PROVIDENCE – University of Rhode Island economist Leonard Lardaro thinks unemployment in Rhode Island could rise to over 20% due to the COVID-19 pandemic, according to his latest Current Condition Index report on the state’s economy.
The economist said he almost didn’t write the CCI for February, as the figures were prior to the shutdowns and effects of COVID-19, and the “world has changed so drastically” since the data was released.
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However, upon seeing a recent projection of the effects of the disease on the economy, Lardaro felt motivated to write his report as he felt it was “too optimistic.” The details referenced in Lardaro’s response align with projections made to the state’s Revenue and Caseload Estimating Conference on Wednesday.
He noted that fewer Rhode Islanders were working than in 2006, even prior to the shutdowns and that repeated his assertion that the state’s unemployment rate was artificially low due to a decline in labor force.
He said that due to the impact of COVID-19, the labor force is growing so that individuals who had not been counted could collect government assistance in the downturn. This will result in a “distortedly high” unemployment, he said, noting that those joining the labor force unemployed will likely remain in the labor force for some time.
Lardaro also foresees a slow recovery. He noted that the state’s tourism, hospitality and travel industries have been hit hardest by the disease and the nature of the outbreak would dictate a slow recovery, thereby hitting the sectors that Lardaro said are among the most important to the economy in the state.
He predicted that the new normal of a crowded beach would look like the beach on a day of bad weather on any other year, and that some restaurants and small businesses will not survive, depressing the possibilities to where the state’s economy could recover.
He also said that the declining tax revenue for the state and a large rise in spending will cause deficits that will further slow the state’s recovery. He added that the state’s reliance on gambling income will also hamper its recovery.
“I don’t see Rhode Island’s economy recovering for at least one to two years,” said Lardaro. He also said he anticipated that the state will be “last out” of the downturn, similar to the state’s economic performance in the Great Recession.
“I can’t tell you how much I hope I am wrong about this, but only time will tell,” he said.
The following is a summary of the CCI for February:
The state had a CCI value of 75, marking a 25-point increase year over year, level with the state’s economic performance in January.
Nine of the indexes 12 indicators improved year over year:
- Government employment increased 1.7% year over year
- U.S. consumer sentiment increased 7.8% year over year
- Retail sales increased 9.9% year over year
- Employment services jobs declined 7.2% year over year
- Private service production employment increased 0.9% year over year
- Total manufacturing hours declined 5.4% year over year
- The manufacturing age declined 0.6% year over year
- The labor force increased 0.7% year over year
Chris Bergenheim is the PBN web editor. You may reach him at Bergenheim@PBN.com.
