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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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Now that the labor market data for Rhode Island have been revised, we have a much better understanding of actual changes that occurred over the past few years. While many of the revisions were highly negative, most notably the employment measures, ironically annual rates of growth upon which the Current Conditions Index is based, actually improved. This highlights one of the critical secrets of Rhode Island’s recent statistical “success:” small denominators. Downward revisions to values reduce the base upon which growth rates for subsequent periods are calculated. This has been occurring with real GDP growth for several years now and has apparently spilled over to other measures, such as individual indicators in the CCI.
Before I detail this month’s CCI results in light of the newly revised data, let me state that this was one of the most bizarre revisions of historical data that I can recall in a very long time. First the depressing employment numbers: According to the data revisions, payroll employment, the number of jobs in RI was 7,300 lower than the earlier data for December of 2018. For January, we returned to our prior peak in December of 2006! Resident employment, the number of employed RI residents, fared little better - its December 2018 level was 5,400 less. It never was above its prior peak. The employment rate, the percentage of our working-age population that is employed was also revised downward. In addition to this (as if that’s not bad enough), the Labor Force was revised lower for every month since January of 2017. Total Manufacturing Hours and Private Service-Producing Employment were also revised lower. What was revised higher? Think Redundancy Island (i.e., RI) - Government Employment. Big surprise!
What was bizarre? As you can see from the table of CCI values below, many of last year’s CCI values were revised higher and, ready for this … the CCI attained its maximum of 100 twice last year. In fact, for nine of the twelve months last year, the CCI was revised higher (typically by +1 improving indicator).
Rhode Island begins 2019 on a positive note, kind of. The CCI rose from its December value of 58 to 75, as nine of its twelve indicators improved. In spite of this, we failed to improve on the year-ago CCI value, something likely to recur numerous times this year. Weakness that began in May of last year appears to be continuing, which is evident in several of the CCI indicators. Overall, only two of the five leading indicators contained within the CCI improved. Employment Service Jobs, a leading indicator that includes temps, rose by 0.8 percent in January, but based on upward revisions in 2017, rates of growth in 2018 have been declining since August. New Claims, the most timely measure of layoffs, improved in January (-4.8%), its third improvement in the last seven months. It remains unclear whether it will resume an downtrend anytime this year.
US Consumer Sentiment fell again for the fourth time in the last six months, no doubt hurt by the shutdown. Rhode Island’s goods-producing sector fared poorly again in January. Single-Unit Permits, a measure of new home construction, fell yet again (-6.8%), its seventh decline in the last eight months. Declining interest rates will likely not give as much of a boost to this indicator as you might think (RI has a static population). Total Manufacturing Hours, a proxy for manufacturing output, has now declined for the most recent four months, with the rate of decline accelerating dramatically over the past two months. Even downward revisions in 2017 could not help this indicator. The Manufacturing Wage actually rose in January (+1.8%), but this was only its first increase since September.
Our state’s Labor Force reached its most recent peak in October and has plateaued at that value ever since, but at declining rates of annual growth. Along with this, the labor force participation rate also fell in January. The Unemployment Rate has remained at 4 percent since October, certainly not the result of robust job growth. Retail Sales grew again in January (+1.2%), Government Employment rose from its level a year ago for a fifth consecutive month (+0.7%), Private Service-Producing Employment growth remained weak (+0.5%), and Benefit Exhaustions, the timeliest measure of longer-term unemployment, fell sharply (-22.1%).
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