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 performed fairly well during the first two months of 2016. Since then, it has underperformed even the moderate-at-best year of 2015. The Current Conditions Index for May “improved” somewhat, moving from 42 in April, a contraction value, back to its neutral value of 50. While the Verizon strike negatively impacted the April value to some extent, ironically, the new data showed that Single-Unit Permits actually failed to improve in April (viewed as a negative), offsetting the strike-related impact on New Claims. So, for the most recent three months, the CCI has failed to exceed its neutral value - a troubling trend, to state it mildly. Put all of this into context, at present, we find ourselves increasingly unable to sustain even what has to be viewed as the rather modest pace of economic activity last year. Should this slowing continue, we might ironically come to view 2015 as a “strong” year. I guess everything really is relative!
That Rhode Island’s economy is slowing should come as no surprise, given that the US economy has also been faltering somewhat over the past few months. However, the word “faltering” means very different things for the US and Rhode Island. The US economy is still growing, albeit below its long-term trend. For Rhode Island, the recent values of the Current Conditions Index indicate that we have shifted gears, so to speak. If there are five gears, Rhode Island finds itself downshifting from third potentially into second gear. The transition (clutching), of course, is the string of neutral values (equal to 50).
The good news, if there is any, is that the pronounced deterioration in the performances of several key indicators that is consistent with declining cyclical momentum appears to have moderated a bit in May. The question remains: Has our state’s cyclical momentum disappeared?
Employment Service Jobs, which includes temporary employment and is a prerequisite to employment growth, fell by a hefty 8.8 percent in May, its third consecutive decline. Manufacturing employment rose (albeit barely), which was enough to offset the effect of a declining workweek, allowing Total Manufacturing Hours, a proxy for manufacturing output, to rise slightly for only its third increase in over a year. Along with this, New Claims, a leading labor market indicator that reflects layoffs, rose (+3%) in May, although it had a difficult comp a year ago. Finally, Retail Sales, the CCI’s star performer for several years, declined by 5.4 percent in May, its worst performance in over a year. It has now declined for four of the past five months.
Overall, three of the five leading indicators contained in the CCI improved in May. Two of those had fairly easy comps from a year ago. Of the remaining leading indicators, Single-Unit Permits rose sharply (+19.4%) coming off a decline of 15 percent in 2015, although its level remained below 1,000 annual units. US Consumer Sentiment rose by 4.8 percent in May, ending a string of five consecutive declines.
Even with this moderating performance of the key cyclical indicators I have been focusing on of late, issues remained with several other indicators. Our state’s Labor Force continues to decrease. May’s decline of 0.7 percent was its twenty-fourth year-over-year decline. As a result, Rhode Island’s Unemployment Rate continues to fall largely for all the wrong reasons.
One pleasant surprise this month was another increase in the Manufacturing Wage, which grew by 2.6 percent versus last May, only its third increase in a very long time. Private Service-Producing Employment, an indicator whose growth rate had accelerated of late, actually decreased in May (-0.1%). Government Employment fell yet again, by 0.8 percent in May, but remained at 60,000. Finally, Benefit Exhaustions, which reflects longer-term unemployment, fell by 2 percent, its slowest rate of improvement in several years.
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in PDF format starting
Historical Annual CCI Values
Copyright © 2014 Leonard Lardaro, Ph.D. All rights reserved.