How Long and Deep Will Rhode Island Be in a Recession - Experts Weigh In

How Long and Deep Will Rhode Island Be in a Recession - Experts Weigh In

Rhode Island’s unemployment is spiraling — now more than 165,000 are out of work. The critical question is when and how does Rhode Island restart its economy.

“Rhode Island is in a recession. My worry is that we entered from a fairly weak position, in spite of what the artificially low jobless rate seemed to imply. Worse yet, before the coronavirus, Rhode Island resident employment remained below its 2006 level and many of our residents never fully recovered from the financial crisis in 2008,” said University of Rhode Island Economics Professor Len Lardaro.

On Tuesday alone, more than 15,000 filed for benefits in Rhode Island — more than in any month in the state's history.

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The lockdowns are hitting states across the country, forcing unemployment up, and economic downturns across the country, but experts warn the Rhode Island recession could be deeper and longer.

“Obviously, Rhode Island will not be exempt from the national economic downturn. The question is whether the recession will last longer and be deeper in Rhode Island. While 2019 was a good economic year for the State, Rhode Island’s economic fundamentals make it is hard to be optimistic that it will not be deeper and longer,” said Gary Sasse, former Director of Administration in Rhode Island.

“We need to change the way things are done here, advancing the basis of economic policy to the 21st century. That will require meaningful in-house due diligence capability and far greater transparency about our state’s economic performance,” said Lardaro.

“A crisis is a terrible thing to waste. Rhode Island wasted the 2008 crisis, but won’t be able to repeat that failure this time,” adds Lardaro.

 

Reopening an Economy

The American Enterprise Institute says there are four critical factors to lifting the stay at home restrictions:

• Hospitals can safely treat patients without resorting to crisis standards of care
• States are able to test everyone with symptoms
• States are able to monitor and trace cases
• There is a 14-day reduction in cases

“The latest job numbers nationally and locally are devasting and portend another 2008 style great recession. As JPMorgan Chase CEO Jamie Dimon recently projected we are headed for ‘a bad recession,’” said Sasse.

The Federal Reserve Boston Bank writes in a report released on Monday that this lockdown has exposed how dependent our economy is on service workers.

An economic epicenter of coronavirus in New England: low-wage service workers.

“Service workers are really important to the economy, but this crisis highlights more than ever whose backs we survive on,” said Marybeth Mattingly, a brief co-author and assistant vice president for Community Development Research and Communications. “It may make us reevaluate what it means to pay many of our essential workers less than a living wage.”

“Since 2014, Rhode Island’s labor participation rate, labor force, and population growth have trailed the nation's. Of greater concern over the last ten years, 44 percent of the jobs created in Rhode Island were in low-wage industries. This suggests that some of the needed structural reform may not have been made to better cushion the Ocean State from another profound recession,” said Sasse.

Rhode Island's independent fiscal group -- the Rhode Island Public Expenditure Council (RIPEC) -- is now led by former Director of Administration Michael DiBiase.

“At RIPEC, we are gathering relevant information, with most of our focus on the state budget. Our analysis is still in process. While the COVID-19 crisis certainly has had a major impact on Rhode Island’s economy, the economic data is very incomplete at this time.  The impact will depend a lot on how long restrictions on business activity continue,” DiBiase.

“To position the State and minimize the impact of a recession, the Governor should consider appointing a working group to suggest a strategy to reopen the state’s economy and fight the recession. Furthermore, education and training are the keys to growing the economy and fostering opportunity. Therefore every effort should be made not to cut education funding as the challenges of balancing the budget are addressed,” adds Sasse.