Students Mackenzie Cetta and Tori Nelson express support toward students going to vote. Photo by Autumn Walter
According to economics professor Leonard Lardaro, Rhode Island’s economy never fully recovered from the Great Recession in 2008, and may never get a chance to.
Lardaro predicts that if the U.S. enters a recession by the end of 2020 due to the trade war with China, the state will be the first to enter the recession and last to recover from it. Through his Current Conditions Index, he is able to see a broadly based set of indicators that track the cyclical momentum of Rhode Island’s economy.
“If you look at the data on the rate of economic growth for Rhode Island, what’s called real GDP, in 2016, Rhode Island’s growth rate was zero,” said Lardaro. “In 2017, 0.8 percent, well below the national average and in 2018, 0.6 percent, ranking [Rhode Island] 48th in the country.”
Even in 2019, the most recent data available, the state’s growth rate was 2.2 percent and according to Lardaro that only ranked Rhode Island 46th in the country.
Rhode Island Sen. William Conley, who is the chair of the Senate Finance Committee, said that since Rhode Island was the last to recover from the recession, that’s why we are seeing these low growth percentages.
“We did have a bigger hole to grow out of,” said Conley. “In part, [that data] is a result of that. These investments take time, it doesn’t happen overnight. I think in Rhode Island we are just starting to [see] the benefits of them.”
The senator assured that the Rhode Island Legislature has been working hard to invest in things like education, the green economy and job training to try to build resiliency.
“Whether or not a recession is coming, [we’re] building the economy, but also doing what we can to insulate us after the next recession,” said Conley.
Rhode Island’s economic performance in the past has shown a trend in entering a national recession first and being last out. Lardaro refers to this “unsettling phenomenon,” as FILO. This means first in, last out in terms of national economic weakness.
“[Rhode Island] had an employment peak in December of 2006 and we’ve only exceeded that the last six or seven months,” said Lardaro. “So, it took roughly 13 years to get back [from the 2008 recession], which is really, really bad.”
Based on Lardaro’s assessment of the national economy, he said he feels strongly that there’s a 75 percent chance that by the end of 2020 the U.S. economy will find itself in a recession.
Lardaro credits the predicted recession to the trade war with China which he thinks will escalate, leading to an unstable national economy and in turn, hurting the state
Conley isn’t so sure that the trade war or other “unrelated factors” are going to affect the country or Rhode Island.
“What I do know is that we are doing everything we can to prepare because inevitably, economic cycles determine that the next recession is going to happen,” said Conley. “You can’t be m
Though Lardaro estimates this recession is likely coming soon, he says it will not be nearly as devastating as the last one. Lardaro stressed that this is absolutely not a guarantee, but if the U.S. were to go into a recession as he predicts it will, and considering Rhode Island’s FILO status, the state will find itself in a recession either at the end of this year or early next year.
With a manufacturing economy, Lardaro said, the economy can easily be turned around by people going back to their original jobs and recover relatively easily. However, in a post-manufacturing economy, the economy doesn’t turn itself around, growth has to be earned and people need to reinvent themselves, according to Lardaro.
Lardaro said that Rhode Island truly relies on Massachusetts and the national economy. “Rhode Islander’s who are unemployed get jobs in states like Massachusetts, that brings our unemployment rate down and they bring their money back to the state.”
Lardaro also said that the state only supplies about 8 percent to URI’s budget and questions whether Rhode Island will be able to sustain even the low levels of funding once the economy eventually slips.
“I’d hate to think [the state would] drop below [8 percent],” said Lardaro. “We don’t really have enlightened decision making, we’re in a situation where [we have] such inadequately funded public higher education in the information age.”
Whether or not Lardaro’s predictions are accurate, Conley wants Rhode Islander’s to know that the state is on the rise.
“Drive around and look at all the cranes in the sky, we are building here,” Conley said. “We are getting capital from outside the state to invest in here.”