Lardaro: conditions fall to contraction value but no recession

SOUTH KINGSTOWN – Rhode Island had a “very weak economic performance” in August, but the state has not entered a recession, according to University of Rhode Island economist Leonard Lardaro.
Lardaro released his Current Conditions Index Monday, indicating an August value of 42, down from the revised July value of 58 (it was revised down based on new claims data).
The index tracks the state’s economic performance through a dozen national and local economic indicators. A reading below 50 indicates economic contraction, while above it signifies expansion.
“Rhode Island’s economy has definitely slowed over the past several months,” Lardaro said. “However, this does not indicate that Rhode Island has entered a recession. … But the bizarre labor market data for August certainly makes this pronouncement considerably more difficult.”
The CCI would have to register contraction value for six or more consecutive months before it would be a recession, Lardaro said.
The five factors that improved in August were: private service-production employment, total manufacturing hours, manufacturing wage, benefits exhaustions, and the unemployment rate.
Lardaro was skeptical, however, about the accuracy of the 14.9 percent manufacturing wage surge in August, following a 12.7 percent rise last month. He also suggested taking the state jobless rate change with a “grain of salt” – down to 10.6 percent in August despite a monthly decline of more than 6,000 in payroll employment and as both resident employment and the state labor force continued to fall.
The factors contributing negatively to the index were: government employment; U.S. consumer sentiment; single-unit permits; retail sales; employment services jobs; labor force; and new claims.
“While Rhode Island’s existing recovery is apparently continuing, the rate of improvement in overall level of economic activity continues to moderate. August marked the 18th month of recovery,” Lardaro said.