Sunday 12 June 2022
URI Economist Len Lardaro PHOTO: URI
While Rhode Island’s economy continued its expansion (recovery) in April, it is clear that some areas of our state’s economy have begun to slow. Part of it is statistical – the “comps” from a year ago have now gotten harder.
However, Rhode Island’s connections to the national economy are also critical to its overall economic performance and we are beginning to see to some extent that national weakness is already affecting us, which is highly likely that FILO’s FI may prevail. While I noted last month that nine out of twelve improving indicators showed healthy growth rates, the story is a little different in April: Several of the indicators that weren’t improving had very large declines, most notably US consumer sentiment and US approvals individual units their weakness is becoming more and more stubborn. Permits, which reflect new housing construction, have now declined for four straight months. If this continues, it could have a negative impact on what was the ‘star’ of the CCI performers, retail sales. A little more worrying, but actually typical of Rhode Island, is that the year-to-year changes in our state’s workforce have been flat for all but a few months. But of course that has always been Rhode Island’s “secret recipe” for low unemployment rates.
For those naïve enough to think that our state’s unemployment rate is an accurate reflection of how our economy is performing, that rate fell to 3.2 percent in April. For those less naïve when labor force participation is factored in, the more accurate unemployment rate, the participation-adjusted rate was 5.5 percent for April, down from 5.8 percent in March.
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As in the US, layoffs here have fallen dramatically, not only from the pandemic highs, but also from the more typical levels of recent months, as companies struggling to hire or find replacements have laid off fewer employees than justified by economic conditions. New claims fell 88.5 percent from last April (“worker hoarding”).
For April, only two of the five leading indicators included in the CCI improved, and both outperformed difficult benchmarks. Total manufacturing hours, an indicator of manufacturing output, rose a healthy 5 percent as both weekly hours and employment picked up again. New applications, as noted above, also improved dramatically. The Monthly CCI showed a glimmer of hope for the future, hitting a long-time high of 92 as 11 of the 12 indicators improved compared to March. If this monthly strength continues, Rhode Island could see less of a negative impact on its economic activity in the coming months, although it’s far too early to tell. The question remains whether Rhode Island will regain its FILO status as the national economy slows. If so, Rhode Island’s economy could slow significantly in mid to late 2023.
Retail sales, the star of the CCI, rose 10.8 percent in April, returning to double-digit growth after two underperforming months. Weakness in housing construction and consumer confidence combined with a weakening economy could well shake this indicator as we move further into 2022.
Of the leading indicators included in the CCI, my main concern remains employment services, an early employment indicator that includes temporary workers, which recorded a fourth consecutive decline in April (-5.2%). Coupled with all the inflation woes we are witnessing, US consumer sentiment is very likely to continue to fall for most if not all of 2022.
To end on a good note, private service employment, which reflects non-government non-manufacturing employment, has managed to sustain strong growth even as we emerge from the artificially low employment levels of the pandemic.
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