Tuesday, March 13, 2012

Current Conditions Index: January 2012

This post is an abbreviated version of my Current Conditions Index report for January of 2012 (it omits the indicator table and "The Bottom Line." For the full report, as well as PDF files with past reports, you can visit my web site: http://www.llardaro.com . This report was covered fairly well by the local media. As always, the Providence Business News did a very nice job of discussing the report, as did GoLocalProv.com. The ProJo also had its usual couple of paragraphs (only). The message from this report: as the national economy accelerates, Rhode Island is being left behind. The prior three posts provide you with much additional detail.

Rhode Island begins 2012 equipped with its newly revised labor market data. The prior data had painted a rather grim picture with Rhode Island’s economy being essentially “dead in the water” for much of the second half of 2011. I had hoped the new data would show that things here were materially better than what we had been led to believe, especially concerning the abysmal performances of our Labor Force, Unemployment Rate, and the two employment series, Resident and Payroll Employment. I wasn’t sadly disappointed by the revised data. More to the point, I was alarmed by how much worse the actual performances of every one of those data series were. To summarize this very succinctly: the “good stuff” (the Labor Force, and both kinds of employment) was revised sharply lower while the “bad  stuff” (the Unemployment Rate) was revised significantly higher. In light of these new data, we need to rethink much of what we had thought about our state’s labor market performance. Check my Blog in the coming weeks for charts and posts about this.

This does not necessarily mean that the overall picture of Rhode Island’s economic performance in 2011 needs to be entirely overturned, though. The assessment of overall performance must be based on a broadly based set of indicators, which is precisely what the Current Conditions Index was designed to do. For 2011, three monthly values were revised lower (January, November, and December), while one (March) increased. Based on these changes, Rhode Island’s economy was a bit more “dead in the water” than I had earlier thought. In spite of this, our exceedingly tepid recovery did continue, albeit barely since the second half of 2011. Our bright spots, most notably Retail Sales, remained. It was our sore points that turned out to be quite a bit more sore. Sadly, or happily, depending on your preference, they still failed to improve, but by wider margins.  

Let’s begin indicator discussion with the bright spots. For January, the Current Conditions Index registered a value of 58, as seven of the twelve indicators improved. January’s CCI reading exceeded that from a year earlier, breaking a string of 10 consecutive misses. Rhode Island’s recovery is now 23 months old.

Retail Sales improved for the fifth consecutive month (+3.5%), starting off 2012 on a very positive note. US Consumer Sentiment rose in January (1.2%), breaking a string of seven consecutive declines. Rhode Island’s manufacturing sector showed significant strength, with Total Manufacturing Hours surging by 7.3 percent, based on greater employment and a sharply longer workweek, both of which helped to give some credibility to the dramatic increase of 19 percent in the Manufacturing Wage.  Benefit Exhaustions, a measure of long-term unemployment, fell again, by 10.7 percent. At the other end of the jobless spectrum, New Claims, a leading labor market indicator that includes layoffs, rose sharply, by 8.2 percent. Sadly, its uptrend appears to remain intact. Single-Unit Permits, which tracks new home construction, the most volatile of the CCI indicators, surged by 67.4 percent in January, obviously affected by weather.

Our Labor Force continued its more-horrible-than-we-knew performance in January (-0.9%), and with this the decline in our Unemployment Rate was not welcome news. Employment Service Jobs, a leading labor market indicator that includes “temps,” fell for a tenth time. Finally, Private Service-Producing Employment declined again (its levels were revised lower) as did Government Employment.

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