Tuesday, August 12, 2014

Current Conditions Index report: June 2014

This is an abbreviated version of the June Current Conditions Index report. The complete report, which includes tables, along with past reports, can be found on my website: www.llardaro.com .
 
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Just when it appeared that Rhode Island’s economy was beginning to re-accelerate, bringing back memories of late 2012, along comes June’s data that abruptly shatters that notion and then some. The June Current Conditions Index value fell all the way back to its neutral value of 50, as only six of the twelve CCI indicators improved. Worse yet, April’s value that had been 58 has been revised down to 50 as well. Not exactly life in the fast lane!

To say that Rhode Island’s overall performance in 2014 has been somewhat disappointing has now become an understatement. Not only did we never get the post-winter bounce we were hoping for, even the good-weather months are proving to be very disappointing. What I find perplexing about Rhode Island’s most recent performance is that in spite of an improving national economy, we continue to flounder.

Perhaps the most pressing issue now is whether Rhode Island has begun to decouple from the accelerating national economy. Apparently, Rhode Island’s negatives are finally catching up to its positives, increasingly diminishing overall momentum. This is part of the reason why Rhode Island has been unable to reduce its Unemployment Rate to a level that would end its prolonged stretch as the state with the highest jobless rate. Think about this for a moment - not only does Rhode Island lag in terms of its relative performance, if recent trends continue, it will begin to lag in terms of its absolute performance as well. I now characterize Rhode Island’s performance as moving from precarious to tenuous, with June marking the eleventh consecutive month where the CCI has failed to beat its year-earlier value.

For June, only two of the five leading indicators contained within the Current Conditions Index improved, although both did so at healthy rates. Single-Unit Permits, which reflect new home construction, turned in yet another strong performance in June, rising by 23.7 percent relative to last June. Total Manufacturing Hours, which measures strength in our manufacturing sector, rose sharply again in June (+4.3%), as both the length of the workweek rose and manufacturing employment increased. Oddly, in spite of this continuing manufacturing momentum, the Manufacturing Wage actually declined for a fourth consecutive time in June, by 2.3 percent.

US Consumer Sentiment fell for the second consecutive month (-1.6%) following a string of five consecutive increases. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, declined sharply in June, by 4.1 percent, its seventh consecutive decline. I continue to view changes in this indicator somewhat suspiciously. The biggest surprises for June, which contributed a great deal to the CCI’s neutral value of 50, were increases in both New Claims for Unemployment Insurance, the timeliest measure of layoffs, and Benefit Exhaustions, which reflects longer-term unemployment. Of these, New Claims, which is a leading indicator, rose at an alarming rate, 21.8 percent relative to last June. It is not clear whether the recent improvements in this indicator will prove to be sustainable. Benefit Exhaustions increased by 10 percent relative to a year ago, following two consecutive months of double-digit improvement.
 

Friday, July 18, 2014

Curent Conditions Index: May 2014

This is an abbreviated version of the May Current Conditions Index report. The complete report, which includes tables, along with past reports, can be found on my website: www.llardaro.com .
 
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Rhode Island’s economy bounced back a bit from its earlier-year woes in May. Following a string of three consecutive 58 values, the Current Conditions Index rose to 67 in May, matching its January value. While Rhode Island’s overall performance in 2014 has been somewhat disappointing, perhaps the May bounce will turn out to be the beginning of a prolonged period of stronger economic activity driven in large part by an improving national economy. Clearly, there have been a number of positives during the first part of this year, most notably improvements in both payroll and resident employment, and along with the latter, a full percentage point decline in our state’s Unemployment Rate. Yet in spite of this good news, Rhode Island’s performance continues to lag in terms of several metrics, the most obvious being the #1 national ranking of our state’s jobless rate that has been sustained for far too long a period. So, while our state’s absolute economic performance continues to improve, its relative performance remains problematic. Sadly, this trend hardly something new. I will continue to describe the overall economic performance of Rhode Island’s economy as precarious, citing the fact that May was the tenth consecutive month where the CCI failed to improve relative to its year-earlier value.  

For May, only three of the five leading indicators contained within the Current Conditions Index improved, but two of those did so at healthy rates. Fortunately, the two that failed to improve do not necessarily signal any real weakness in our state’s economy or the possibility of a transition to slower growth. US Consumer Sentiment fell by 3.1 percent in May, ending a string of five consecutive increases. This decline very likely reflected stock market performance that has since reversed. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, fell by another 1.1 percent in May, its sixth consecutive decline. Suffice it to say that I continue to view changes in this indicator somewhat suspiciously.

Single-Unit Permits, which reflect new home construction, and was adversely impacted by winter weather earlier in the year, turned in a strong performance in May, rising by 9 percent relative to last May. Total Manufacturing Hours, which measures strength in our manufacturing sector, rose sharply again in May (+3.1%), as both the length of the workweek rose and manufacturing employment increased by 900. Oddly, in spite of this manufacturing momentum, the Manufacturing Wage actually declined for a third time in May, by 2.3 percent. New Claims for Unemployment Insurance, the timeliest measure of layoffs, declined, albeit slowly in May, for a third consecutive month and sixth time in the last seven months. In spite of its recent improvements, it is not yet clear whether this indicator has resumed the longer-term downtrend that will be critical to our sustaining May’s overall momentum in the coming months.

