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:

April’s economic data provided us with a reprieve, kind of, and for now. Virtually anything following the positively horrible March data would have been an improvement, and April’s data was a clear improvement in its own right — a strong 50, even though the Current Conditions Index didn’t move above its neutral value.

 Cause for concern about Rhode Island’s economy remains. The CCI has been at a neutral or a contraction value for every month since December. More troubling is the fact that all of the 2025 CCI’s values have lagged their corresponding values from a year ago. And once again this month, only one of the five leading economic indicators contained in the CCI improved, and it did so with a relatively easy comp from last year.

 In spite of all of these factors, there were a few things to cheer about this month. First and foremost, Retail Sales, a critical economic indicator that has shown strength through almost the entire post-pandemic period, rose sharply in April, by 7.3 percent. In spite of a couple of months of weakness, its uptrend remains intact. Was this month’s strength caused partly by persons “front loading,” as the tariff war was beginning to take effect? While that is very likely to be a part of the strong number, I suspect it would have been an improving value this month in spite of the tariff war. The question moving forward is how much this month’s strength will “steal” sales from the upcoming months. If the national economy is any guide, that will be a factor. The other important performance this month concerns Employment Service Jobs, a leading labor market indicator that includes temps. It too rose sharply in April (+6.4%), ending a very long string of declines.

 While these two indicator performances were significant, strong performances among the remaining CCI indicators were largely absent. For now, at least, it appears that the horrendous March data was a fluke. But only time will tell.

 Another concern I have is related to Rhode Island’s manufacturing sector. Clearly, the trade war, which is largely concentrated on goods imports, is negatively impacting this sector. However, manufacturing here was weakening prior to April, which was its fifth consecutive annal decline. For April, manufacturing employment remained unchanged while the workweek was shorter—not a positive sign moving forward, as that suggests falling employment in the coming months. As Total Manufacturing Hours fell by 2.1 percent in April, the Manufacturing Wage rose by 2.5 percent, its first annual increase after six consecutive annual declines. Some of this is compositional (above-average portions gained employment relative to below-average portions), but sustained declines in this indicator are indeed very rare.

Looking at the remaining April data, we see a mixed to weak overall performance. Once again, Rhode Island’s Labor Force fell in April relative to a year ago, as did both the labor force participation rate and the employment rate. As a result, the Participation-Adjusted Unemployment Rate rose to 6.3 percent in April, well above the official rate of 4.9 percent, which given the declining participation rate and labor force trends, lacks credibility as an indicator of Rhode Island’s labor market slack.

Private Service Providing Employment, which rose by 0.5 percent in April relative to a year ago, continued a string of sub-one-percent growth rates that date back to last June. New Claims, which reflects layoffs, rose at a double-digit rate (+23.3%), for its eighth overall increase in the last twelve months. Benefit Exhaustions, which indicate long-term unemployment, fell in April (-3.6%) following a sharp rise last month (+44.5%). This was its first improvement in well over a year. Government Employment rose (+1.1%), following a “blip” decline last month, as federal government employment actually rose slightly, local government employment was constant, but state government employment increased. US Consumer Sentiment dropped even more sharply than last month (-32.1%), and Single-Unit Permits, reflective of new home construction, fell (-7.5%) for a second consecutive month and a fourth time in the last six months. 

 So, Rhode Island could be in the early stages of a recession, although this month’s data suggests we might instead be on a recession precipice. Keep in mind that if we are in a recession, that will not necessarily mean that the levels of key indicators have fallen dramatically. Instead, it will reflect that current levels, even though they might remain “high,” would continue to fall relative to their values a year (or month) ago.