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The second quarter for Rhode Island turned out to be significantly better than had been anticipated at the beginning of this year, consistent with the second quarter acceleration in the pace of national economic activity. The performance of Rhode Island’s economy for June was very good, as the Current Conditions Index registered a value of 75, with nine of 12 indicators improving. Importantly, the overall strength of most of the leading indicators contained in the CCI has been sustained over the first half of this year, a positive and welcome sign as we move into the remainder of this year.
The primary negative for this month is the fact that the
CCI's value of 75 this June failed to beat last year’s level, the first time in
2013 that this has occurred. Given the strength we witnessed during the second
half of 2012, this is not likely to be the last time this phenomenon occurs. In
spite of this, there continues to be a significant amount of positive news in
this month’s data as well as for Rhode Island's economic performance in 2013.
Before
discussing this month’s indicator results, I need to clarify a point that
appears to be confusing a number of persons I have spoken to over the past
several months: If our state's economy has such strong momentum, why then are
we still so far below where we were back
in 2006 and 2007? In order to answer this question, it is important to keep in
mind that current levels of economic activity depend on both the rates of
growth we have been experiencing as well as the prior activity levels
themselves. This is where Rhode Island finds itself in such a
frustrating situation. Rhode Island's economy was hit extremely hard during the
last recession, as the level of economic activity here fell about as far, if
not farther, than just about any other state. Therefore, satisfactory rates of
growth applied to the highly depressed level of economic activity here has
resulted in relatively small changes in the actual level of economic
activity. Welcome to our world!
My
greatest concern moving forward is that Rhode Island has failed to do the hard
work required to reinvent itself and to make its economy more competitive. The
organizational changes instituted during the last legislative session are good,
but they fail to deal with our state’s most pressing problems. They represent
little more than yet another swipe at the symptoms of our state’s structural
problems, leaving our long-term weaknesses to fester.
Three of the CCI’s leading indicators turned in
strong performances this month, and all of those did so in spite of very strong
“comps.” The uptrend in Single-Unit Permits, a leading indicator of
housing, continued, reflecting further movement beyond its trough. Permits have
now settled into a range of about 70+ per month. The remaining leading
indicators that improved are related to the labor market. The first of these, Employment
Service Jobs, which includes temporary employment, a prerequisite to
overall employment growth, rose by a healthy 4.6 percent in June. This
indicator has consistently improved since last April. The other, New Claims
for Unemployment Insurance, is the most timely measure of layoffs. It has now
moved back into a clearly established downtrend, which is critical if Rhode
Island is to continue improving as we move into the third quarter. The fourth
of the CCI’s leading indicators, Total Manufacturing Hours, which
measures strength in our manufacturing sector, failed to improve in June, based
on a large drop in the workweek.
