Friday, May 18, 2012

Current Conditions Index Report: March 2012

This is an abbreviated report of the Current Conditions Index for March of 2012. If  you are interested in reading the entire report with tables and The Bottom Line, please go to my web page: .

In my report last month, I noted that based on the existing labor market data being released by the RI Department of Labor and Training, “ … it is no longer clear whether the Rhode Island is still in a recovery or whether it has moved into the earliest stages of a dreaded double-dip recession. Payroll employment has now declined for seven consecutive months on a year-over-year basis … For many, this alone would be a sufficient basis upon which to make the recession call.”

After my report was released, I was informed by the RI DLT that the current labor market data has been understating job change, and that employment has been rising for some time now. So, remember all the data they were and are still publishing and the conclusions anyone serious about analyzing our state’s economy would arrive at based on them? To quote Emily Litella of Saturday Night Live fame: “Never Mind.”

So, in an odd and circuitous way, my overall conclusion last month that Rhode Island has not entered nor is about to enter into a recession proved to be correct. And, in spite of what the data published by the DLT now say, our state’s March Unemployment Rate is not 11.1 percent, but somewhat lower, likely in the 10-11 percent range.

All of this requires that I adapt CCI values. Since existing labor market data are very likely understating two CCI indicators, Private Service Producing Employment and Employment Service Jobs, I will now be providing two CCI estimates each month until the data flaws disappear (hopefully) next February.  

Rhode Island ended the first quarter of 2012 on a positive note, as a re-acceleration from the mid-2011 doldrums materialized. While Current Conditions Index values based on the faulty existing labor market data continued to show readings barely above stall speed (the top values), allowing for likely data revisions, the CCI beat or tied its year-earlier values for every month in the first quarter (the lower values). As of March, Rhode Island’s current recovery reached its 25th month.

On a year-over-year basis, four of the five non-survey-based CCI indicators improved. All five showed improvement on a monthly basis. Retail Sales increased by 4.4 percent, its seventh consecutive improvement compared to year-earlier values. While part of this is no doubt related to the skilled Rhode Islanders we rent out to neighboring states who bring their income home with them, Retail Sales momentum clearly does have “legs” at present. Along with this, US Consumer Sentiment rose as well, by 13 percent. Both of these indicators had March values that exceeded their February levels. New home construction, based on Single-Unit Permits, continued its roller coaster ride, falling by 14 percent in March relative to last year. But it too managed to improve relative to February. New Claims for Unemployment Insurance, a leading labor market indicator that reflects layoffs, declined by 7.1 percent, its fourth improvement in the last five months. It too showed strength relative to February. Finally, Benefit Exhaustions, reflective of longer-term unemployment, also fell, at a double-digit rate.

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