Is state’s economy in gear...finally?
A little good news is better than none, and that’s how some are greeting indicators that the Rhode Island economy is showing signs of improving.
This week several reports are cause for hope, although they are hardly of the nature for outright celebration.
URI Professor of Economics Leonard Lardaro released the November Current Conditions Index calling it a “spark of life.”
Based on 12 key economic indicators pertaining to housing, retail sales, fiscal pressures, the employment situation and labor supply, the index rose to 67, the highest it has been since last February.
The index ranges from 0, when no indicators improve compared to year-earlier levels, to 100, when all 12 show improvement. Values above 50, the "neutral" value, indicate that the Rhode Island economy is expanding, while values below 50 are indicative of contraction. Pretty much for the last nine months, Rhode Island has been stuck in neutral.
But maybe we’re in gear now.
This week, the state Department of Revenue announced that as of the halfway mark for the fiscal year, tax revenues were 3.3 percent higher than they had been projected. That’s $44.5 million more as of Dec. 31. More than half of that came from a $24.4 million increase in personal income taxes.
Seemingly casting a shadow on the positive numbers, sales tax revenues actually were $1.3 million, or 0.3 percent, below projections for the six months.
“I like to be cautious,” says Paul Dion, chief of the state’s office of Revenue Analysis, “there are still large amounts of money to be collected.” He noted that higher than projected refunds or lower personal tax returns could easily reverse the trend.
As for a “spark of life,” Dion said, “I’m cautiously optimistic.”
Secretary of State Ralph Mollis also had something to report offering yet another glimmer of hope. Based on the number of new businesses filed with his office – 6,846 for the year as compared to 6,778 in 2010 – he said it appears the state’s entrepreneurs may be more optimistic about a recovery.
"The economy has had a traumatic few years, so let’s be careful about reading too much into this data. The pain isn’t over, but there are signs that things may be turning around,” said Mollis in a statement.
There are signs that the economic shakeout is not over. In 2011, 6,627 corporate entities disappeared, about 7 percent more than 2010 when 6,183 companies shut their doors. Still, Rhode Island did better than in 2008, when a record 7,071 companies went out of existence.
The state’s unemployment rate was at 10.5 percent for November 2011 as compared to 11.5 percent for December in 2010. Rhode Island hit peak unemployment of 11.8 peak in December 2009.
Are the numbers showing a turn in the tide?
“While this month's reading may be a signal that Rhode Island's economy has finally moved to a sustainable higher level of economic activity, I believe it is still too early to make that call,” Lardaro said in a statement.
In an interview yesterday, Lardaro reiterated the point that “sustainability” is the critical factor. He said that the state had a “good holiday season,” although it is not known whether that is a reflection of peoples’ decision to spend savings or an increase in disposable income. He said the last three months of 2011 showed increased spending but that overall for the year spending was down.
Lardaro questioned manufacturing wages, which he said showed a jump from $14.89 to $17.38 an hour, but was optimistic with reports showing expanded hours and output.
Still, Lardaro doesn’t paint a rosy picture for the state, laying the blame on legislators who he says have failed to address issues such as state regulations, fees and taxes that could turn the economy around. He also cites high Rhode Island utility costs and the “glaring problem of a lack of a skilled labor force.”
“Rhode Island really failed to reinvent itself,” he says, referring to the collapse of the financial and housing markets in 2008 as a “lost opportunity.”
“Although we’re doing better, Rhode Island is one of the worst performing states in the country; we’re known for our unemployment and our beaches,” he said.
If building permits were a reliable indicator, it would appear Warwick has a way to go before it is out of the woods.
While traditionally slow at this time of year, Ted Sarno, director of the city building department, said activity has really fallen off in the last month. He observes there is some construction activity, such as Nordstrom’s Rack at Warwick Mall, TD Bank at Wilde’s Corner and that the unseasonably warm winter has enabled contractors to “get things in the ground.”
As for a rejuvenation of the economy he said, “We haven’t seen any indication of it yet.”
In summary, Lardaro said in a statement, “The pressing question for now is whether Rhode Island's economy has broken out of the neutral range it has been stuck in for many months. Several elements within the November data that suggest that this might be the case while others imply that sustained improvement might not materialize. All of this is complicated by likelihood of revisions to the existing labor market data, as data for the final months of the year are those most likely to be changed when rebenchmarking occurs. We'll just have to wait and see.”