Rhode Island Current Conditions Index

BACKGROUND

The Current Conditions Index (CCI) is a monthly indicator that details the present state of the Rhode Island economy by following the behavior of twelve key economic indicators pertaining to housing, retail sales, fiscal pressures, the employment situation, and labor supply:

Government Employment
Employment Services Jobs*
Retail Sales
University of Michigan US Consumer Sentiment Index**
Single-Unit Housing Permits
Private Service-Producing Employment***
Manufacturing Man-hours****
Average Hourly Manufacturing Wage
Seasonally Adjusted Unemployment Rate
Resident Labor Force
New Initial Claims for Unemployment Insurance
Unemployment Insurance Regular Benefit Exhaustions

The CCI ranges from 0, when no indicators improve compared to year-earlier levels, to 100, when all twelve show improvement. Values above 50, the "neutral" value, indicate that the Rhode Island economy is expanding, while values below 50 are indicative of contraction. Prior to "The Great Recession" that began in June of 2007, the CCI had never attained a value of 0, indicating that no indicators improved relative to year-earlier values. This changed in 2008, when the CCI fell to 0 on three occasions, and in 2009, when another value of 0 was recorded. Prior to this, the low for the CCI had been 8, which occurred for only a single month on several occasions. For almost all of 2008, the CCI recorded values of 8. The CCI attained its maximum value of 100 on several occasions, for almost all of 1984 and once in 1986. Note that these values occurred exclusively when Rhode Island was still a manufacturing-based economy.

* Up until February 2006, the CCI used Help Wanted Advertising for Providence, RI as one of its indicators (and toward the end of its use an econometric adjustment was required). This indicator replaces Help Wanted Advertising.
** Prior to the October 2001 report, the CCI used Existing Home Sales in Rhode Island. This indicator replaces Existing Home Sales.
*** Prior to the January 2003 report, Miscellaneous Service Employment, a major category of the SIC codes, was used. Now that NAICS replaces the SIC codes, the current indicator was chosen to replace Miscellaneous Service Employment.
****Beginning with the November 2005 report, Manufacturing Man-hours will be referred to as Total Manufacturing Hours.

THE CCI THIS MONTH
MONTHLY HIGHLIGHTS:

MAY 2016: 50

Rhode Island’s economy performed fairly well during the first two months of 2016. Since then, it has underperformed even the moderate-at-best year of 2015. The Current Conditions Index for May “improved” somewhat, moving from 42 in April, a contraction value, back to its neutral value of 50. While the Verizon strike negatively impacted the April value to some extent, ironically, the new data showed that Single-Unit Permits actually failed to improve in April (viewed as a negative), offsetting the strike-related impact on New Claims. So, for the most recent three months, the CCI has failed to exceed its neutral value - a troubling trend, to state it mildly. Put all of this into context, at present, we find ourselves increasingly unable to sustain even what has to be viewed as the rather modest pace of economic activity last year. Should this slowing continue, we might ironically come to view 2015 as a “strong” year. I guess everything really is relative!

That Rhode Island’s economy is slowing should come as no surprise, given that the US economy has also been faltering somewhat over the past few months. However, the word “faltering” means very different things for the US and Rhode Island. The US economy is still growing, albeit below its long-term trend. For Rhode Island, the recent values of the Current Conditions Index indicate that we have shifted gears, so to speak. If there are five gears, Rhode Island finds itself downshifting from third potentially into second gear. The transition (clutching), of course, is the string of neutral values (equal to 50).

The good news, if there is any, is that the pronounced deterioration in the performances of several key indicators that is consistent with declining cyclical momentum appears to have moderated a bit in May. The question remains: Has our state’s cyclical momentum disappeared?

Employment Service Jobs, which includes temporary employment and is a prerequisite to employment growth, fell by a hefty 8.8 percent in May, its third consecutive decline. Manufacturing employment rose (albeit barely), which was enough to offset the effect of a declining workweek, allowing Total Manufacturing Hours, a proxy for manufacturing output, to rise slightly for only its third increase in over a year. Along with this, New Claims, a leading labor market indicator that reflects layoffs, rose (+3%) in May, although it had a difficult comp a year ago. Finally, Retail Sales, the CCI’s star performer for several years, declined by 5.4 percent in May, its worst performance in over a year. It has now declined for four of the past five months.

Government Employment	-0.8
US Consumer Sentiment	4.8	Y
Single-Unit Permits	19.4	Y
Retail Sales	-5.4
Employment Services Jobs	-8.8
Priv. Serv-Prod Employment	-0.1
Total Manufacturing Hours	0.7	Y
Manufacturing Wage	2.6	Y
Labor Force	-0.7
Benefit Exhaustions	-2.0	Y
New Claims	3.0
Unemployment Rate (change)	-0.7	Y
Y = Improved Value

Overall, three of the five leading indicators contained in the CCI improved in May. Two of those had fairly easy comps from a year ago. Of the remaining leading indicators, Single-Unit Permits rose sharply (+19.4%) coming off a decline of 15 percent in 2015, although its level remained below 1,000 annual units. US Consumer Sentiment rose by 4.8 percent in May, ending a string of five consecutive declines.

