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.
It wasn’t too hard to see what December would bring for Rhode Island’s economy: like the nation, Rhode Island slowed a bit further, as weakness in our goods-producing sector continued, becoming a bit worse than was the case in November. Ironically, almost everyone here overlooked this entirely and instead chose to celebrate the decline in our state’s jobless rate to 5.1 percent, presuming as they so often do that the Unemployment Rate by itself is a sufficient basis with which to characterize our state’s economic performance. Obviously, that presumption is false for two reasons. First, while our jobless rate was at its lowest value in many years, recent rates are not comparable to rates in earlier years since at present, participation rates are much lower than they were back then. Perhaps more importantly, to accurately assess economic performance, it is necessary to evaluate the performance of a broadly based set of indicators, which is precisely what the Current Conditions Index does.
For December, the Current Conditions Index fell from its November value of 75 all the way back to 58, its level in April, and a continuation of its downward trajectory from the August high of 92, as only seven of the twelve CCI indicators improved. In a sign of what we might see more frequently going into 2016, the CCI this month failed to beat its level from a year ago, ending a streak of nine consecutive months for which we had either matched or exceeded year-earlier values.
There was some good news for December. The weakness in the CCI value largely reflected that fact that overall, our negatives grew relative to our positives. This should not come as a total surprise, however, given the slowdown in growth nationally. As has been true for several months now, much of our recent weakness continues to be concentrated in our state’s goods-producing sector, in manufacturing and new home construction.
TTotal Manufacturing Hours, a measure of manufacturing sector strength, fell by 2.9 percent in December, its seventh decline in the last nine months and its worst decline in well over a year. Along with this, the Manufacturing Wage declined yet again, this month by 3.3 percent. New home construction, in terms of Single-Unit Permits, fell by 11.5 percent in December, partly the result of a difficult comp a year ago. This follows a bizarre increase of 58.6 percent in November. I still don’t understand what is happening with this indicator. US Consumer Sentiment fell for the first time in fifteen months (-1.0%).
Among December’s seven improving indicators were only two of the CCI’s five leading indicators. Employment Service Jobs, which includes temporary employment and is a prerequisite to employment growth, rose by 5.1 percent, among its highest growth rates in quite some time. This indicator has clearly strengthened since June. Finally, New Claims, a leading labor market indicator that reflects layoffs, fell by 13.3 percent in December, assisted by a very easy comp one year ago.
Retail Sales growth reaccelerated in December (+5.5%), making this its nineteenth consecutive improvement. Private Service-Producing Employment, one of the indicators whose monthly growth has not slowed of late, rose by another 2.4 percent in December. Government Employment fell again (-1.3%). Benefit Exhaustions, which reflects longer-term unemployment, declined by 32.7 percent relative to last year. While our Labor Force managed to sustain its recent uptrend on a yearly but not monthly basis (+1.1%), it fell back to its April level. Because of this, my major concern moving forward continues to be the declines in both our employment rate and labor force participation rate that began in July. Bothremain well below their recession levels. So, once again, Rhode Island finds its Unemployment Rate falling for the wrong reasons. Any comparison of the current and 2007 jobless rates is purely spurious.
You can download monthly reports
in PDF format starting
Historical Annual CCI Values
Copyright © 2014 Leonard Lardaro, Ph.D. All rights reserved.