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The assessments of Rhode Island's economy provided by the Current Conditions Index over the past few years were recently confirmed by data released from the US Bureau of Economic Analysis (BEA). The CCI showed that Rhode Island's economy was virtually flat in 2011, with an average value of 55 for the entire year (approximately a neutral value), before accelerating in 2012, mainly during the second half of the year. According to the BEA data, real GDP for Rhode Island was unchanged in 2011, then accelerated to a 1.4% rate of growth in 2012. I had referred to this uptick as our “shifting into higher gear” and noted that for Rhode Island, shifting into a higher gear meant moving to third gear, unlike many other states which had already moved to even gears. Sadly, my assessment turned out to be a bit too accurate: the 1.4 percent rate of growth in 2012 for Rhode Island was its highest rate since 2006!
According to the CCI values for 2013,
Rhode Island’s economy has slowed a bit from its accelerated pace in late 2012.
During the first three months of this year, the CCI had moved between 67 and
83. Although two of the three values weren't particularly strong, all three did
manage to beat their year-earlier values (part of the weaker portion of 2012).
For April, the CCI slid once again to 67 as only eight of twelve indicators
improved. And, for the first time this year, the CCI failed to better its
year-earlier value.
Don’t interpret this as indicating that
Rhode Island’s economy has substantially weakened, or that it is about to fall
off of a cliff. Instead, the pace of economic activity here has leveled off to
about what we attained by the end of 2012. That’s not great, but a lot better
than virtually anything we have seen since 2006.
In spite of all of this, there was cause
for optimism in April’s data. Two leading indicators turned in strong
performances, while a few of our recent strong indicators had to overcome
strong comps from a year ago. The continued uptrend in Single-Unit Permits,
a leading indicator, reflects our having moved past a bottom in new home
construction. In spite of recent volatility, permits appear to have settled
into a range of about 60+ permits per month. Employment Service Jobs,
also a leading indicator, reflects temporary employment, a prerequisite to
overall employment growth. This indicator has consistently improved since last
April. This April, it rose by a stunning 10.6 percent compared to a year ago. US
Consumer Sentiment failed to improve (but barely) for only the second time
in over a year, although its comp from a year ago was very difficult to beat.
Rhode Island’s manufacturing sector
continued to show strength, as Total Manufacturing Hours rose again (by
1.7%) while our Manufacturing Wage continued to rise at what I believe
to be a non-credible rate (4.2%). New Claims for Unemployment Insurance,
which reflects layoffs, has begun to rise on a year-over year basis, a very
unwelcome development. It has been trending higher on a monthly basis since the
third quarter of last year. Private Service-Producing Employment, whose
growth has fallen to below one percent of late, appears to be in the process of
stabilizing around 350,000.
While Rhode Island’s Unemployment Rate
fell to 8.8 percent in April, this change is not as significant an
indicator of Rhode Island’s momentum as many here seem to believe. Not only is
the Unemployment Rate a lagging economic indicator, most of its recent
monthly declines have coincided with declines in our Labor Force,
reflecting the fact that a number of our state’s jobless residents are
continuing to drop out of the Labor Force as they are no longer actively
searching for employment (part is also related to retirements).
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See the full report (with tables) at: http://www.llardaro.com .
