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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:

JULY 2014: 75

 

 

As Rhode Island moves into the third quarter, it appears to have left the disappointing performance from the prior quarter behind - at least for now. The July Current Conditions Index jumped from its neutral value of 50 in June all the way to 75 for July, as nine of the twelve CCI indicators improved. Not only does this improvement come as welcome news for Rhode Island, the increase from June was somewhat expected. I noted last month that the two CCI indicators whose performance put a “nail in the coffin” for June’s CCI, Benefit Exhaustions and New Claims, had displayed bizarre increases that month that were not explainable by any of the obvious undercurrents in our state’s economy. As expected (with my fingers crossed), both went from double-digit rises last month (remember we want both of these to decline) to double-digit declines. So, while it is still accurate at this point to say that Rhode Island’s overall performance in 2014 has been disappointing, the July CCI provides us with a potential glimmer of hope that perhaps things here are beginning to strengthen after all as we move through the second half of 2014. Before we get carried away, it must be noted that this July’s CCI reading of 75, while a marked improvement over June, was still below the reading for last July, marking the twelfth consecutive month where the CCI has failed to beat its year-earlier value. I can certainly think of happier one-year anniversaries! So, as Rhode Island moves into the last half of 2014 the most pressing issue continues to be whether Rhode Island’s economic performance will ultimately decouple from the accelerating national economy.

 

In July, four of the five leading indicators contained within the Current Conditions Index improved, most doing so at healthy rates. Single-Unit Permits, which reflect new home construction, turned in a very strong performance for July, rising by 26.3 percent relative to its value last July. Total Manufacturing Hours, which measures strength in our manufacturing sector, rose sharply again in June (+3.6%), as both the length of the workweek and manufacturing employment displayed significant increases. Oddly, in spite of such strong and sustained manufacturing momentum, the Manufacturing Wage actually declined for a fifth consecutive time in July, by 4.3 percent.

 

Government Employment -0.7
US Consumer Sentiment -4.3
Single-Unit Permits 26.3 Y
Retail Sales 3.3 Y
Employment Services Jobs 1.2 Y
Priv. Serv-Prod Employment 2.1 Y
Total Manufacturing Hours 3.60 Y
Manufacturing Wage -4.3
Labor Force 0.5 Y
Benefit Exhaustions -30.2 Y
New Claims -17.2 Y
Unemployment Rate (change) -1.9 Y
Y = Improved Value

 

Two of the leading indicators that failed to improve last month did considerably better in July. New Claims, which is a leading labor market indicator, fell at a double-digit rate (-17.2%) after inexplicably rising at a double-digit rate in June, making it more likely that this indicator will resume a downtrend. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, rose for the first time since last November (+1.2%), halting a streak of seven consecutive declines. In spite of this good news for July, I continue to view changes in this indicator somewhat suspiciously. The sole leading indicator that failed to improve this month was US Consumer Sentiment, which declined for the third consecutive month (-4.3%) following a string of five consecutive increases.

 

Retail Sales remained strong in July, rising by 3.3 percent compared to a year ago. This indicator has now improved for seven of the last nine months. Private Service-Producing Employment rose by 2.1 percent in July, its strongest rate of growth in over a year. As has been the case for quite some time now, Government Employment fell once again, declining in July by 0.7 percent versus a year ago. Benefit Exhaustions, which reflects longer-term unemployment, reversed its strange double-digit increase of last month, falling by 30.2 percent relative to a year ago. July was the third double-digit improvement for this indicator in the last four months.

 

Finally, Rhode Island’s Labor Force rose by 0.5 percent versus a year ago in July, the same rate as for June. Along with this, our state’s Unemployment Rate fell to 7.7 percent, moving us to the highly coveted status of #3 nationally.


 

THE BOTTOM LINE

Based on the July CCI, the recent neutral values we observed may well prove to be aberrations. While it is too early to tell for certain at this point, it might be useful to invoke our state's motto: Hope.

Consistently beating prior-year performance will not only require that we sustain much of the momentum displayed this month, but it will be necessary to see improving Consumer Sentiment, which is likely, along with the resumption of a rising Manufacturing Wage, which may be less likely. Don’t expect to see improving Government Employment any time soon.

 

  

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 75   58 58 58 67 50 75          

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            
70 55 74 76            

 

Annual CCI Values

Copyright © 2008,2009, 2010Leonard Lardaro, Ph.D. All rights reserved.

 

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