Rhode Island’s unemployment rate fell to 3.7% in the third quarter, its lowest level in nearly three years, but the improvement came from people leaving the workforce rather than from more Rhode Islanders finding jobs, according to a quarterly briefing released Wednesday.
The briefing comes from Bryant University’s Center for Global and Regional Economic Studies and the Rhode Island Public Expenditure Council, a business-backed research group.
Rhode Island’s rate fell from 4.3% in the second quarter and now sits below New England’s 4.2% and the national 4.1%. At the same time, the number of Rhode Island residents with jobs fell for a fifth consecutive quarter, down 500 to its lowest point in nearly five years.
The reason both numbers fell at once is that the labor force itself is getting smaller. Rhode Island’s labor force participation rate — the share of working-age residents either working or looking for work — dropped to 62.1%, a ninth straight quarterly decline. Participation peaked at 64.7% in the second quarter of 2024 and has fallen 2.6 percentage points since, compared with 1.6 points across New England and 1 point nationally.
People who stop looking for work are not counted as unemployed, so a shrinking labor force pushes the unemployment rate down even when no one is being hired.
Rhode Island has also given up most of its edge over the rest of the country. In mid-2024 the state’s participation rate ran 2.1 percentage points above the national rate; it is now 0.5 points above. Over the same period, Rhode Island slipped from 0.4 points behind New England to 1.4 points behind.
“While an unemployment rate of 3.7% is good news, it continues to mask a deeper structural concern: the decline is driven by people leaving the labor force,” Edinaldo Tebaldi, professor of economics and vice president of strategy at Bryant, said in a statement. “Despite resilient consumer demand and stable nonfarm employment, resident employment declined for a fifth consecutive quarter and labor force participation declined for nine straight quarters; hence, the health of the labor market remains under significant pressure.”
Jobs held steady; spending stayed strong
The number of jobs based in Rhode Island was essentially flat, rising by 400 from the previous quarter and falling by 500 from a year earlier. The state gained jobs in three of nine major industry sectors, lost jobs in three, and saw little change in the rest.
Professional and business services posted the largest quarterly gain, adding 700 jobs. Education and health services — the state’s largest sector — recorded the largest decline, losing 900.
Consumer spending remained strong. Net sales tax receipts, which the briefing uses as a measure of overall demand, rose 7.5% from a year earlier and 3.3% from the previous quarter.
Rhode Island’s economy grew at an annualized rate of 0.9% in the second quarter, the most recent period with data available, after contracting in the first. That trailed New England’s 2.5% and the nation’s 2.2%, though the briefing says the return to growth and continued consumer spending show the state is not in a recession.
“Some of this quarter’s indicators are encouraging, including continued growth in consumer spending and a steady number of in-state jobs, but others suggest that Rhode Island continues to fall behind the region and the nation,” said Michael DiBiase, RIPEC’s president and CEO. “Our economy grew more slowly than New England’s and the country’s in the second quarter, extending a long-running trend, and our labor force is shrinking at a faster rate.”
DiBiase said addressing those trends should be a priority for lawmakers, “with a focus on building a more competitive business climate and a more highly skilled workforce.”
The full briefing and the underlying data set are available at RIPEC.org.
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