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:

SEPTEMBER 2013: 75

Rhode Island ended the third quarter on a fairly positive but mixed note, as there was both good news and bad news about our state’s performance. First, the good news: the Current Conditions Index rose from 67 in August to 75 in September, as nine indicators improved overall. Several of those improvements were very substantial changes. The bad good news comes when we contrast our state’s performance this year with that last year: for a second consecutive month, and the third time in four months, the CCI failed to exceed its year-earlier value. During the fourth quarter, it is not unreasonable for us to expect to see this pattern repeated every month. This has been a concern of mine for some time now, and I have written about it in the last few reports, for if this does come to pass, as is likely, it would reflect a definite slowdown in our rate of growth relative to the end of last year. However, in light of the clear acceleration in the pace of economic activity for Rhode Island as 2012 came to an end, this does not come as much of a surprise. The October CCI results will be quite interesting, as they will reflect not only the fiscal drag from Washington, but the effects of the government shutdown as well.

In light of these uncertainties moving forward, it is informative to examine the performance of the leading indicators contained in the CCI. For September, three of the four leading indicators improved in spite of difficult “comps” from a year ago. The only leading indicator that failed to improve, US Consumer Sentiment, fell only slightly (by 0.3%), but this relatively small decline occurred relative to a rise of over 33 percent last September.

So, as we move into the last quarter of 2013, our state’s momentum may be losing a step or two, but a substantial amount of momentum remains, as attested to by the performances of both the leading indicators contained in the CCI and several of its non-leading indicators. This means we will just have to wait longer to ultimately return to where our state’s economy was prior to the Great Recession. Our recent rates of growth applied to the depressed activity levels Rhode Island fell to will continue to generate relatively small changes in the actual activity levels.

As stated earlier, three of the CCI’s four leading indicators improved in September. The uptrend in Single-Unit Permits, a leading indicator of housing, continues, as we have moved well beyond our recession trough (note: the September Permits value is an estimate as the government shutdown has caused a delay in its release until next week). US Consumer Sentiment failed to improve for the first time since January. However, it had an extremely difficult “comp” from last September. In spite of this temporary setback, Sentiment remains in a well-established uptrend that promises to continue as long as the stock market continues to improve.

Government Employment	0.0
US Consumer Sentiment	-0.3
Single-Unit Permits	21.3	Y
Retail Sales	8.1	Y
Employment Services Jobs	3.4	Y
Priv. Serv-Prod Employment	0.9	Y
Total Manufacturing Hours	1.56	Y
Manufacturing Wage	4.5	Y
Labor Force	-1.9
Benefit Exhaustions	-7.7	Y
New Claims	-7.9	Y
Unemployment Rate (change)	-1.0	Y
Y = Improved Value

The remaining leading indicators are related to the labor market. The first of these, Employment Service Jobs, which includes temporary employment, a prerequisite to overall employment growth, rose by a healthy 3.4 percent in September. Its decline last month was the first in over a year. Like US Consumer Sentiment, this one-month problem does not threaten its longer-term uptrend, something that will be important as we move to the last quarter of this year. New Claims for Unemployment Insurance, the most timely measure of layoffs, improved in September, falling by 7.9 percent in spite of a very large decline last year (-25.1%). At present it has no clear trend, which is potentially problematic since a trend of rising layoffs would adversely affect other CCI indicators in coming months. The final leading indicator, Total Manufacturing Hours, which measures strength in our manufacturing sector, rose by 1.6%.

Retail Sales remained very strong, growing by 8.1 percent relative to last September. Private Service-Producing Employment growth remained below one percent, our state’s Labor Force declined again (the sixth time), and our Unemployment Rate notched a bit higher over the month. Finally, Government Employment was unchanged. Has this now reached a bottom?

THE BOTTOM LINE

The third quarter is apparently an inflection point for the rate of growth in Rhode Island’s economy. While September was the second consecutive month for which the CCI failed to beat its year-earlier value, it is not unreasonable to expect this pattern to recur for the remainder of 2013. Let’s be clear, however, Rhode Island’s rate of growth may well slow during the fourth quarter, but a considerable amount of economic momentum exists at present. In light of this, bizarre assertions suggesting the Rhode Island is closer to neutral than drive are totally without any foundation in actual data.

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

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
70	55	74

Historical CCI Values

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.