Lardaro Report: Good Economic News Becoming More Difficult to Find
Monday, May 12, 2014
Lardaro states, "It appears that our negatives are going to strengthen in the coming months, which will increasingly offset our ongoing positives, leading to a bumpy ride as 2014 progresses. All we can do is hope that increasing national momentum will moderate this potential slowing of our state’s momentum."
Lardaro's Current Conditions Index:
The much anticipated bounce back from the adverse effects of the harsh February weather turned out to be a non-event. While the indicators most obviously impacted by the weather improved as expected, several other indicators were far less accommodating, leaving the March Current Conditions Index stuck at the same value it attained in February, 58. Unfortunately, this extended the string of consecutive months where the CCI has failed to improve relative to its year-earlier value to eight.
New home construction, which came to a virtual standstill last month, returned to a more reasonable level. And Retail Sales, which should have felt weather effects, remained strong for both February and March. As we move farther beyond the uncertainties produced by winter weather, the underlying performance of Rhode Island’s economy is becoming more apparent. While the overall picture that emerges is mixed, we appear to have entered a period where our negatives are beginning to expand, increasingly offsetting the beneficial effects of the parts of our state’s economy that continue to exhibit strength. The result will be a period of yet slower growth overall which will at times mask a some or a great deal of the positive momentum that exists within our state. While this is hardly the outcome we wanted to observe, it indicates that we can expect the present recovery to become even less broadly based should these trends persist. The good news, which is becoming more difficult to find, is that an accelerating rate of growth for the national economy will clearly benefit Rhode Island as we move through the remainder of 2014. How much we benefit, however, is a very different question. We may well see improvements in absolute terms (like the recent decline in our Unemployment Rate), but relative to other states, we will continue to lag (we remained #1 for joblessness in March).
Retail Sales turned in yet another strong performance in March, rising by 4.8 percent relative to a year ago. Keep in mind this indicator excludes clothing sales, which likely grew substantially in light of March’s cold weather. Private Service- Producing Employment, which was revised higher in the recent rebenchmarking, continues to display strength, increasing by 1.6 percent relative to last March. The performance of our state’s Labor Force continued as it has for a while now. The “good news,” was that its rate of decline fell below one percent. In spite of this, March was its eleventh consecutive decrease. Even with these declines, Rhode Island once again claimed the #1 jobless slot in March, as our Unemployment Rate fell all the way to “only” 8.7%. Benefit Exhaustions, w hich reflects longer-term joblessness, rose in March (+3.5%) for the first time in over a year. Finally, Government Employment fell by 0.5 percent to just under 60,000.
THE BOTTOM LINE
The present recovery continues to be less broadly based than it was a year ago based on the fact that the CCI has now failed to exceed its year-earlier value for eight consecutive months. Winter weather is no longer a possible explanation. While a number of areas continue to display strength, and can be expected to continue doing so in the coming months, it appears that our state’s cyclical negatives are gaining strength, which will dissipate our overall momentum. The critical question at present continues to be whether increasing nation- al economic momentum will be sufficient to help us fend off the ef- fects of our strengthening negatives.
Related Slideshow: 7 Strategies for Rhode Island Economic Development in 2014
What will it take to move the Rhode Island economy forward in 2014? GoLocal talked with elected officials, candidates, and leaders for their economic development plans in the coming year.
Below are key elements of the economic priorities for Governor Lincoln Chafee, Speaker of the House Gordon Fox, Senate President M. Teresa Paiva-Weed, House Minority Leader Brian Newberry, gubernatorial hopefuls General Treasurer Gina Raimondo and Ken Block, and RI Center for Freedom and Prosperity's Mike Stenhouse.
Governor Lincoln Chafee
Speaker Gordon Fox
"Among the many pieces of legislation the House will address will be issues of higher education affordability, expanding apprenticeship opportunities, and offering help to our manufacturers. We will also look closely at our tax structure to make sure we are competitive with our neighboring states, including the corporate tax and the estate tax, and I will carefully review the recommendations of the commission studying our sales tax.”
Senate Pres. Paiva-Weed
Greg Pare, spokesperson for the Senate President, said that the Senate is planning to issue recommendations soon on workforce development initiatives to address the skills gap among Rhode Island job seekers.
"An example of a proposal anticipated in that report is the elimination of state’s Indirect Cost Recovery on the Job Development Fund, which is about $1.2 million this year. Those funds would be directed towards job training and skills development programs to provide immediate impact and help workers gain the skills necessary to succeed in today’s economy."
Gen. Treasurer Raimondo
"To grow our economy, we need to make Rhode Island a leader in manufacturing again. Great things can happen at the intersection of government, higher education, and the private sector. Rhode Island is lucky to have thriving institutions in each of these three sectors, and we need to foster collaboration among them to find solutions to our challenges, and spark our economy.
By promoting partnerships in high-growth areas, [Rhode Island Innovation Institute] will help grow our manufacturing base, and create new, high-quality jobs."
"First, we need to fix Rhode Island’s broken Unemployment Insurance program. The state’s Unemployment Insurance tax, paid by employers, is ranked worst in the country by the Tax Foundation. It is one of the factors that makes Rhode Island an uncompetitive place to do business. Also, it is inherently unfair that a large group of businesses are effectively subsidizing the payrolls of a small group of businesses who misuse the system. There is a simple change to state law that can fix this problem."
"Rhode Island’s temporary disability tax (TDI) is broken, and places an unnecessarily high tax burden on Rhode Islanders. This tax, paid for by employees, will be reduced by changing the way we manage the program. As Governor, I will substantially reduce the cost of purchasing this insurance by requiring that Rhode Island’s program adhere to national norms."
"To best encourage new job creation, I propose the following tax incentive: exempt from future capital gains taxes any new investments in Rhode Island-based businesses. This change would create a powerful incentive for investors who are deciding where to locate a new business, or where they relocate an existing one. This proposal has the potential change the economic playing field for Rhode Island."
Minority Leader Newberry
“It would be overly ambitious to set being #1 as a goal right now, but we think 25, the middle of the pack, is a reasonable goal to set, one we think we should pursue, and one we can achieve,” said Newberry. "One of the initiatives is a requirement that every bill receive a fiscal evaluation before it can be heard by committee, better insuring that legislators know the real cost of the legislation they are acting on."
"Another proposal would exempt social security income from RI state income tax, making Rhode Island more tax-friendly for our seniors and keeping them here rather than migrating to more tax-friendly states."
“Strong action is way overdue here. Nearly 60% of Rhode Islanders now believe that the state is headed in the wrong direction. We think they’re right, and our central goal is to get it turned around."