PROVIDENCE – University of Rhode Island economist and professor Leonard Lardaro said Tuesday he is more convinced that Rhode Island is continuing to move toward a recession after a weak performance in March.
The Current Conditions Index that Lardaro publishes each month had a contraction value of 42 in March, a decrease from the expansion value of 58 in February. A CCI value above 50 indicates expansion, while a value below 50 indicates contraction. Only five of the CCI’s 12 indicators showed improvement in March, compared with a year ago.
“What is more concerning is the performance of the individual indicators, since not all 42’s are the same,” Lardaro said in the report. “There are some cases where the overall score is low but the improving indicators showed a good deal of strength and the indicators that failed to improve did so by narrow margins. Then there is this March, where the improving indicators did not display much strength and the non-improving indicators were generally very weak.”
Laradro said employment, an indicator not on the CCI, is showing signs of concern because while the number of Rhode Island jobs rise, the year-over-year gains are diminishing.
“Resident employment, the number of employed RI residents, has actually been declining for several months now compared to a year ago,” according to the report. “Its annual declines coincide almost exactly with the slowing of our state’s economic momentum. And, historically, resident employment has been the more accurate indicator at turning points, which appears to be where we are now.”
Lardaro said four of the five CCI leading indicators failed to improve in March: single-unit permits, employment service jobs, labor force and benefit exhaustions. Those indicators “continued their negative trends that began around last October. What is more worrisome is that none of these negative trends are likely to reverse any time soon,” Lardaro said. The only leading indicator to improve was U.S. consumer sentiment, marking its second consecutive month of expansion.
Layoffs have risen every month, Lardaro said, adding that this might reflect employers becoming less worried about their ability to hire new workers or replacements, possibly marking an end to a prolonged period of “labor hoarding.”
Single-unit permits have now declined 11 of the last 13 months, falling at double-digit rates since October. Employment service jobs, which include temps and leads future changes in employment, has now declined on a yearly basis for six consecutive months and on a monthly basis for seven months, Lardaro said.
“The picture painted by the recent performances of the these four leading indicators is that employment prospects in the coming months will likely persist as layoffs continue and Rhode Island’s manufacturing sector weakens further,” Lardaro said. “All of this will likely occur with a continuing downtrend in new home construction.”
Rhode Island’s labor force fell for the 14th consecutive month in March, Lardaro said.
“I am now more convinced than ever that Rhode Island’s economy is continuing to move toward a recession,” Lardaro said. “After all, this is entirely consistent with our state’s history of being FILO [first in, last out]. One more contracting CCI month may well make me change this assessment to one of the dreaded ‘R’ word.”
Year-over-year CCI indicators performance in March:
- Government employment increased by 3%
- U.S. consumer sentiment rose by 4.7%
- Single-unit permits decreased by 11.9%
- Retail sales declined by 1.9%
- Employment services jobs decreased by 11.7%
- Private services production employment increased by 0.3%
- Total manufacturing hours declined by 3.6%
- The state’s manufacturing wage rose by 2.7%
- The state’s labor force decreased by 0.8%
- Unemployment benefit exhaustions declined by 1.6%
- New unemployment insurance claims increased by 3.3%
- Unemployment rate rose by 0.1%
