KINGSTON – “The third quarter was a very difficult one for Rhode Island,” University of Rhode Island Prof. Leonard Lardaro wrote in his monthly report.
“As the national economy’s rate of growth accelerated – real GDP growth was almost 4 percent (READ MORE) – the Rhode Island economy slowed noticeably.”
Though his Current Conditions Index rose to 42 points from August’s six-year low of 33, “that still means Rhode Island is in a contracting model,” Lardaro noted. (Fifty points is the neutral level, indicating the state’s economy is neither expanding or contracting.)
Of the index’s 12 component indicators, only five improved in September, “and four of those were relatively unimpressive changes,” Lardaro said.
“I always attempt to determine if there might be extenuating circumstances behind seemingly weak performances,” he said. “Sadly, almost nothing positive can be said about Rhode Island’s September performance.” Weakness “was spread across all of the sectors the Current Conditions Index Tracks.”
For instance, one of the few measures to rise – single-home permits, an indicator of new home construction, which rose 20.2 percent from its 2006 level – “only turned in an impressive-looking improvement because its ‘comp’ last September was so weak,” falling 43 percent below its 2005 level, Lardaro noted.
Also improving compared with September 2006 were private service-producing employment, which has slowed markedly in recent months; the size of the state’s labor force, which edged up 0.3 percent, ending a two-month decline; the state’s unemployment rate, which fell from 5.1 percent to 4.9 percent, despite the larger pool of workers, though it continued to lag the national rate; and the local manufacturing wage, which surged 3.7 percent.
But the manufacturing sector continued its mixed performance of recent months, with a 2.0-percent decline in hours worked partially offsetting the increase in hourly pay.
Employment services jobs – a leading indicator for the labor market that includes temporary workers – fell by 10.7 percent in the category’s second monthly decline. Government employment also fell, “to nobody’s surprise,” Lardaro said.
New claims for unemployment edged up 0.7 percent, in their 10th increase of the past 11 months; benefit exhaustions – an indicator of long-term unemployment – surged 17.2 percent.
“Even retail sales – long a source of strength – slid by 3.1 percent, accompanied by a decline in U.S. Consumer Sentiment,” the URI economist said.
The bottom line, Lardaro said, is that “Rhode Island’s economy has begun to slow noticeably.
“Perhaps more troubling,” he added, “is the fact that its growth rate has decoupled from that of the U.S. economy. Leading indicators present in the CCI point to continued weakness.
“I place the odds of a U.S. recession in the next 6 to 9 months at 45 percent. For Rhode Island, I believe that probability is an uncomfortable 65 percent.”
The Current Conditions Index, created by University of Rhode Island economist Leonard Lardaro, measures the strength of the state’s economic climate. Additional information, including historic data, is available at members.cox.net/lardaro/current.
