PROVIDENCE – The Rhode Island economy continued to expand in August, but slowed as the COVID-19 pandemic continued to impact the state’s economy.
The state’s current conditions index value for the month was 67, a decline from its highest possible value of 100 in July, according to University of Rhode Island economist Leonard Lardaro Monday. Lardaro said in his report that the state’s economy was bound to lose its momentum after rapidly ramping up from the spring into the summer.
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Lardaro said the the state should also expect a “choppy” economic performance as it moves forward.
“For August, the Current Conditions Index fell from its highest possible value of 100 in July to 67 in August, as eight of 12 CCI indicators improved,” said Lardaro. “In spite of this, the CCI has remained in expansion territory since April, so activity is still improving but at a slower pace – this is not a decline in activity. I fully expect this expansion to continue for the foreseeable future. But it will be a bumpy ride, as this month’s change indicates.”
The overall CCI value for Rhode Island was 25 one year prior. A value above 50 indicates expansion, while a value below 50 indicates contraction.
The pandemic’s impact was offset by the re-opening parts of the state’s economy and the highly stimulative effects of monetary and fiscal policy, said Lardaro. He also noted that the state’s recent economic expansion does not mean it has returned to a pre-pandemic level of economic activity.
“I estimate that Rhode Island is still at least two years away from returning to pre-pandemic levels of economic activity since throughout this entire crisis, Rhode Island has done painfully little to improve its longer-term competitiveness, which has relegated our fate largely to the pace of national economic momentum,” Lardaro said in the report.
“Worse yet, I expect that in spite of the sugar high from all the federal money Rhode Island received, and the intentions of [the R.I. 2030 plan], we will not make enough of the structural improvements our state needs absent in-house due diligence,” Lardaro added.
The state’s year-over-year expansion was driven by strong performances in the retail sector, total manufacturing hours, and the manufacturing wage, the report said.
“Looking at individual indicator performances for August, retail sales remained the star CCI performer, rising by 16.8% from a year ago, which was its seventh consecutive double-digit increase,” said Lardaro. “Of the five leading indicators present in the CCI, only two improved in August and both had relatively easy comps. The most impressive is total manufacturing hours, which increased again at a double-digit rate (+14.1%), its fifth consecutive double-digit improvement.”
Lardaro also noted there have been very large revisions to new jobless claims, as claims determined to be fraudulent have been removed from the totals. Based on this cleaner data, new claims, which reflect layoffs, fell by 72.1% from their value one year prior. Lardaro said the decline is not all that impressive given that there was a 566% year-over-year rise in claims in August 2020.
Employment service jobs barely declined (-0.2%) after improving each month since April, he said. The same pattern was true for single-unit permits, which fell by 9.1% this month following a series of increases. U.S. consumer sentiment also declined in August, which could signal less future momentum, especially as it pertains to the state’s housing and retail sales.
“Rhode Island’s unemployment rate fell in August to about half its level last August at the same time its labor force declined significantly from a year ago — Rhode Island’s secret sauce for reducing its unemployment rate,” he said. “Finally, the manufacturing wage rose by 10.1% this month, continuing more than a year of consecutive improvements.”
For August, the monthly CCI fell below its neutral value of 50 to 25, as only three of 12 indicators improved relative to July. This was a continuation of a weakening pattern in this index since May of this year.
Year-over-year CCI indicator performance in August:
- Government employment decreased 0.6%
- U.S. consumer sentiment decreased 4.6%
- Single-unit permits decreased 9.1%
- Retail sales increased 16.8%
- Employment services jobs decreased 0.2%
- Private service production employment increased 6.3%
- Total manufacturing hours increased 14.1%
- Manufacturing wage increased 10.1%
- Labor force increased 0.9%
- Benefit exhaustions declined 76.1%
- New claims declined 72.1%
- The unemployment rate declined 6.8 percentage points
Cassius Shuman is a PBN staff writer. You may reach him at Shuman@PBN.com.
