Lardaro: Momentum continues to build in R.I. economy, despite labor-market woes
LEONARD LARDARO, the University of Rhode Island economist who calculates Rhode Island's monthly Current Conditions Index, said he is optimistic about the state's long-term economic health despite a high unemployment rate and shrinking labor force. September's CCI was 75, up from 67 in August and identical to last year's September figure.
SOUTH KINGSTOWN – Economic activity for the month of September reflected sustained, if not entirely consistent, positive momentum in the state’s economy, according to the statistician who produces the Current Conditions Index.
The September index, calculated by University of Rhode Island economist Leonard Lardaro and released on Monday, came in at 75, up from 67 for August and identical to last year’s September figure.
The monthly measurement uses a dozen data points to measure momentum in the state economy. One of the key indicators, retail sales, showed impressive strength, growing by 8 percent, Lardaro said.
While September represented the third time in four months that the monthly index failed to exceed last year’s, nine of the 12 economic indicators within the month improved. In addition, the government employment rate remained neutral, neither improving nor declining. And while a leading economic indicator, U.S. consumer sentiment, fell, the drop was slight, at 0.3 percent, Lardaro added.
The data comes on the heels of the latest report from the R.I. Department of Labor and Training, which put the state unemployment rate at 9.2 percent, the second-worst rate in the country. Despite that, Lardaro is optimistic about the long-term picture of economic improvement in the state.
“I don’t see anything for despair in this,” he said. “Retail sales are really strong. Last month, it was over 6 percent, now it’s over 8 percent. We’re doing well. We’re hanging in there. Our unemployment is second in the nation, but it’s been higher for awhile. You have to earn momentum; it doesn’t just happen from a cyclical bounce.”
Lardaro’s index measures the state’s economic performance, or momentum, over a dozen metrics, or indicators. Lardaro seasonally adjusts each indicator, and then compares its monthly value with that of the same month a year ago to determine whether it has improved or not.
A CCI index greater than 50 indicates progress while a value less than 50 signals setbacks.
“Our state’s momentum may be losing a step or two,” Lardaro’s report stated, “but a substantial amount of momentum remains. … This means we will just have to wait longer to ultimately return to where our state’s economy was prior to the Great Recession.”
The labor force indicator dropped 1.9 percent in September, but indicators that improved included total manufacturing hours, up 1.6 percent, and new claims for unemployment, which fell 7.9 percent, the report found.
The last few months of 2012 were so healthy economically that they are hard to beat, Lardaro said.
“That’s when Rhode Island really started to accelerate,” he said.
The analyst’s prediction for the rest of the year is that Rhode Island will keep growing, albeit at a slower pace than last year.
“Layoffs are the real question,” he said. “They’ve improved in September, but they’ve been kind of up and down. If we can grow fast enough so layoffs don’t increase, that’s going to be a big positive. We’ll continue at this lower rate of growth, with some positive growth and momentum, but it will be a number of years before we return back to our [pre-recession] peak.”
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