Home Economy Economic Activity Lardaro: Short-term changes negatively impacting R.I.’s economy

Lardaro: Short-term changes negatively impacting R.I.’s economy

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PBN Staff

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02/17/2025

Leonard Lardaro — WHILE RHODE ISLAND’S economic momentum plateaued in December year over year, short-term changes are starting to have a negative effect, University of Rhode Island economist and professor Leonard Lardaro said Monday in his monthly Current Conditions Index report. / PBN FILE PHOTO/MICHAEL SALERNO

PROVIDENCE – Rhode Island’s economic momentum plateaued in December year over year; however, short-term changes are starting to have a negative effect, University of Rhode Island economist and professor Leonard Lardaro said Monday in his monthly Current Conditions Index report. The index, which Lardaro publishes each month, had an expansion value of 67 in December,

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PROVIDENCE – Rhode Island’s economic momentum plateaued in December year over year; however, short-term changes are starting to have a negative effect, University of Rhode Island economist and professor Leonard Lardaro said Monday in his monthly Current Conditions Index report. The index, which Lardaro publishes each month, had an expansion value of 67 in December, same as both October and November and well below its value of 83 in June. A CCI value above 50 indicates an economic expansion, while a value below 50 indicates economic contraction. “The Current Conditions Index, which contrasts year-over-year changes in 12 key indicators, continues to perform fairly well. If we compare 2024 values with their corresponding 2023 values, those this year have exceeded year-earlier values for 11 of the 12 months in 2024,” Lardaro said. “We have therefore moved beyond 2023 levels and improved, although we seem to have plateaued at 67.” However, on a monthly basis, Lardaro warns, “a very different story is emerging,” with some CCI indicators remaining in contraction for the entire half of 2024. “We are at a point where short-term changes [monthly] are more negative than longer-term changes [yearly],” Lardaro said. “Should this continue, it has negative consequences for our economic momentum, which is especially concerning now that the 'sugar high' of federal funds is gone and we are facing relatively large budget deficits.” The monthly weakness is most apparent in the state’s labor force, Lardaro said. While that sector has risen on a yearly basis, it has declined monthly since July. Resident unemployment is a similar story, also declining monthly since July. “Add to this the number of unemployed, whose monthly changes have remained flat or declining since August, and a disturbing picture emerges. But things are actually worse,” Lardaro said. “Looking at yearly changes in resident employment and the number of unemployed, employment changes have consistently lagged changes in the number of unemployed. That signals that we should now begin to consider our unemployment rate as being problematic, with its increases no longer to be viewed as easily explained away based on a rising labor force.” New unemployment claims, which reflect layoffs and what Lardaro calls a “leading market indicator” have risen monthly since August, while benefit exhaustions, which reflect long-term unemployment, have climbed every month since 2024. “The linkage between annual and monthly perspectives is critical when ascertaining where future values will likely be,” Lardaro said. “Continued monthly deterioration eventually translates into annual declines. So the most important question for now becomes whether this monthly weakness will continue.” Overall, eight of the 12 lead indicators of the CCI improved year over year in December, including four of its five leading indicators. Year-over-year CCI indicators in December:

Employment service jobs increased by 2.6%.

Government employment increased by 2.1%.

Labor force increased by 2.1%.

Total manufacturing hours increased by 1.7%.

Manufacturing wage decreased by 1.7%.

New unemployment claims increased by 15.6%.

Private service-producing employment increased by 1.1%.

Retail sales increased by 3.6%.

Single-unit permits increased by 71.1%.

Unemployment benefit exhaustions increased by 42.2%.

Unemployment rate increased by 1.2%.