Monday, October 13, 2014

Current Conditions Index: August 2014

This is an abbreviated version of the August 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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August will turn out to be the most significant month thus far in 2014 for two reasons. First, in August, Rhode Island was able to sustain the improved momentum we witnessed in July, as the Current Conditions Index matched its July value of 75, which had been its highest thus far in 2014. Second, and most importantly, August brought with it the one “signal” we were sorely in need of this year: after a string of twelve consecutive months where the CCI had failed to beat its year-earlier values, at long last, the CCI for August of this year exceeded its value from last August. So, the major negative related to consecutive disappointments in our state’s economic performance relative to a year ago has ended at twelve. The implication of both of these factors is critical: we appear to have transitioned from a period where the current recovery was becoming less broadly based into one where economic momentum is increasing. That, as the saying goes, is a big deal!

Along with this good news it is important to keep in mind the central role that our goods-producing sector has played: both housing and manufacturing have continued to move well beyond their cyclical troughs, helping us to sustain our fluctuating cyclical momentum. So, as Rhode Island moves farther into the second half of 2014, our state’s economic performance might not have decoupled from the accelerating national economy after all. Stay tuned!

In August, four of the five leading indicators contained within the Current Conditions Index improved. The one leading indicator that failed to improve, Single-Unit Permits, which reflects new home construction, had previously turned in a string of strong performances. This volatile indicator declined by 8.6 percent in August relative to its value last year.

Total Manufacturing Hours, which measures strength in our manufacturing sector, rose once again in August (+1.1%), but August growth was substantially slower than it was in July, as manufacturing employment rose but the length of the workweek fell slightly. As has been true for some time now, the Manufacturing Wage declined, for a sixth consecutive time in August, by a difficult to believe 4.6 percent.

New Claims, which is a leading labor market indicator, fell at a double-digit rate (-20.5%) for the second consecutive month, raising the likelihood that this indicator will resume a downward trend. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, rose for the second time since last November (+2.2%), growing at almost twice the July rate.  Finally, US Consumer Sentiment rose in August (+0.2%), ending a string of three consecutive declines.


Wednesday, September 10, 2014

Current Conditions Index: July 2014

This is an abbreviated version of the July 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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As Rhode Island moves into the third quarter, it appears to have left the disappointing performance from the prior quarter behind - at least for now. The July Current Conditions Index jumped from its neutral value of 50 in June all the way to 75 for July, as nine of the twelve CCI indicators improved. Not only does this improvement come as welcome news for Rhode Island, the increase from June was somewhat expected. I noted last month that the two CCI indicators whose performance put a “nail in the coffin” for June’s CCI, Benefit Exhaustions and New Claims, had displayed bizarre increases that month that were not explainable by any of the obvious undercurrents in our state’s economy. As expected (with my fingers crossed), both went from double-digit rises last month (remember we want both of these to decline) to double-digit declines. So, while it is still accurate at this point to say that Rhode Island’s overall performance in 2014 has been  disappointing, the July CCI provides us with a potential glimmer of hope that perhaps things here are beginning to strengthen after all as we move through the second half of 2014. Before we get carried away, it must be noted that this July’s CCI reading of 75, while a marked improvement over June, was still below the reading for last July, marking the twelfth consecutive month where the CCI has failed to beat its year-earlier value. I can certainly think of happier one-year anniversaries! So, as Rhode Island moves into the last half of 2014 the most pressing issue continues to be whether Rhode Island’s economic performance will ultimately decouple from the accelerating national economy.

In July, four of the five leading indicators contained within the Current Conditions Index improved, most doing so at healthy rates. Single-Unit Permits, which reflect new home construction, turned in a very strong performance for July, rising by 26.3 percent relative to its value last July. Total Manufacturing Hours, which measures strength in our manufacturing sector, rose sharply again in June (+3.6%), as both the length of the workweek and manufacturing employment displayed significant increases. Oddly, in spite of such strong and sustained manufacturing momentum, the Manufacturing Wage actually declined for a fifth consecutive time in July, by 4.3 percent.

Two of the leading indicators that failed to improve last month did considerably better in July. New Claims, which is a leading labor market indicator, fell at a double-digit rate (-17.2%) after inexplicably rising at a double-digit rate in June, making it more likely that this indicator will resume a downtrend. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, rose for the first time since last November (+1.2%), halting a streak of seven consecutive declines. In spite of this good news for July, I continue to view changes in this indicator somewhat suspiciously. The sole leading indicator that failed to improve this month was US Consumer Sentiment, which declined for the third consecutive month (-4.3%) following a string of five consecutive increases.

Retail Sales remained strong in July, rising by 3.3 percent compared to a year ago. This indicator has now improved for seven of the last nine months. Private Service-Producing Employment rose by 2.1 percent in July, its strongest rate of growth in over a year. As has been the case for quite some time now, Government Employment fell once again, declining in July by 0.7 percent versus a year ago. Benefit Exhaustions, which reflects longer-term unemployment, reversed its strange double-digit increase of last month, falling by 30.2 percent relative to a year ago. July was the third double-digit improvement for this indicator in the last four months.
 

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.