Rhode Island Current Conditions Index

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:

FEBRUARY 2017: 83

The first quarter of 2016 wasn’t exactly stellar. And, while we had been led to believe that the second half of last year was a period of economic acceleration, as it turned out, data revisions eliminated most of the strength that we thought had occurred. The good news, though, is that Rhode Island has begun 2017 on a highly positive note, reminiscent of the momentum we previously thought we experienced at the end of last year. Better late than never, I guess!

The Current Conditions Index for February was 83, higher than any value in 2016 (although we previously thought we attained this), as ten of the twelve CCI indicators improved. Better yet, the CCI has now exceeded its year-earlier value for the most recent three months and four of the last six months. Momentum is definitely accelerating, perhaps back to where we thought it was at the end of last year. Of the five leading indicators contained in the CCI, four improved, although three of those had fairly easy comps a year ago.

The sole leading indicator that failed to improve, Employment Service Jobs, includes temporary employment and is a leading indicator of future employment. It was the greatest disappointment among all revised indicators, and it clearly continues to disappoint. The last time this indicator improved was March of 2016. This indicator should be monitored, since its continuing deterioration suggests a weakening in future employment growth.

Government Employment	0.3	Y
US Consumer Sentiment	5.1	Y
Single-Unit Permits	22.9	Y
Retail Sales	2.5	Y
Employment Services Jobs	-3.2
Priv. Serv-Prod Employment	1.0	Y
Total Manufacturing Hours	0.9	Y
Manufacturing Wage	5.5	Y
Labor Force	0.0
Benefit Exhaustions	-17.8	Y
New Claims	-30.2	Y
Unemployment Rate (change)	-0.9	Y
Y = Improved Value

For the third consecutive month, both indicators reflecting Rhode Island’s goods-producing sector improved. Total Manufacturing Hours, a proxy for manufacturing output, rose by 0.9 percent, a deceleration in growth from the prior two months. February’s improvement in this indicator emerges partially from a relatively easy comp last February. The main driver of its improvement was a longer workweek. Combine this with the failure of Employment Service Jobs to improve and one sees a possible trend where businesses may begin substituting additional hours in place of increasing employment. Single-Unit Permits also rose sharply this month (+22.9%), in spite of a very difficult comp last February. February was the third consecutive improvement in this indicator. If mortgage rates continue to rise and the restricted supply of houses on the market causes higher home prices to persist, future strength in this indicator may not materialize.

US Consumer Sentiment improved in February (+5.1%), its fourth consecutive increase, something very likely tied to economic optimism that has been associated with the outcome of the presidential election. New Claims, the timeliest measure of layoffs, fell dramatically in February (-30.2%), its sixth improvement in the last seven months. It had a fairly easy comp from last year.

Government Employment continues to remain above 60,000, which it has now done for over a year. Sustaining this level, which had largely been the result of rising federal government employment, was driven by higher state and local government employment in February. Private Service-Producing Employment growth has been somewhat volatile of late. For both of the most recent two months, it has risen by 1 percent, which is close to its highest rate of growth since last July. Retail Sales did well in February, rising by 2.5 percent compared to a year ago. After rising sharply last month, Benefit Exhaustions showed a noticeably improvement in February (-17.8%), resuming its longer-term downtrend.

The year-over-year performance of Rhode Island’s Labor Force, which I continue to view as a train wreck, not only failed to improve during all of 2016, it has yet to improve this year. At least the year-over-year change for February was 0. Improvement hasn’t occurred since April of 2014! At least the February Unemployment Rate decline, for once, occurred for the right reasons. Pay no attention to its move below the US rate.

THE BOTTOM LINE

As national economic momentum is accelerating, so too is that for Rhode Island. There are limits to US growth, though, given that we are close to full employment and monetary tightening will continue. That’s not terribly good news for Rhode Island, given our confirmed status as the proverbial canary in the coal mine. While our elected officials obsess over our jobless rate falling below the US rate, they refuse to acknowledge the primary reason for how it got there — a Labor Force whose level continues to fall off a cliff. We remain unprepared for slowing US growth. This would be a good time for them to go into crisis mode. The problem is, they don’t know how.

Monthly CCI Values (red = recession)
(Note: These are revised values. Original reports sometimes specify different CCI values, based on originally released data.

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
1983	42	58	58	67	75	83	83	75	83	83	83	92
1984	100	92	100	100	100	100	100	92	100	92	92	83
1985	67	75	75	75	67	75	67	50	50	58	83	67
1986	75	83	100	92	92	83	92	92	92	92	92	67
1987	67	67	58	58	67	75	75	75	75	67	75	75
1988	83	83	75	67	67	67	58	50	67	58	50	58
1989	67	50	50	33	58	33	25	25	25	33	33	33
1990	25	25	25	25	17	17	17	17	33	17	25	25
1991	25	17	17	8	25	17	25	25	25	33	17	17
1992	42	42	58	75	75	83	75	67	67	83	83	92
1993	75	83	67	67	83	67	75	75	75	58	42	58
1994	58	67	67	58	58	75	67	67	67	67	83	75
1995	58	58	58	67	50	42	42	42	58	33	67	42
1996	50	42	75	75	67	75	75	67	75	92	83	92
1997	100	92	83	75	67	75	75	75	83	75	92	83
1998	83	75	75	75	75	75	75	67	58	75	75	50
1999	83	75	75	83	67	83	75	75	92	75	83	58
2000	83	83	83	67	42	50	58	50	58	67	67	67
2001	42	33	25	17	33	50	25	33	33	42	33	42
2002	58	75	67	58	42	33	50	50	58	67	67	50
2003	50	50	50	58	58	58	83	67	83	75	92	67
2004	67	67	58	67	58	58	67	67	67	58	50	67
2005	50	67	50	50	42	75	58	67	42	58	58	67
2006	58	58	67	58	33	50	33	58	75	83	58	67
2007	50	50	33	33	58	50	33	33	17	17	8	25
2008	8	8	8	17	8	0	8	0	8	0	8	8
2009	17	8	0	8	17	33	17	42	33	42	50	33
2010	42	58	67	67	75	75	83	83	67	67	75	83
2011	50	67	67	58	50	58	58	42	50	50	58	50
2012	58	50	58/75	50/75	58/67	67/75	50/58	67/75	50/58	75/83	75/83	92
2013	75	67	83	67	83	75	75	67	7 5	75	67	75
2014	67	67	58	58	67	50	67	67	75	67	58	67
2015	58	58	67	58	67	75	75	92	83	67	75	58
2016	58	67	50	42	50	42	67	75	75	50	58	75
2017	75	83

You can download monthly reports in PDF format starting
with January 1999 by clicking on the monthly index value.

Historical Annual CCI Values

1980	1981	1982	1983	1984	1985	1986	1987	1988	1989
42	54	33	74	96	67	88	69	65	39
1990	1991	1992	1993	1994	1995	1996	1997	1998	1999
22	21	70	69	67	51	72	81	72	77
2000	2001	2002	2003	2004	2005	2006	2007	2008	2009
65	39	56	66	63	57	54	40	7	24
2010	2011	2012	2013	2014	2015	2016
70	55	74	76	64

Monthly CCI Values (red = recession) (Note: These are revised values. Original reports sometimes specify different CCI values, based on originally released data.

Historical Annual CCI Values

Monthly CCI Values (red = recession)
(Note: These are revised values. Original reports sometimes specify different CCI values, based on originally released data.