URI Economist: 50 Percent Chance Of Double-Dip Recession In RI

URI Economist: 50 Percent Chance Of Double-Dip Recession In RI

Rhode Island has a 50 percent chance to experience a double-dip recession over the next year, according to University of Rhode Island Economist Leonard Lardaro.

The gloomy forecast comes in the June edition of Lardaro’s Current Conditions Index, a monthly report card that ranks the state’s economic growth on a scale on 0 to 100 based on 12 key indicatiors. June’s score was 58 -a slight improvement over May - but Lardaro says the national economy continues to be a cause for concern in Rhode Island.

“While I continue to believe that the US economy will not experience a double-dip recession, the weakening pace of national economic activity has caused me to revise my prediction for Rhode Island. I had previously given a one-in-three chance of a double-dip recession for Rhode Island during fiscal year 2012,” Lardaro says in the report. “I now find it necessary to revise that prediction to a 50% probability that Rhode Island experiences a double-dip recession this fiscal year.”

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RI Still In Recovery

Lardaro’s monthly breakdown takes into account government employment, US consumer sentiment, single-unit housing permits, retail sales, employment services jobs, private service-producing employment, total manufacturing hours, manufacturing wage, labor force, benefit exhaustions, new claims, and the unemployment rate.

June represents the fourth consecutive month the state failed to improve its year-earlier value, according to Lardaro.

“At times like this, when our state’s economy is slowing, it is important to keep in mind that Rhode Island is still in a recovery, and that the current recovery is moving closer to the eighteen month mark,” he said. “So, Rhode Island does have positive momentum and some margin for error with which to counter whatever weakness lies ahead. The ultimate question, of course, is what happens nationally throughout the remainder of this year.”

The Trends

The report notes that labor force numbers have either declined or failed to improve over the past five months, which Lardaro says makes the slight decline in the unemployment rate questionable.

“The number of Employment Service Jobs, a leading labor market indicator that includes ‘temps,’ has fallen for the past four months,” he said.

But one surprising area of growth has been the state’s manufacturing sector, the report says. Total manufacturing hours have increased every month for the past year and the manufacturing wage has grown over five percent over the last two months.

While private service-producing employment increased by 1.9 percent, “the benefits of its change were somewhat offset by public sector employment weakness. Government Employment fell sharply once again, declining by 3.2 percent in June, as budget cuts continued,” Lardaro said.

Unemployment Drop Not Good News

One of the largest improvements over the last year has been the unemployment rate, which fell to 10.8 percent in June, down from 11.6 the year before. But Lardaro warns that those numbers can be deceiving, noting that negative factors can be contributing to a drop in unemployment.

“That fall, however, was not necessarily good news, as our Labor Force fell in part because of unemployed Rhode Islanders dropping out of our Labor Force,” he said.

58 Still Low

While June’s score improved over the previous month, the 58 is still one of the lowest ratings over the last two years. Three of the past four months have remained stagnant at 58. But prior to March, Rhode Island had not seen a score that low since February of 2010.

In his closing statement in the report, Lardaro predicted the possibility of a double-dip recession, but said he hopes he is incorrect.

“I can’t remember ever hoping that a forecast I made would prove to be so wrong,” he wrote.
 

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