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The fourth quarter isn’t playing out as
well for Rhode Island as we might have hoped. For November, our state’s positive
but not exactly stunning momentum continued. As has been true for some time
now, there was both good news and bad news concerning Rhode Island’s economic
performance. First, the good news (of sorts): although the Current Conditions
Index for November fell to 67 from October’s 75, several key indicators continue to display
hopeful signs for the future months. While three of the CCI’s five leading
indicators improved this month, the two that failed to improve relative to
last November both faced very difficult comps.
The bad news once again emerges when we contrast November’s performance
for this year with that in 2012: for a fourth consecutive month, and the fifth
time in six months, the CCI has failed to exceed its year-earlier value. Sadly,
my earlier suspicion that a pattern of failure to improve on year-earlier
values is proving to be correct. Let’s hope this doesn’t continue for much
longer. Since the CCI’s readings in early 2013 were not terribly strong, we
might find ourselves once again exceeding year-earlier values in
just a few months. At any rate, what we are continuing to witness is a slowing in our
rate of growth relative to the end of last year. This, by itself, is discouraging
since our state’s current rate of growth is not exactly going to cause
whiplash. The ultimate test of how robust this recovery proves to be will be
defined by our ability to accelerate from current rates of growth. While more rapid national growth will
clearly help with this, Rhode Island’s failure to meaningfully redefine itself
for the information age (other than renaming the EDC) has
left our state’s obstacles to more rapid growth, most notably our
non-competitive tax and cost structure, intact.
As stated earlier, for November, three of
the CCI’s five leading indicators improved. The other two were unable to escape
the effects of very difficult “comps” from a year ago. US
Consumer Sentiment fell sharply (-9.4%), in part because of a 29 percent rise one year
ago. November marked the third consecutive decline for Sentiment. It
remains in an uptrend at present that will likely continue as long as the stock
market continues to rise. Employment Service Jobs, which includes temporary
employment, a prerequisite to overall employment growth, fell for only the
second time in over a year, declining by 1.3 percent. Should its uptrend reverse, this would pose
problems as we move into 2014. One potentially hopeful thought: these recent declines
might be revised away with the upcoming rebenchmarking of the 2013 data.
While our state’s economic momentum continues to slow,
pockets of substantial momentum remain, based on the performances of both the
leading indicators contained in the CCI and several of its non-leading
indicators. Even with these, it will be quite some time before we return to our
prior peak in economic activity.
The remaining leading indicators
improved in November. The recent surge in Single-Unit Permits, a
leading indicator of housing, continued, as Permits rose by 30.1 percent
compared to last November, as Rhode Island’s housing sector continued to move
well beyond its recession trough. New Claims for
Unemployment Insurance, the most timely measure of layoffs, improved in
November, falling by 26.9 percent. Unlike the leading indicators discussed
earlier, even though this indicator is not in a well-defined downtrend, the
most recent three months indicate that this might be changing. The final
leading indicator, Total Manufacturing Hours, which measures strength in our
manufacturing sector, rose by 5.6 percent in November, driven mainly by a large
increase in the length of the workweek. This indicator has now improved for
eleven of the last thirteen months.
