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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

75

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.
getacro.gif (776 bytes)

 

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          

 

Copyright © 2014 Leonard Lardaro, Ph.D. All rights reserved.

 

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