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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:
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. |
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Rhode Island’s economy continued to slow in November, but unlike last month, there were even more signs of a slowing. While the Current Conditions Index was 67 in November, with eight of twelve indicators improving, rates of growth in several indicators continued to slow and in what bodes badly for the coming months, all four of the CCI indicators that failed to improve in November were leading economic indicators. All of this calls into question how rapid the pace of economic growth will be through the end of 2022 and into 2023. This conclusion was further enhanced by the performance of the Monthly CCI (see bottom right). This alternative way of viewing Rhode Island’s economic momentum has been signaling potential problems since April of this year. For November, the Monthly CCI fell all the way to 17, as only two of the twelve indicators improved relative to October.
November’s data, and to some extent that for October, appear to be signaling weakness in the coming months. In November, New Claims for Unemployment Insurance, a leading indicator of layoffs and the best measure we have of layoffs in this state, rose sharply for the first time since the height of the pandemic, even with a very easy comp. Retail Sales, the star performer of the twelve CCI indicators, has been slowing noticeably since August, posting very slow growth in November. Single-Unit Permits, which reflect new home construction, have dramatically weakened, resuming the downtrend that began in December of last year. Employment Service Jobs, a leading indicator of employment, has also fallen now for two consecutive months while US Consumer Sentiment also remained weak this month.
The reason I am so concerned about the behavior of these indicators is that none of the first three are survey based, although Employment Service Jobs is survey based, so it might be revised when the rebenchmarked data appear soon. In addition to this, for November, both the Employment Rate (percent of the resident population that is employed) and the Labor Force Participation Rate (percent of the population in the Labor Force) both declined as well. As for the latter, this caused the participation-adjusted Unemployment Rate to rise from 4.5 percent all the way to 4.9 percent versus the naïve (official) rate which also rose, but to 3.6 percent. So, the question now is whether Rhode Island’s performance in August and September (when the CCI was 92) was a fluke or whether and when we return to those levels. In the context of a slowing national economy, the answer to this question might not be that difficult to ascertain. At least we can still say that November was the seventeenth consecutive month for which Rhode Island’s economy expanded (the CCI was above 50). And, it shouldn’t be lost on all of this that Rhode Island’s manufacturing sector hung in there during November, as Total Manufacturing Hours rose again (+4.6%) and the Manufacturing Wage increased by 4.5 percent.
For the other CCI indicators, Government Employment rose as it has for every month since April of last year (+1.6%), Private Service-Producing Employment also increased (+1.9%) but showed a slowing rate of improvement, and Benefit Exhaustions, which reflect long-term unemployment, continued to drop sharply (-50.6%).
The performance of the Monthly CCI Indicator slipped sharply in November, all the way to 17, providing further evidence of continuing weakness in annual changes. Future calls, however, are made more difficult by the fact that October and November employment numbers will likely be changed with rebenchmarking. So, it remains too premature to make any calls that Rhode Island is witnessing the first stage of LO (Last Out). Our saving grace might prove to be the large unspent federal funds our state received. When spent these should boost our rate of growth through much of 2023.
The reason I am so concerned about the behavior of these indicators is that none ours rose again (+4.6%) and the Manufacturing Wage in | ||
