PROVIDENCE – University of Rhode Island economist Leonard Lardaro said he hopes that the state has moved past the “absolute bottom” of economy activity that it will experience throughout the coronavirus pandemic.
As Rhode Island’s COVID-19 numbers become increasingly more stable as a result of high testing percentages and low incidence, Lardaro still says that the damage has been “devastating,” and could take three to five years to bring the state back to where it was pre-pandemic.
“The ultimate duration will only be a reasonably estimable when a vaccine has been developed and ‘herd immunity’ is reasonably close at hand,” wrote Lardaro in his Current Conditions Index report for May, which was released on early Monday morning.
As previously stated, Lardaro wrote that the pandemic is resulting in an exogenous shock to the economy, one that no one could have predicted. The state had a CCI value of 8, marking a 42-point decrease from last May, but remains the same value as April’s. As previously stated in April’s CCI report, Lardaro said the last time the CCI was this low was April of 2009.
“The magnitudes of its effects are enormous,” wrote Lardaro of the pandemic. “This, of course, makes it extremely challenging to write a report like this since it is so difficult to characterize where our state’s economy currently stands.”
Lardaro admitted that while the index’s indicators are abysmal compared to a year ago, the monthly changes are slowly improving. He noted that May was another rough month for Rhode Island; only one of the index’s indicators improved, which was manufacturing wages, which increased 5.2% year over year. This improvement follows a 1.5% increase in April.
Retail sales, which was once the CCI’s best indicator, fell by an additional 22.3% in May, compared to last year, which also follows a 17% decrease in April.
To examine the full scope of the slow improvements during the pandemic, Lardaro examined the CCI indicators by monthly changes for the first time ever.
“Things are much brighter,” wrote Lardaro of the monthly changes. “Calculating the CCI based on monthly data gives a neutral value of 50, with six indicators proving relative to April.”
The monthly improvements include U.S. consumer sentiment increasing by 0.5% in May from April, employment services jobs increasing by 18.9%, private service-production employment increased by 18.9%, manufacturing wages increased by 3.8%, new claims decreased by 61.2% and the unemployment rate decreased by 1.8 percentage points.
“Rhode Island’s future monthly momentum will be determined by its ability to control the spread of COVID, the impact of expiring government programs and, of course, national economic growth,” wrote Lardaro.
Eleven of the index’s indicators did not improve year after year, including new claims, which increased by 634.9% from last May, following a 1,623.4% increase in April.
Year-over-year changes in Rhode Island’s CCI indicators:
- Government employment declined 1.7%
- U.S. consumer sentiment declined 27.5%
- Single-unit permits declined 26.7%
- Retail sales declined 22.3%
- Employment services jobs declined 36.7%
- Private service-production employment declined 19.7%
- Total manufacturing hours declined 16.7%
- The manufacturing wage increased 5.2%
- The labor force declined 5.8%
- Benefit exhaustions increased 102.4%
- New claims increased 634.9%
- The unemployment rate increased 12.7 percentage points
Alexa Gagosz is a PBN staff writer. Contact her by emailing Gagosz@PBN.com.
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