Lardaro: Despite some strengths, R.I. economy still deteriorating overall

RHODE ISLAND'S economy is benefiting from a strengthening national economic momentum, University of Rhode Island economist and professor Leonard Lardaro said Wednesday. / PBN FILE PHOTO/MICHAEL SALERNO

PROVIDENCE – After a string of five months of contraction, Rhode Island’s economy held steady in August thanks to a strengthening national economy, University of Rhode Island economist and professor Leonard Lardaro said in his monthly Current Conditions Index report Wednesday.

But Lardaro warned that Rhode Island still appears to be in a “statistical recession.”

“Strength in several key areas persist even though on average things appear to be deteriorating,” he said.

The index that Lardaro publishes each month had a neutral value of 50 in August, the first time since February that the state’s economy had not shown signs of contraction. A CCI value below 50 indicates economic contraction, while a value above 50 indicates an expansion.

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In July, the CCI – a compilation of 12 economic indicators such as retail sales, housing construction permits, manufacturing wages and unemployment rate – had been 33.

“I stated that if national economic momentum strengthened, Rhode Island’s economy would almost certainly gain momentum along with the national economy,” Lardaro said. “It looks like that is what is happening now.”

Lardaro said August brought some welcome news for the state’s economy, but he wasn’t convinced that this was signaling a turnaround.

“The analogy I will make pertains to wrestling: A shoulder can often be on the mat for a two count but then the shoulder springs up before the final three count occurs,” Lardaro said “The Current Conditions Index was at a neutral value of 50 in December, then fell to contraction values for all but February this year. That was the two count. For August, the CCI rose back to the neutral value of 50, as six of 12 indicators improved, a movement above ‘the mat,’ at least for now.”

Among positive changes that occurred in August, Lardaro said, was that the state’s labor force increased for the fifth consecutive month, while the participation-adjusted unemployment rate fell to 4.7%.

However, signs of weakness persisted: Payroll employment jobs fell 6,900 compared with August of 2022, which appeared to contradict the rise of resident unemployment, Lardaro said.

Total manufacturing hours, a key CCI indicator, fell for the ninth consecutive month as did employment service jobs, which suffered its 11th consecutive drop. New unemployment claims ticked down for the month of August, but single-unit housing construction permits fell at double-digit rates.

Lardaro said the continued drop of employment service jobs and the “uptrend” in unemployment insurance claims and benefit exhaustions in recent months are a concern for the state’s labor market.

“This is a troubling combination: Weakened hiring, rising layoffs and persons remaining unemployed for longer, exhausting their unemployment benefits,” Lardaro said. “If Rhode Island’s economy is helped by the U.S. economy, [all] of these must improve.”

Year-over-year CCI indicators in August:

  • Employment services jobs decreased by 11.3%.
  • Government employment decreased by 2%.
  • Labor force decreased by 0.05%.
  • Manufacturing hours declined by 7.9%.
  • Private services production employment decreased by 0.4%.
  • Retail sales increased by 1.1%.
  • Single-unit permits decreased by 26.9%.
  • Unemployment benefit exhaustions increased by 21.5%.
  • Consumer sentiment increased by 19.1%.

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