Rhode Island's Economy Continues Slow and Steady Growth

Rhode Island Public Expenditures Council

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Rhode Island's Economy Continues Slow and Steady Growth

PROVIDENCE, R.I. (October 2015) – According to the Rhode Island Current Economic Indicator (CEI) briefing released today by the Center for Global and Regional Economic Studies and the Rhode Island Public Expenditure Council (RIPEC), Rhode Island’s economy continued to expand at a slow, but steady rate. The state’s economy grew by an annualized rate of 1.8 percent in the first quarter of 2015, compared to an expansion of 1.6 percent in the first quarter and 1.9 percent in the fourth quarter of 2014. Previous projections had expected Rhode Island’s economy to grow at a 1.6 percent annualized rate in the second quarter. Growth is anticipated to continue into the third quarter of 2015, as the Leading Economic Indicator projects an expansion of 1.6 percent. A copy of the full briefing is available here.

The U.S. Gross Domestic Product (GDP) increased at an annualized rate of 3.9 percent in the second quarter of 2015, compared to an increase of 0.6 percent in the first quarter. The Regional Current Economic Indicator indicates that the New England economy grew at an annualized rate of 2.8 percent in the second quarter of 2015, compared to 1.9 percent in the first quarter. Rhode Island’s economy has now grown at a slower rate than the regional economy during the past three quarters.

Rhode Island’s modest economic growth in the second quarter was largely the result of mixed performance on the eleven CEI indicators that measure internal state economic activity. Seven of these eleven indicators experienced positive growth in the second quarter. Among the factors contributing to reduce growth were construction employment, trade, transportation, and utilities employment and information services employment. Construction employment decreased by an annualized rate of 23.5 percent during the second quarter; this was the third quarter out of the last four with job losses in the construction industry. Financial services employment remained unchanged for the second consecutive quarter.

Although the overall picture was mixed, some industry sectors performed well in the first quarter of 2015. Manufacturing employment increased by an annualized rate of 0.6 percent, continuing a trend of positive job growth in the last four quarters. In addition, professional and business services employment increased by an annualized rate of 15.9 percent, reversing a trend of two consecutive negative quarters. Finally, leisure and hospitality employment and education and health services employment also posted positive job growth during the second quarter.

While overall economic growth in Rhode Island remains subpar, the state’s labor market continues to perform reasonably well. Real wage and salary disbursements increased at an annualized rate of 1.1 percent in the second quarter and general sales and gross receipt taxes, which is a proxy for aggregate demand in the state, increased by an annualized rate of 7.2 percent during the second quarter. Additionally, average weekly initial unemployment claims decreased at an annualized rate of 9.3 percent in the second quarter, suggesting that fewer Rhode Islanders are losing their jobs.

“Rhode Island’s economy is showing continued signs of slow growth, with certain segments of the labor market performing reasonably well, but with the notable exception of the construction industry,” remarked John C. Simmons, Executive Director of RIPEC. Simmons added, “The most concerning aspect of the state’s continued mediocre growth is that Rhode Island is consistently growing at a slower rate than the national and regional economies. This suggests that the state is benefiting from positive trends elsewhere, but is experiencing little growth of its own.”

The quarterly CEI, developed by economists at The Center for Global and Regional Economic Studies at Bryant University, combines several key gauges of economic activity in a single statistic that measures the overall current economic conditions in Rhode Island. It is calibrated to grow at the rate of the Real Gross State Product and, therefore, can be interpreted as the underlying growth rate of the state economy. The CEI is calculated using the most current available data for the state.

For additional information about the RI CEI or the newsletter, contact Edinaldo Tebaldi, associate professor of economics at Bryant University, at etebaldi@bryant.edu.