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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 economic performance at the end of 2020 was largely the same as it has been throughout the pandemic: Severe contraction compared to a year ago, sprinkled with a few glimmers of light for the most recent few months. Was this year’s performance merely a reflection of what is happening nationally or is there something else at work? While we, like everyone else, were literally dragged into shutting large parts of our state’s economy down, where we find ourselves now must also be judged relative to how well our state’s economy was performing prior to the pandemic. As I have noted countless times over the last couple of years, Rhode Island’s economy has remained largely stuck at its 2016 level (based on real GDP). Resident employment, even before the pandemic hit, remained below its level of December 2006 - more than a decade earlier! The statistical deceivers in our state hid behind an extremely low jobless rate, but that was a byproduct of mediocre growth in resident employment coupled with a decade long decline in our state’s Labor Force. And, while Rhode Island’s economy is clearly FILO, we were spared the FI portion this time (as everyone fell sharply at the same time), but since our elected officials (not to be confused with leaders) have effectively wasted this crisis, as they did in 2008, we have failed to reinvent ourselves to make our state’s economy more competitive and linked to national growth than it has been in a while. In other words, the LO remains. None of our elected officials have yet to define specifically what Rhode Island’s economic niche is and how to energize and possibly redefine our engines of growth. This would certainly be an opportune time to do so, as our state continues to rank at or near the bottom for all business climate surveys. Perhaps there should be a new show that replaces Hawaii Five-0: Rhode Island 50. In the future, we must reinvent our state’s economy and business climate. Sadly, this state is run exactly the same it has been for forty years, even though the economic world has changed. For this reason, I continue to believe it will take three to five years for Rhode Island to return to where it was pre-pandemic, and that wasn’t all that great!
This month, I am doing something a bit different. The table above is not for year-over-year comparisons of the CCI indicators, but a contrast of February with December of 2020. The depth of the decline in our state’s economy is shocking. Only three CCI indicators have improved relative to February, the same three that have done so for months now. Look at employment (bottom): Both measures have decline by over 40,000 since February! It seems we don’t do terribly well in good times, but manage to fall precipitously when things get bad, same as 2008. There might be some good news on the horizon. First, we will soon get the revised lab
There might be some good news on the horizon. First, we will soon get the revised labor market data for 2020. It might (key word) show that the declines were not as bad as what we are seeing now. Second, the monthly based CCI again reached 58, an expansion value, for the fourth time in the last five months. So maybe we are in or moving towards the early stages of crawling out of the depth of our declines. If so, where are we headed? More slow and lagging growth with our elected officials continuing to hide behind misleading statistics, telling us always to focus on the positive. That’s not leadership, it’s denial, a major reason why our economy has continued to do so badly. Let me summarize this state of affairs with two words: Endogenous Mediocrity: Rhode Island’s economic mediocrity is a logical and predictable outcome of the way things are and are not done here. ving towards the early stages of crawling out of the depth of our declines. If so, where are we headed? More slow and lagging growth with our elected officials cochangeAugust, reaching an expansion val | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
