Slower U.S. growth adds to Rhode Island squeeze

The U.S. economy expanded at a 1.5% annualized rate in the second quarter, slowing as consumer prices remained 3.5% above their year-earlier level, a combination that adds pressure in Rhode Island, where employment has declined and unemployment exceeds regional and national rates.

The Bureau of Economic Analysis reported Thursday that gross domestic product grew at a 1.5% annualized rate during April, May and June, down from 2.1% in the first quarter. The advance estimate is the federal government’s preliminary measure of economic activity and may be revised as more complete data become available.

Consumer spending, investment and exports contributed to second-quarter growth, while declining government spending partly offset those gains. Consumer spending increased 3.2% during the quarter, providing support even as households faced elevated prices.

The consumer price index rose 3.5% in June from a year earlier, the Bureau of Labor Statistics reported, easing from 4.2% in May but remaining above the Federal Reserve’s 2% target. The June reading was the first decline in the annual inflation rate since January, when it stood at 2.4%.

Energy costs increased 15.7% from a year earlier in June, compared with 23.5% growth in May. Gasoline prices rose 26.7%, while fuel oil increased 42.9%, maintaining pressure on household transportation and heating budgets despite the slower overall inflation rate.

The combination leaves the Federal Reserve with competing risks: weaker growth can reduce hiring and investment, while persistent inflation can discourage policymakers from lowering borrowing costs. The figures do not establish that the economy has entered stagflation, a condition involving weak growth, high unemployment and persistent inflation, but they show elements of that risk developing at the same time.

The Federal Reserve voted 9-3 on Wednesday to hold its benchmark interest rate in a range of 3.5% to 3.75%. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan dissented in favor of an increase, reflecting concern that inflation remains too high.

For Rhode Island workers, the national slowdown follows a period in which the state’s labor market had already soured. Resident employment fell by 6,100 jobs, or 1.1%, over the year through the first quarter, according to a Rhode Island Public Expenditure Council and Bryant University briefing.

Rhode Island’s unemployment rate increased from 4.4% to 4.6% during the first quarter, its highest level since the third quarter of 2021. Both New England and the nation had unemployment rates of 4.3%, while the number of employed Rhode Islanders fell for a third consecutive quarter to its lowest level since the first quarter of 2023.

Slower national growth can further constrain hiring and business investment in a state already losing employed residents. Continued price increases, meanwhile, reduce the purchasing power of wages and keep operating costs elevated for businesses, particularly when energy prices remain volatile.

Rhode Island’s economic weakness preceded the latest national figures. The state’s gross domestic product declined at a 0.4% annualized rate in the fourth quarter of 2025, while New England grew 0.9% and the U.S. economy grew 0.5% during the same period.