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.
Rhode Island’s economy is on a tear, kind of. After stumbling somewhat in the second quarter of 2014, the pace of this recovery picked up noticeably in the third quarter, as the Current Conditions Index managed to reach and sustain a value of 75 for all three months of that quarter. This performance is significant for a couple of reasons. First, and foremost, the August CCI exceeded its year-earlier value, something we hadn’t witnessed in twelve months. Second, the string of 75 values were the highest recorded in 2014, outpacing earlier-year values of 50, 58, and 67. The gray area, however, is that September’s CCI value only matched its value from last September, failing to extend the string of yearly improvements. But this is Rhode Island, where nothing economic is ever all that easy. So let me modify my recent criterion, actually soften it a bit, to apply to Rhode Island’s current situation: we have now matched or exceeded year-earlier CCI values for two consecutive months.
Our transition from a period where the current recovery was becoming less broadly based into one where increased momentum is being sustained thus continues. That is a big deal, especially for this state. So,as we move into the fourth quarter of 2014, there is a fairly high probability that our state’s economic performance is not decoupling from the accelerating national economy after all.
In September, four of the five leading indicators contained within the Current Conditions Index improved. The sole leading indicator that failed to improve was Total Manufacturing Hours, which measures strength in our manufacturing sector. This indicator fell for the first time in over a year (-0.3%), following slower growth since June. While manufacturing employment rose, the length of the workweek fell slightly. As has been true for some time now, the Manufacturing Wage declined, for a seventh consecutive time in September, by a bizarre and difficult to believe 6.6 percent. Were the BLS to conduct a direct survey of the Manufacturing Wage here my guess is that its actual level would be well below their inflated estimates over the past few years.
Single-Unit Permits, which reflects new home construction, had declined in August by 8.7 percent (year-over-year) after a string of strong performances. This volatile indicator rose by a mind-boggling 36.7 percent in September relative to its value last year. So, while the momentum derived from Rhode Island’s goods-producing sector may be moderating, weakness in manufacturing is being at least partially offset by strength in housing.
New Claims, which is a leading labor market indicator, fell by 7.4 percent in September, breaking a string of two consecutive double-digit declines. This indicator has now improved for six of the past seven months, a very healthy sign as we move into the fourth quarter. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, rose for the third consecutive month (+2.3%). Its rate of growth has been increasing over this three-month stretch, another positive sign as we move forward. Finally, US Consumer Sentiment rose in September (+8.7%), its second increase following a string of three consecutive declines.
Retail Sales remained strong in September, increasing by 4.7 percent compared to a year ago. This indicator has now improved for eight of the last ten months. Private Service-Producing Employment rose by 1.6 percent in September, with growth slowing over the past three months. Not surprisingly, Government Employment failed to improve once again. For September, it declined by 0.7 percent. Its recent performance strongly points to it having bottomed at 60,000. Benefit Exhaustions, which reflects longer-term unemployment, fell 12.3 percent relative to a year ago. September marked the fifth double-digit improvement for this indicator in the last six months.
Finally, Rhode Island’s Labor Force rose by 0.5 percent versus a year ago, although it declined relative to August. Along with this, our Unemployment Rate remained at 7.6 percent, third nationally.
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Historical Annual CCI Values
Copyright © 2008,2009, 2010Leonard Lardaro, Ph.D. All rights reserved.