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As
we moved further into the fourth quarter, the Rhode Island economy posted yet
another strong performance. In November, Rhode Island’s economy sustained the
jump in momentum we witnessed last month, which was itself the best we had seen
here for quite a while. Using the flawed “official” labor market data, the
Current Conditions Index registered a score of 75 for November, as nine of the
twelve CCI indicators improved. And, a number of those improving indicators
registered strong changes. Looking beyond the labor data inaccuracies, the more
correct score for November is 83. Rhode Island’s recovery was 33 months old as
of November.
This
back-to-back strength provides a critical piece of evidence supporting the
hypothesis that October’s strong performance was not a “one month wonder.” What
we appear to be witnessing is a trend of more broadly based economic activity
that has generated increased economic momentum. It thus appears that Rhode
Island’s economy has now shifted into a higher gear.
This
seems to suggest that the trend of uneven economic activity, the bounces in
monthly CCI values we had been witnessing over the past several months, has now
ended. However, just as it is not wise to place too much emphasis on the
results of a single month, while two months tends to be more convincing, even
more data is needed before it will be safe to arrive at this conclusion. In
spite of this, it is now an appropriate time to address a meaningful
distinction in terms of the assessment of economic activity: levels versus
rates of growth.
The
Current Conditions Index is a momentum indicator. Its values reflect how
broadly based economic activity is (i.e., the greater the number of improving
indicators, the more broadly based is economic activity) and the resulting
underlying momentum. It does not, however, dwell upon the levels of the
various indicators or the overall economy. So, at present, assuming the fourth
quarter results hold, we are witnessing a broadening of economic activity here
that has produced greater momentum. This reflects the rates of change
of the CCI indicators and our state’s economy.
It says nothing about current levels. This is where things get a bit
discouraging: while Rhode Island’s economy is improving, the levels of key
variables like payroll employment remain far below the values they attained at
the height of the last recovery (our employment peak occurred in December of
2006). We still remain about six percent below our employment peak. The recent
CCI performance indicates that we are moving toward our prior peak at a more
rapid rate. Obviously, the greater is sustained momentum, the shorter is
the time before we reach a prior peak.
For
November, (at least) nine of the twelve CCI indicators improved. Importantly,
November saw only the second increase in our state’s Labor Force since
the end of 2010! Four of the five non-survey-based indicators, those that don’t
suffer from the flaws currently plaguing the “official” labor market data,
showed substantial improvement versus one year ago. Retail Sales
sustained its recent strength, registering a strong 6 percent growth rate
versus last November, its eleventh increase in the past thirteen months. Along
with this, US Consumer Sentiment once again surged by just under 30
percent, helped by improvement in the national economy. Benefit Exhaustions,
reflective of longer-term unemployment, also fell at a double-digit rate
(-12.3%), sustaining its downward (improvement) trend. New home construction,
based on Single-Unit Permits, rose by 3 percent, providing further
evidence that it reached a bottom several months ago. In spite of this, its
levels remain subdued, partly the result of our state’s declining population.
The sole disappointment was for layoffs, in terms of New Claims for
Unemployment Insurance, which rose by 1.6 percent.
See the full report at: http://www.llardaro.com .
