You Won’t Find this Economist in an Ivory Tower

Professor Leonard Lardaro in his Chafee Hall office on URI’s Kingston Campus.

Leonard Lardaro works with his feet firmly planted in the real world. The creator and producer of Rhode Island’s Current Conditions Index, he teaches his students how to make sense of economic information.

For URI economics professor Leonard Lardaro ’73, teaching is all about grounding theory and analysis in the real world.

This comes naturally to Lardaro, creator of the Current Conditions Index (CCI)— a sophisticated economic forecasting tool that provides a snapshot of the current health of the Rhode Island economy. The index is used by legislators, real estate professionals, banks, and others to determine the health of the state economy and to plan accordingly. It’s also used by the media as a counterpoint to the spin politicians put on economic news.

“He’s been our go-to guy on the economy for more than 20 years,” says radio talk show host Matt Allen of AM station WPRO in Providence. “He doesn’t mind speaking truth to power—and he does it in a nonpartisan way. He’s also a teacher, so he’s able to take complex issues and make them understandable to our listeners.”

A Teacher First

Given his prominence as a media expert, Lardaro enters the classroom with a unique brand of credibility. His goal is to train students to become discerning critics of economic information by providing them with the analytical tools they need to assess the quality of economic data and forecasts.

“I teach them how to analyze what they read and hear in the media,” says Lardaro, who received his undergraduate degree in economics from URI and completed his Ph.D. at Indiana University, Bloomington.

He also teaches them how to look beyond obvious conclusions. For example, as we came out of the pandemic, the U.S. dollar was quite strong, but Lardaro warned that this wasn’t necessarily a cause for optimism.

“You would think that’s a good thing, having a strong U.S. dollar; but in a lot of ways, it was bad for our economy,” he says. “Sure, it made imports cheap, but it also made our exports less competitive, which leads to slow growth. U.S. companies were making money overseas, but when they converted their profits to dollars, they lost money. That hurt the stock market.”

Lardaro teaches students at the beginning and the end of their undergraduate careers. He lays the foundation for economic analysis in his macroeconomics class, then requires them to pull together all they’ve learned in his senior-year capstone course, in which students analyze an economic topic of their choice.

Lardaro’s goal is to train students to become discerning critics of economic information by providing them with the analytical tools they need to assess the quality of economic data and forecasts.

In addition, Lardaro teaches a class in econometrics—an upper-level course for which he literally wrote the book. Applied Econometrics is a college textbook that applies statistical methods to economic data for purposes of gaining an empirical understanding of economic relationships and forecasting economic trends.

“I teach them statistical reasoning,” he says. “I use economic theory and statistical methodology to teach them how to estimate critical relationships. This gives them the tools they need to discern a reliable forecast from one that fails to take into account all the factors.”

A More Complete Picture

Accounting for all the factors is exactly what Lardaro set out to do in 1995 when he created the Current Conditions Index.

“I was the Rhode Island forecaster for the New England Economic Project, and at that time the state of the economy was gauged solely by manufacturing employment,” he says. “So, I developed a broader-based methodology that considered a set of 12 economic indicators.”

Those indicators include retail sales, new housing permits, unemployment, and manufacturing wages. The monthly CCI score consists of the percentage of the indicators that have improved compared to the same time the previous year. If more than six of the indicators have improved, the state has an expanding economy; if fewer than six have improved, the economy is contracting.

At the time of this writing, in the summer of 2023, the index indicated that the Rhode Island economy had been contracting monthly for more than a year. On a series of media talk shows, Lardaro warned that the state was on the brink of a recession. That’s not the kind of news politicians and business leaders want to hear.

“People ask me why I’m always so negative. They say, ‘You’ve got to be more positive.’ No, I don’t. What they should be asking,” says Lardaro, “is whether I’m accurate. I’m just the messenger.”

Seeing the Future

As the messenger, Lardaro believes it’s time for the state to adapt to the competitive world of modern economic development.

“Rhode Island hasn’t changed the way it’s doing things in nearly 40 years when we switched from a manufacturing to a service economy in the late 1980s,” he says. “We’re not doing well, but it doesn’t have to be that way. We can fix it.”

Lardaro believes the first step is to professionalize economic analysis at the state level by creating a group of Ph.D. economists to advise legislators and other government officials about the economic feasibility of legislation and various development proposals.

“The state needs to develop a system of in-house due diligence,” he says. “You want your electrical system installed by professional electricians rather than well-intentioned do-it-yourself types. It should be the same with the state’s economy.”

According to Lardaro, successful states have a team of economists within state government. For example, Massachusetts has the Executive Office of Economic Development, which has 13 separate offices that specialize in business development, tourism, international trade, and more.

Though his advice isn’t always taken, Lardaro continues to produce his Current Conditions Index for free, as he has for the last three decades.

“I consider it my service to Rhode Island,” he says. “It also fits well with what I teach in my classes, so my research adds authenticity to the way I teach students at URI.”

–Bill Ibelle

Photo: Michael Skorski