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.
In Johnston, 96 new businesses opened in 2011, including Ocean State Job Lot. By comparison, Cranston had 234 new businesses move in.
“That’s been the impetus of this administration, bringing business in, because it helps stabilize your tax base,” said Mayor Joseph Polisena, adding that having a central location with access to all major highways makes Johnston appealing to business.
Unlike residential development, which puts a strain on town services – especially public education – commercial development raises tax revenues for the town and puts money back into the local economy, as local employees eat at Johnston restaurants, get gas at local stations and patronize local businesses in general.
“It creates revenue for the town. Plus, it creates jobs,” Polisena said.
In addition to bringing new business in, he says keeping existing businesses happy is paramount. In particular, he was glad to see FM Global and BJ’s stay in the town.
“One of the most important things we ever did was to keep FM Global. FM Global is a world corporate headquarters; they were gone and we got them to stay. They’re a staple in this community,” he said. “The small businesses also add up; 10 jobs here, five jobs there.”
North Central Chamber of Commerce President Deborah Ramos has seen growth in member businesses of the chamber, though not as significant as those filing with the Secretary of State. In 2012, the chamber grew by 35 members. In 2011, that number jumped to 54. Nineteen of those businesses were from Johnston, and six were new to the community overall.
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 percent in December 2009.
“There are still a lot of people out of work and we need more jobs,” Polisena said.
He recognizes that there are areas that need improvement when it comes to economic development. He would like to see development on the 110 acres of empty land after Route 6, heading west, as well as on Plainfield Pike and the industrial park near Rhode Island Resource Recovery. A developer has committed to revitalizing Stuart’s Plaza, but residents are getting impatient, as the project has remained stagnant for two years.
Statewide, 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.
In summary, Lardaro said in a statement that the evidence over whether or not Rhode Island business is on its way up remains inconclusive.
“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 suggest that this might be the case while others imply that sustained improvement might not materialize,” he said. “All of this is complicated by [the] 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 re-benchmarking occurs. We'll just have to wait and see.”