PROVIDENCE – Rhode Island’s economy did not experience a "statistical recession" last year as originally believed, University of Rhode Island economist and professor Leonard Lardaro concluded Tuesday in his monthly Current Conditions Index report.
The index that Lardaro publishes each month had an expansion value of 58 in January, the same as in November and December. A CCI value below 50 indicates economic contraction, while a value above 50 indicates an economic expansion.
Lardaro said Rhode Island did not experience an actual or statistical recession in 2023 due to the revised labor market data that put a more favorable perspective on the state’s cyclical economic performance over the last year.
"The 'official' data led to the inescapable conclusion that Rhode Island had entered a recession," Lardaro said. "However, I didn’t agree with that and attributed this to misleading signals from aggregate data. As a result, I labeled our state’s economy as having entered a 'statistical recession:' on average, our state had begun a period of contraction over most of 2023 that late-year data pointed to our moving beyond."
Even though the state did much better than initially indicated, the cyclical momentum in 2023 still wasn’t great, Lardaro said, adding that the Current Conditions Index values were mostly 58 [seven times], barely in expansion territory, with four neutral values of 50 and a contraction value of 42 in May.
"While these results are not all that great, at least they are demonstrably better than what we had been led to believe earlier,” Lardaro said. "Of course, given the history of the re-benchmarking of Rhode Island labor market data, that could change next year, although I seriously doubt it. My concerns now are for 2024."
Lardaro said January was typical, with seven of the CCI's 12 economic indicators improving year over year.
Retail sales continued to be strong, up 5.8% year over year in January. Private service-producing employment, which had increased every month in 2023, also continued its rise in January.
Government employment also was up 1.6% year over year and U.S. consumer sentiment sustained its strength, rising 21.6% in January. Manufacturing wages, which were well above the rate of inflation, rose by 11.3% year over year in January as well.
The state’s labor force rose 1.4% in January, its sixth consecutive annual increase.
"Our state’s labor force has now begun to rise as unemployed persons are starting to return," Lardaro said. "This will have the positive effect of helping ease labor shortages but the negative statistical effect of causing our unemployment rate to rise. A rising unemployment rate is not necessarily bad if it occurs for the reasons we are now experiencing.”
Lardaro, however, said some weaknesses still remain. Single-unit permits only rose once last year while benefit exhaustions have gone up every month after surging in April. New claims have only improved twice in 2023.
Employment service jobs were the biggest disappointment from the revised labor market data, Lardaro said, with all of that sector’s annual changes more negative than the earlier numbers.
“I had hoped and somewhat expected that many of those would be changed to positive values. No such luck,” Lardaro said. "This indicator has declined 16 consecutive months. So, while there are mounting concerns about our state’s labor market, we are better off overall than we had thought – stuck in first gear is better than going in reverse.”
Year-over-year CCI indicators in January:
- Employment-services jobs decreased by 7.8%.
- Government employment increased by 1.6%.
- Labor force increased by 1.4%.
- Manufacturing hours increased by 3.7%.
- Manufacturing wages increase by 11.3%.
- New unemployment claims increased by 6.8%.
- Private-service producing employment increased by 2.6%.
- Retail sales increased by 5.81%.
- Single-unit permits decreased by 6.8%.
- Unemployment benefit exhaustions increased by 25.5%.
- Unemployment rate increased 0.7%.
- U.S. consumer sentiment increased by 21.6%.
