Where Is Rhode Island’s Economy Going — It Depends on Who You Ask
GoLocalProv Business Team and Kate Nagle
Where Is Rhode Island’s Economy Going — It Depends on Who You Ask
The Fane Tower, which would have created an estimated 1,000 construction jobs over three years, has been scrapped. The redevelopment of the Superman building -- a $300 million plus project, is in limbo. And rising interest rates are causing trouble for small businesses trying to borrow.
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University of Rhode Island economist Professor Leonard Lardaro has worries about Rhode Island’s economic performance over the next year.
“Rhode Island’s economy has clearly slowed down — it’s very obvious from revised data. The ‘official’ unemployment number is meaningless — participation keeps going down,” said Lardaro. He says the revised labor force numbers show significant problems in the Rhode Island economy.
“The revised data changed everything,” adds Lardaro.
Lardaro also worries about the impact of higher interest rates and bank lending.
“What worries me particularly about Rhode Island is the banks that do a lot of lending to small businesses and commercial real estate, who were already struggling. With lending standards going higher, that’s not a good thing,” said Lardaro.
“Crises don’t play out like the textbooks. The Federal Reserve model for inflation is that it’s a demand phenomenon — you have to start to taking supply things into account more and more which they’re not equipped to do,” he adds.
Liz Tanner, the Rhode Island Secretary of Commerce, is more optimistic.
“The announcement that inflation has reached a 22-month low is welcome news for citizens and businesses alike. This development signals a more stable economic environment, which can potentially lead to increased consumer confidence and growth in the business sector,” said Tanner.
“That said, it is crucial to remain vigilant and continue to closely monitor various economic indicators to proactively safeguard our state against the most significant repercussions of a potential recession if that becomes necessary,” she adds.
Tanner says that at Commerce, “Our focus remains on the future as we diligently work to ensure that our state stays on track for a complete and robust recovery from the lingering effects of the pandemic. To this end, we will continue to collaborate with key stakeholders, invest in strategic initiatives, and support the development of innovative solutions that will foster economic resilience and long-term prosperity.”
Providence Economic Development Director Cassandra Thomas said, “It is encouraging that inflation is starting to come down but we expect there to be volatility in the stock market and the economy more broadly. It will take time for rates to come back down to impact construction and borrowing costs. We will continue to act with caution and are budgeting conservatively to reflect that.”
“From a city perspective, we're keeping a close eye on construction start dates, employment data for Rhode Island, local tax receipts and hotel occupancy. Together, that data can give us a good sense of where our economy is going,” Thomas adds.
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Gary Sasse, the former head of the Rhode Island Public Expenditure Council and Director of Administration, says that "inflation increased 5% for the 12-month period ending in March, or 5.6% when food and energy costs are excluded. While price deceleration is welcome news, policymakers target inflation around 2% as necessary for healthy and sustainable economic growth."
"One month does not make an economic cycle, so we need to see several months of inflation declines to project an impact on the Rhode Island economy. In the short run, the Fed could pause in raising interest rates, but there probably will not be interest rate relief, and the capital projects Rhode Island was banking on should not become more affordable as a result of the latest inflation report. The bottom line is that the Fed has raised interest rates nine times over the past year, and they will not be rolled back in the short term," adds Sasse.
"Economic cycles are a fact of life, and the best way for RI to minimize the impact of economic fluctuations is to have a competitiveness strategy aimed at making the most productive use of its human and capital resources," he said.