Friday, April 19, 2013

Current Conditions Index; February 2013

Below is an abbreviated version of the February 2013 Current Conditions Index report. The full report (in PDF format) along with tables and historical reports is available on my web site: 

Just as persons in Rhode Island finally discovered that our state’s economy performed considerably better than the flawed labor market data had led us to believe throughout 2012, we wake up to the reality that the first two months of 2013 have not been as kind to our state’s economy. During the second half of 2012, Rhode Island’s recovery clearly strengthened, as the breadth of overall economic activity here (the number of indicators improving) and the pace of this recovery accelerated. We attained Current Conditions Index values of 92 twice in late 2012 and finished the year with a pair of 83 values, as ten of the twelve CCI indicators improved. For January of 2013, the CCI fell to 75, and in February, the third anniversary of Rhode Island’s recovery, the CCI fell to 67, as only eight CCI indicators improved. Happy Anniversary! At least it is still possible to say that while the CCI values for each of the first two months this year were somewhat discouraging relative to what we saw in the second half of 2012, both did manage to exceed year-earlier values. 

This isn’t the first time I can recall seeing less impressive performance than what we had apparently missed after upwardly revised data were released. What a tease!

I wish I could say that this month’s indicator performance was in some way misleading, that there is reason to believe that Rhode Island’s economy isn’t slowing, but the data show rather convincingly that Rhode Island’s economy has in fact slowed during the first two months of 2013. Perhaps even worse, two critical indicators that have been strong performers for some time now may be in the process of reversing their trends.

The first of these is Retail Sales. Its performance has been stellar, as its year-over-year growth rates have exceeded 3 percent, reaching over 6 percent several times since October. It is quite possible that the combination of the lapse of the Payroll Tax Holiday and high gasoline prices will produce retail weakness throughout the first half of 2013. The other indicator is New Claims for Unemployment Insurance. This is a leading indicator that reflects layoffs. On a year-over year basis it has improved for some time now. It has, however, begun to weaken on a monthly basis, which could eventually translate into weakness year-over-year. 

Along with both of these, several of the indicators that were supposedly declining but actually improved last year have begun to slow as well. Growth in our state's Labor Force has moderated since December, as has Employment Service Jobs, a leading labor market indicator. The same is true for Private Service-Producing Employment, which saw its growth fall below 1 percent for the first time since December. To be fair, there was a “strange” behavior for payroll employment in February, as it fell from January’s level, which is very likely responsible for the slowing rates of growth for both Employment Service Jobs and Private Service-Producing Employment. Let’s hope this doesn’t signal that the employment data is getting “strange” again this year! 
See the full report (with tables) at: .

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