score of 33 points. (Scores higher than 50 points indicate the state’s economy is growing, while lower scores indicate it is shrinking.)
The last time the CCI fell below 33 points was in April 2001, when it plummeted to 17.
The index – based on 12 key economic indicators related to housing, retail sales, the employment situation and the labor supply – reached its all-time low of 8 points in April 1991, amid a nationwide recession, defense cutbacks and the Rhode Island banking crisis. It attained its maximum value of 100 points during several months of 1984 and 1986.
“Very few positive things … can be said about Rhode Island’s August performance,” Lardaro wrote. “In some months, the existence of difficult ‘comps’ lead me to conclude that things are stronger than they appear. Not this month! The most accurate description of Rhode Island’s overall economic performance in August is: ‘horrible.’”
Not only did eight of 12 indicators lose ground, he said, but even more troubling, “a number of non-improving indicators will likely retain that status for some time to come.”
The strongest performances were in private service-producing employment, up 2.0 percent compared with August 2006; consumer sentiment, up 2.0 percent; and the unemployment rate, down 1.9 percent; and manufacturing, where the average hourly wage rose 3.8 percent as hours worked fell 1.1 percent.
Meanwhile, employment service jobs (including temporary positions) fell 0.8 percent compared with August 2006, in the first decline of the past 12 months; new unemployment claims rose 13.2 percent, in the ninth increase of the past 10 months; and unemployment benefits exhaustions surged 19.1 percent. Government employment also declined, falling 0.5 percent.
“All of this bodes badly for our unemployment rate, currently at 5.1 percent, but rising,” Lardaro said. The state’s labor force in August was down 1.0 percent from a year ago, which “made the jobless rate lower than it would have been with more favorable economic activity.”
The housing market’s “roller-coaster behavior” continued, with single-unit building permits falling 18.8 percent compared with a year ago. “In light of the backlog of unsold homes, don’t [expect] much improvement from this indicator any time soon,” he said. In addition, retail sales, “influenced by housing weakness,” fell 3.6 percent.
The bottom line, Lardaro wrote, is that “based on national trends and Rhode Island’s recent weakness, the trend promises to be highly unfriendly to Rhode Island for the remainder of this year. There is no obvious basis upon which to anticipate improvement in many CCI indicators, especially as we wrestle with deficits.”
The Current Conditions Index, created by University of Rhode Island economist Leonard Lardaro, measures the strength of the state’s economic climate. Additional information, including historic data, is available at members.cox.net/lardaro/current.