Even with this moderating performance of the key cyclical indicators I have been focusing on of late, issues remained with several other indicators. Our state’s Labor Force continues to decrease. May’s decline of 0.7 percent was its twenty-fourth year-over-year decline. As a result, Rhode Island’s Unemployment Rate continues to fall largely for all the wrong reasons.

One pleasant surprise this month was another increase in the Manufacturing Wage, which grew by 2.6 percent versus last May, only its third increase in a very long time. Private Service-Producing Employment, an indicator whose growth rate had accelerated of late, actually decreased in May (-0.1%). Government Employment fell yet again, by 0.8 percent in May, but remained at 60,000. Finally, Benefit Exhaustions, which reflects longer-term unemployment, fell by 2 percent, its slowest rate of improvement in several years.

THE BOTTOM LINE

Rhode Island’s economic performance continues to be concerning, as the Current Conditions Index has now failed to move into its expanding range (above 50) for three consecutive months. As national growth moderates, Rhode Island is slowing more than the US, once again displaying our asymmetry with national growth: we respond instantly to national weakness but far less so to increasing national growth. Should our recent weakness continue, we will begin to increasingly experience the ill effects of our state’s elected officials doing virtually nothing until very recently. It is imperative at this point that we both continue and accelerate these structural changes.

Monthly CCI Values (red = recession)
(Note: These are revised values. Original reports sometimes specify different CCI values, based on originally released data.

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
1983	42	58	58	67	75	83	83	75	83	83	83	92
1984	100	92	100	100	100	100	100	92	100	92	92	83
1985	67	75	75	75	67	75	67	50	50	58	83	67
1986	75	83	100	92	92	83	92	92	92	92	92	67
1987	67	67	58	58	67	75	75	75	75	67	75	75
1988	83	83	75	67	67	67	58	50	67	58	50	58
1989	67	50	50	33	58	33	25	25	25	33	33	33
1990	25	25	25	25	17	17	17	17	33	17	25	25
1991	25	17	17	8	25	17	25	25	25	33	17	17
1992	42	42	58	75	75	83	75	67	67	83	83	92
1993	75	83	67	67	83	67	75	75	75	58	42	58
1994	58	67	67	58	58	75	67	67	67	67	83	75
1995	58	58	58	67	50	42	42	42	58	33	67	42
1996	50	42	75	75	67	75	75	67	75	92	83	92
1997	100	92	83	75	67	75	75	75	83	75	92	83
1998	83	75	75	75	75	75	75	67	58	75	75	50
1999	83	75	75	83	67	83	75	75	92	75	83	58
2000	83	83	83	67	42	50	58	50	58	67	67	67
2001	42	33	25	17	33	50	25	33	33	42	33	42
2002	58	75	67	58	42	33	50	50	58	67	67	50
2003	50	50	50	58	58	58	83	67	83	75	92	67
2004	67	67	58	67	58	58	67	67	67	58	50	67
2005	50	67	50	50	42	75	58	67	42	58	58	67
2006	58	58	67	58	33	50	33	58	75	83	58	67
2007	50	50	33	33	58	50	33	33	17	17	8	25
2008	8	8	8	17	8	0	8	0	8	0	8	8
2009	17	8	0	8	17	33	17	42	33	42	50	33
2010	42	58	67	67	75	75	83	83	67	67	75	83
2011	50	67	67	58	50	58	58	42	50	50	58	50
2012	58	50	58/75	50/75	58/67	67/75	50/58	67/75	50/58	75/83	75/83	92
2013	75	67	83	67	83	75	75	67	7 5	75	67	75
2014	67	67	58	58	67	50	67	67	75	67	58	67
2015	58	58	67	58	67	75	75	92	83	67	75	58
2016	58	67	50	42	50

You can download monthly reports in PDF format starting
with January 1999 by clicking on the monthly index value.

Historical Annual CCI Values

1980	1981	1982	1983	1984	1985	1986	1987	1988	1989
42	54	33	74	96	67	88	69	65	39
1990	1991	1992	1993	1994	1995	1996	1997	1998	1999
22	21	70	69	67	51	72	81	72	77
2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
65	39	56	66	63	57	54	40	7	24
2010	2011	2012	2013	2014
70	55	74	76	64

Monthly CCI Values (red = recession) (Note: These are revised values. Original reports sometimes specify different CCI values, based on originally released data.

Historical Annual CCI Values

Monthly CCI Values (red = recession)
(Note: These are revised values. Original reports sometimes specify different CCI values, based on originally released data.