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Rhode Island began the third quarter on a very positive note, as the pace of activity during the second quarter was sustained. The performance of Rhode Island’s economy for July was quite good, with the Current Conditions Index registering a value of 75, as nine of 12 indicators improved. Importantly, the overall strength of most of the leading indicators contained in the CCI has continued through all of this year (including July), which is a welcome occurrence as we enter the final half of the year.
Importantly, the
primary negative from last month was eliminated in July — the CCI once again beat its value from a year ago. So, only once this
year, June, has the CCI failed to beat its year-earlier level. Given the strength we witnessed starting in
August of last year, we may well witness several more months where the CCI is
unable to exceed its prior-year values, which will reflect a slowing in our
rate of growth. Let’s cross that bridge when we get to it. For now, we should
be focusing on all of the positive news contained in this month’s data along with Rhode Island's economic
performance thus far in 2013.
Before doing this, let me to reiterate a point I made last
month. Many remain confused by the seeming paradox of how a state's
economy showing such momentum can remain so far below where it was back in 2006 and 2007. The answer, plain and simply, is that current levels of
economic activity depend on both the rates of growth we are experiencing and the prior activity levels
themselves. During The Great Recession, Rhode Island’s
overall economy along with many of its indicators, declined greatly, about as
far, if not farther, than just about any other state. So, our
recent rates of growth applied to these depressed activity levels continue to generate relatively small changes in the actual level of
economic activity here. Don’t expect this to change any time soon! Rhode Island has yet to undertake the hard
work required to reinvent itself and to make its economy more competitive. Recent organizational
changes will do virtually nothing return us to where we once were.
All four of the CCI’s leading indicators
turned in strong performances this month. Three of them did so in spite of very
strong “comps” from a year ago. The uptrend in Single-Unit
Permits, a leading indicator of housing, continued, reflecting further
movement beyond its trough. Permits rose 6 percent in July and have now settled
into a range of 70+ each month. US Consumer Sentiment improved
for the sixth consecutive month in July, rising 17.7 percent.
The remaining leading indicators 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 1.5 percent in July. While this indicator has
consistently improved since last April, its rate of improvement has clearly
slowed of late. New Claims for Unemployment Insurance is the most timely measure of layoffs. It
recently appeared to be returning to a downtrend, but this change is not
apparent at present. New Claims rose by 2.2 percent in July, its fourth
increase in the last six months. Declining layoffs will be critical if Rhode
Island is to continue improving as we move through the second half of the year.
The fourth of the CCI’s leading indicators, Total Manufacturing Hours, which
measures strength in our manufacturing sector, jumped by a very healthy 4.1
percent, driven by higher employment and the workweek.