Retail Sales remained strong in May, rising by just under 5 percent compared to a year ago. This indicator has now improved for eleven of the last twelve months. Based on its recent performance, it is one of the strongest CCI indicators. Benefit Exhaustions, which reflects longer-term unemployment, improved at a double-digit rate in May (-13.1%), registering its second consecutive double-digit improvement.
 
 

Thursday, June 12, 2014

Current Conditions Index: April 2014

This is an abbreviated version of the April Current Conditions Index report. The complete report, which includes tables, along with past reports, can be found on my website: www.llardaro.com .
 
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The non-event bounce back from the adverse effects of the harsh February weather we witnessed in March apparently continued into April. What a way to begin the new quarter! The April Current Conditions Index remained stuck at its same value since February, 58. This extends the string of consecutive months where the CCI has failed to improve relative to its year-earlier value to nine. Looking at the CCI for all of 2014, one has to conclude that this year is turning out to be a real disappointment. If I had to summarize Rhode Island’s current economic performance with one word, that word would be precarious.

This should not be viewed as indicating that there are no positive forces at work here. Look at how much payroll employment has been rising: for March, Rhode Island added 7,600 jobs while only losing 900, for a net change of 6,700. Clearly, the pace of job growth has accelerated here of late while job loss has diminished to levels far below what we experienced during The Great Recession. Yet in spite of this, and recent healthy declines in our state’s Unemployment Rate, we remain well below our prior employment peak of December of 2006 and our jobless rate is still the highest in the nation. Worse yet, Rhode Island’s image has suffered nationally: we have now come to be known as “the unemployment rate state.” Not only can we do better than this, we have to! The clock continues to run. Some promising legislative changes have emerged from the Rhode Island House. Let’s hope the Senate follows suit.

For April, only three of the five leading indicators contained within the Current Conditions Index improved, some by healthy rates.  The two that failed to improve do not signal any real weakness or transition to noticeably slower growth. Single-Unit Permits, which reflect new home construction, the indicator most adversely impacted by winter weather, stumbled in April, declining by 4.5 percent after bouncing back with a healthy 20.2 percent increase in March. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, fell 1.0 percent in April, its fifth consecutive decline. Let’s just say I continue to view changes in this indicator suspiciously.

New Claims for Unemployment Insurance, the timeliest measure of layoffs, declined for the second consecutive month and fifth time in the last seven months. In spite of these recent improvements, it is not yet clear whether this indicator has resumed the longer-term downtrend that will be needed if we are to improve activity levels significantly in coming months. Total Manufacturing Hours, which measures strength in our manufacturing sector, rose sharply in April (+4.0%), as the workweek rose by a full hour and manufacturing employment increased by 600. It was odd to see that in spite of this manufacturing momentum, the Manufacturing Wage actually fell by 1.9 percent in April.  Finally, US Consumer Sentiment rose by 10 percent in April, its fifth increase following three consecutive months of declines.
 
 

Tuesday, May 13, 2014

Current Conditions Index: March 2014


This is an abbreviated version of the March Current Conditions Index report. The full report, which includes tables, along with past reports, can be found on my website: www.llardaro.com .
 
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The much anticipated bounce back from the adverse effects of the harsh February weather turned out to be a non-event. While the indicators most obviously impacted by the weather improved as expected, several other indicators were far less accommodating, leaving the March Current Conditions Index stuck at the same value it attained in February, 58. Unfortunately, this extended the string of consecutive months where the CCI has failed to improve relative to its year-earlier value to eight.

New home construction, which came to a virtual standstill last month, returned to a more reasonable level. And Retail Sales, which should have felt weather effects, remained strong for both February and March. As we move farther beyond the uncertainties produced by winter weather, the underlying performance of Rhode Island’s economy is becoming more apparent. While the overall picture that emerges is mixed, we appear to have entered a period where our negatives are beginning to expand, increasingly offsetting the beneficial effects of the parts of our state’s economy that continue to exhibit strength. The result will be a period of yet slower growth overall which will at times mask some or a great deal of the positive momentum that exists within our state. While this is hardly the outcome we wanted to observe, it indicates that we can expect the present recovery to become even less broadly based should these trends persist. The good news, which is becoming more difficult to find, is that an accelerating rate of growth for the national economy will clearly benefit Rhode Island as we move through the remainder of 2014. How much we benefit, however, is a very different question. We may well see improvements in absolute terms (like the recent decline in our Unemployment Rate), but relative to other states, we will continue to lag (we remained #1 for joblessness in March).   

For March, four of the five leading indicators contained within the Current Conditions Index improved, some by healthy rates. Single-Unit Permits, which reflect new home construction, the indicator most adversely impacted by winter weather last month, bounced back with a 20.1 percent increase in March (returning to around 70 permits per month). New Claims for Unemployment Insurance, is the timeliest measure of layoffs, also turned in a strong performance, falling by 7.1 percent relative to last March. At present, it is not clear whether this indicator will resume its previous downtrend. Should it fail to, it would impart a decidedly negative bias to the momentum that exists at present. Total Manufacturing Hours, which measures strength in our manufacturing sector, sustained its strength in March (+2.3%), as a rise in employment offset the negative effect of a slight decline in the length of the workweek. US Consumer Sentiment rose by only 1.6 percent, but this was its fourth increase following three consecutive months of declines. The final leading indicator, Employment Service Jobs, which includes temporary employment and is a prerequisite to employment growth, fell  1.3 percent in March, its fourth consecutive decline. Let’s just say I continue to view changes in this indicator suspiciously.