Rhode Island began the third quarter with
both good news and bad news. The good news is that its economy actually
accelerated at the end of 2011 into mid-2012. While the “official” labor market
data continue to show an economy that has fallen off a cliff (I challenge
anyone using that data to conclude anything other than RI has entered into a
double-dip recession), reality has been very different! The bad news is twofold:
first, almost nobody in this state realizes that such improvement in levels and
acceleration in the pace of activity occurred (unless they have been following
this index and my Blog); second, it is now very clear that the pace of activity
Rhode Island attained earlier this year has now moderated significantly. Both
the CCI values based on the “official” data (the upper value) and my estimation
of the actual numbers (the lower number) show that Rhode Island’s economy has
shifted into a lower gear: the “official” number for July fell to 50 while my
estimated value declined to barely expanding, at 58.
So, the question now shifts to
which indicators will take the proverbial baton and lead any future
improvements? While the US economy has slowed, both the Federal Reserve and the
European Central Bank have taken strong steps to avoid significant downturns in
economic activity during the coming months. One outcome of this, a weakening US
Dollar, should help to moderate and hopefully offset some of the recent
weakness in our state’s manufacturing sector as exports benefit. Unfortunately,
there is a rather long lag before dollar depreciation normally translates into
significant improvement in US (and Rhode Island) manufacturing.
In light of all of this, what do we
actually know about Rhode Island’s current economic performance? As of July,
Rhode Island’s tepid recovery that began in February of 2010, now 29 months
old, continues to lose momentum, most notably in the areas of manufacturing and
retail. For July, Retail Sales fell (by 1.6%), its first decline since last August, following real
strength over every month prior to July of this year. Total
Manufacturing Hours barely rose in July (+0.1%), as the workweek declined. Of course, we
are told that our Manufacturing Wage is still growing at what is likely the most rapid rate on earth
(+11.8%).
In spite of this, things here are now and
will remain significantly better than what the “official” data show, especially
since the flawed “official” data can be expected to begin showing ever-larger
employment declines for the rest of this year. Even for July, we were told that
payroll employment fell by an eye-opening 7,300 compared to a year ago. A more
accurate reading can be obtained by reversing the sign of the “official”
payroll change — overall employment is likely around 7,000 higher than what the
“official” data show.
See the full report at: http://www.llardaro.com .
