Sunday, September 25, 2011


I have moved the location for my web page from to  Please change this in your bookmarks. My full Current Conditions Index reports will be published there each month from this time forward. PDF files of past reports will also be available there.

Tuesday, September 13, 2011

Current Conditions Index: July 2011

Rhode Island started the third quarter on a mixed note. The good news is that the Current Conditions Index for July rose to 67 from its value of 58 in June. That is the highest CCI reading since February of this year. The bad news is that in spite of this higher reading for July, the CCI once again registered a value below its level one year ago. As of July, the Current Conditions Index has failed to beat its year-earlier value for five consecutive months. So, while Rhode Island’s present recovery is continuing, the rate of improvement in the overall level of economic activity continues to moderate.

Make no mistake about it, though, Rhode Island’s economy continues to grow as it has through all of 2011. This recovery will be eighteen months old in August. As I noted last month, the positive economic momentum this has afforded us will provide us with some margin for error in dealing with whatever weakness lies ahead. “The” question, however, continues to be what will happen nationally — will the US experience a double-dip recession?

In July, the trends in several key indicators continued to deviate from what we will need them to be if growth is to re-accelerate. Our Labor Force has now declined or failed to improve on a year-over-year basis for the last six months. Worse yet, on a monthly basis, the decline extends all the way back to last December. This, of course, casts doubt on the validity of the “signal” provided by recent declines in our Unemployment Rate. At this point, I recommend not attempting to gauge the overall strength of Rhode Island’s economy by the behavior of our state’s Unemployment Rate. Not only is this indicator losing some of its statistical meaningfulness, it is a lagging indicator as well. The number of Employment Service Jobs, a leading labor market indicator that includes “temps,” has fallen for the past five months, although its comp last July was very difficult to beat. Along with this, US Consumer Sentiment fell by another 5.3 percent versus last July. While much of this is related to the total dysfunction of our nation’s legislative branch, its effects are nonetheless spilling over into other elements of economic activity.

Fortunately, not everything is moving toward unfavorable trends. The spectacular and (to me at least) unexpected ongoing strength in our state’s manufacturing sector continued in July. Total Manufacturing Hours (+3.2% in July) has now improved for the last thirteen months. Both employment and hours rose in July. Growth in the Manufacturing Wage went parabolic in July, rising by 12.8 percent compared to a year ago. Clearly, sustaining our state’s recent manufacturing momentum will require continued dollar weakness, which, given federal government dysfunction, is likely to continue. Private Service-Producing Employment rose by 2.2 percent in July, its highest growth rate since October. Sadly, the benefits of this change were offset by another sharp decline inGovernment Employment (-3.0%). 

Retail Sales rose by 1.8 percent in July, its fourth improvement in the last five months. New Claims, a leading labor market indicator that indicates layoffs, fell by only 0.4 percent this month, but that was its seventh consecutive improvement. Single-Unit Permits, which reflects new home construction, rose by 1.4 percent in July, its first improvement in a while, although the number of permits remains extremely low. Finally, Benefit Exhaustions, which measures long-term unemployment, declined by 14.4 percent, sustaining its overall downtrend.

Saturday, September 3, 2011

This Week

I always try to make at least one post per week on this Blog. Unfortunately, I have Cox bundle service, so all of my Cox services, most notably the Internet, have been non-existent since last Sunday at 9am. Apparently, I live on "the block that Cox forgot." This whole experience has been like having to deal with the Rhode Island's DMV on the home-base level! I call every morning, talk to Cox's tech support, who after thinking my service had been restored, suddenly "discover" that 20 homes on my street remain without any service. I always get the same: "Hopefully your service will be restored by tonight" response. Yeah, but in the long-run, we're all dead! Thank God I have an iPhone (obviously not with Cox), so I can make calls while my Cox phone service "sleeps." And, I am writing this blog post from Starbucks in Wakefield.

As I have been reflecting on all of this and trying to remain constructive, I am VERY thankful that my home, and all of my street, have power. Those who still don't have power are the ones who are truly suffering.

There are a few things I have been contemplating, given all the time I now have on my hands. First, what if Irene had actually been a hurricane, with sustained winds of 70+ mph? Why did a tropical storm do this much damage throughout this state? I'm not buying the duration of winds argument at this point.

Second, my experience in this instance has fortunately been restricted to dealings with the private sector, where alternatives exist if I am unhappy with my existing service. Were this instead related to one of the roughly half of our state's legislators who run unopposed, I would not have had any option for making a change (unless, of course, that person were to commit a felony). Sadly, while the other half of the legislature has opposition, they often end up being re-elected in spite of relatively few accomplishments or problems voters here might have with them. Rhode Island residents are all too willing to complain, but when it comes time to taking action in terms of voting against an incumbent whom one dislikes, this very seldom occurs. Even worse, very few persons here actually bother to vote, even though they are registered!

Why the dichotomy? People would no doubt respond that with Cox, or any private-sector company for that matter, there is actual money on the line. Actually, there is a far greater cost here than one might realize. Permit me to inject a bit of economics here. The cost of anything potentially consists of two parts, the direct or explicit cost, what we actually pay, and the indirect or implicit cost where time is involved in consuming a good or service. In my situation, even though I can get a credit from Cox for service time lost, this will only offset the explicit portion of total cost. The implicit cost, which is related to lost phone calls, Internet, and television (I missed reports on the disastrous employment report yesterday), involves chunks of time because I have been forced to seek alternative ways of having these services. These implicit costs have now become quite high as I move ever closer to the one-week mark. So, contrary to intuition, receiving a credit does not provide total compensation for the services I have lost, anymore than it reflects the total cost involved.

Let me end by moving once again to the statewide level. If anyone is naive enough to believe that retaining incumbent legislators whom persons don't really support is without cost, guess again. There is both the explicit cost, of being forced to pay higher taxes than we should pay given the quality of public services and leadership here, and the implicit cost of the lost time due to our state's celebrated atmosphere of excessive business regulations, time waiting at places like the DMV (blame the system set up, not the workers for this), and the list goes on and on and on. I'll leave it to you to guess which cost, explicit or implicit here, is larger.