Lardaro: No recession yet but it’s likely coming

UNIVERSITY OF RHODE ISLAND economist and professor Leonard Lardaro said Monday that Rhode Island is not in the early stages of a recession, though there’s a strong possibility the state’s economy is moving toward one. / PBN FILE PHOTO/MICHAEL SALERNO

PROVIDENCE – University of Rhode Island economist and professor Leonard Lardaro said Monday that Rhode Island is not in the early stages of a recession, although there’s still a strong possibility that’s coming.

The Current Conditions Index that Lardaro publishes each month had an expansion value of 58 in February, an increase from the contracted value of 33 in January. A CCI value above 50 indicates expansion, while a value below 50 indicates contraction. 

“Rhode Island’s economy did better this month [February] than it had for the prior two months, as the Current Conditions Index moved back into the expansion range,” Lardaro said. “While this is only one month’s result, it is still important, nonetheless. Specifically, one key indicator, retail sales, resumed its longer-term uptrend, calling into question whether its decline in January was a fluke. Often, as retail sales goes, so too does the Rhode Island economy.” 

However, Lardaro warned that because four of the five leading economic indicators in the monthly CCI, new claims, single-unit permits, total manufacturing hours and employment service jobs continue to be weak, he can’t rule out Rhode Island is moving toward a recession. 

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“The picture painted by these recent performances of the four leading indicators is that employment prospects in the coming months may well diminish at the same time that layoffs continue and Rhode Island’s manufacturing sector weakens further, and all this with a depressingly long downtrend in new home construction,” Lardaro said. 

Lardaro said there were some bright spots in February. Retail sales rose a healthy 4.8% in February and the manufacturing wage went up 2.9% year over year. Private service-producing employment continues to rise, benefit exhaustions fell 20.1% and government employment increased 1.1% year over year. Lardaro also noted that the state’s labor force rate declined for the 13th consecutive month and is down 0.7% year over year, while Rhode Island’s unemployment rate remained at 3.1% for the second straight month. 

“What would cause Rhode Island’s economy to strengthen and move beyond its recent weakness? An acceleration in the pace of national economic activity. In light of monetary tightening and fading effects of federal fiscal stimulus, this is an extremely unlikely prospect,” Lardaro said. “The time has come for Rhode Island to begin planning for, and not reacting to, future economic conditions.” 

Year-over-year CCI indicator performance in February:   

  • Government employment increased 1.1%   
  • U.S. consumer sentiment increased 25.5%   
  • Single-unit permits declined 23.2%   
  • Retail sales increased 4.8%   
  • Employment-services jobs declined 14.7%   
  • Private-services production employment rose 0.8%   
  • Total manufacturing hours declined 3.5%   
  • The state’s manufacturing wage rose 2.9%   
  • Unemployment benefit exhaustions declined by 20.1%   
  • New unemployment insurance claims increased 6.6%   
  • The state labor force declined 0.7%  
  • Unemployment rate declined 0.1%. 


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