KINGSTON – “May’s data put an abrupt end” to last month’s hopes of an economic turnaround in the Ocean State, University of Rhode Island economist Leonard Lardaro writes in his monthly report on the state economy.

His Current Conditions Index fell back to its all-time low of 8 points – “the value it has been stuck at for almost all of 2008” – after surging to 17 points in April. Values lower than 50 points indicate that the state’s economy is contracting. The index’s average value last year was about 40 points; this year, the CCI has averaged about 11.

“Clearly … 2008 is proving to be the worst year of any for which CCI values have been calculated,” Lardaro said. “Oh, for the good old manufacturing days – especially 1984, when the CCI was at 100, its maximum value, almost every month!”

Of the dozen indicators that comprise the CCI, all but one worsened in May. The exception was the average manufacturing wage, which rose 1.4 percent compared with a year ago.

But total manufacturing hours fell 8.3 percent year-over-year, “its most rapid rate [drop] since September of 2002, as both the work week and employment continued to fall,” Lardaro said.

Employment services jobs – a leading indicator for the labor market that includes temporary workers – “registered its fourth consecutive double-digit decline,” to 17.6 percent below the May 2007 level. Private service-producing employment dipped 1.9 percent compared with a year ago. Government employment fell 1.1 percent.

“Labor-market data for May were, to put it kindly, awful,” Lardaro said.

New claims for unemployment benefits rose 14.3 percent year-over-year. Benefit exhaustions, a measure of long-term unemployment, surged 31.9 percent. Meanwhile, Rhode Island’s resident labor force shrank 1.1 percent compared with May 2007 – a decline Lardaro credited largely to long-time jobless workers’ falling off the unemployment rolls – as resident employment fell even faster.

As a result, the state’s unemployment rate surged to 7.2 percent, the second-highest nationwide, and nearly double the year-ago rate. (READ MORE) The actual May increase may have been smaller, Ladaro wrote. “I believe that

published unemployment rate data for the months leading up to May had been understating the extent of joblessness here somewhat. … When the revised labor market data are released next February, expect to see higher unemployment rates prior to May and a downward revision to May’s rate.”

U.S. consumer sentiment, measured by the Reuters / University of Michigan Surveys of Consumers, plunged 32.3 percent in May compared with a year ago. Retail sales fell 10.6 percent. And single-unit building permits issued statewide fell 33.3 percent.

But the latter report, Lardaro said, “is not as negative a statistic as it might first seem,” because the decline in new construction “helps us reduce our bloated inventory of unsold homes.”

The bottom line, he wrote, is that “the year 2008 is proving to be the worst for Rhode Island’s economy since values for the CCI have been calculated.

“Expect economic conditions here to remain weak until the middle of next year,” as the state confronts not only “its largely self-imposed budget deficits, but higher energy and food prices, rising electricity costs and elevated heating bills, as well,” Lardaro said.

The Current Conditions Index, created by University of Rhode Island economist Leonard Lardaro, measures the strength of the state’s economic climate. Values above 50 points indicate the economy is expanding. Additional information, including historic data back through 1983, is available at members.cox.net/lardaro/current.