Rhode Island
GoLocalProv | Business | URI Economist Issues Warning About RI Economy—Is He Right?
Tuesday, June 20, 2023
URI Economist Len Ladaro has tough words for state leaders (L-R) Senate President Ruggerio, Speaker Shekarchi, and Governor McKee
On one side of projecting the state’s economic outlook are government officials like Governor Dan McKee and legislative heads Speaker Joe Shekarchi and Senate President Dominick Ruggerio — they are trumpeting the state of the Rhode Island economy.
On the other side is economist Leonard Lardaro.
And Lardaro is taking aim at Rhode Island politicians.
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The University of Rhode Island economist is hitting their claims with data — and says the Rhode Island economy is far weaker than the political narrative.
Lardaro on Record
“In other states, a declining labor force during a recovery is a cause for concern. Not in RI. Our elected officials actually benefit from this – they hide behind the artificially low unemployment rate it creates as people presume it is job gains that are causing the low rate,” said Lardaro.
“Rhode Island’s enabler: a secular downtrend in its labor force participation rate (percentage of the population in the labor force). This explains how we went from double-digit unemployment rates to values below the national average,” Lardaro said.
“To some extent, this is influenced by the rising average age of our population. How much so? Is that the whole story? I tested this econometrically and found the downtrend still exists even after controlling for changes in the average age of the RI population,” according to Lardaro.
URI Professor Leonard Lardaro PHOTO: URI Lardaro’s Report
Lardaro states the following:
“The April Current Conditions Index value of 33 is very clearly in the contraction range. This follows contractionary readings of 42 in both January and March (with a neutral value of 50 in December). I truly wish it was possible for me to say that this month’s reading was a “strong” 33, but I cannot. Only four of the
twelve CCI indicators improved in April and a couple of them barely managed to eek out gains, improving at rates far below what we had witnessed over the last year. Clearly, the two “star” indicators throughout the pandemic and post-pandemic period, most notably Retail Sales and Total Manufacturing Hours, have faltered. While Retail Sales barely managed to improve in April (+0.5%), in real (inflation-adjusted) terms, it has been
falling for a while. Given its fluctuations of late, it is not clear at this point whether it remains in an uptrend. Total Manufacturing Hours, a proxy for manufacturing output, has now declined for the last five months with both the length of the workweek and employment falling.
Looking at a broad range of economic indicators for Rhode Island over the last year, one sees very few areas of strength in the aggregate data. However, aggregate data can and often does mask very different behaviors upon disaggregation. Parts of Rhode Island’s economy, those related to the higher end of the income spectrum, continue to do quite well. The same is becoming increasingly less true for average to below-average-income Rhode Islanders.
If we do have recession here, and I now place the odds of that as being fairly high, it will be one where aggregate activity masks remaining areas of strength. Perhaps it might be called a “recession in a box,” or “I can’t believe it’s not a recovery.” Sadly, our current economic performance is entirely consistent with our state’s history of being FILO [first in, last out].”
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