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As Rhode Island moves into the third
quarter, it appears to have left the disappointing performance from the prior
quarter behind - at least for now. The July Current Conditions Index jumped
from its neutral value of 50 in June all the way to 75 for July, as nine of the
twelve CCI indicators improved. Not only does this improvement come as welcome
news for Rhode Island, the increase from June was somewhat expected. I noted
last month that the two CCI indicators whose performance put a “nail in the
coffin” for June’s CCI, Benefit Exhaustions and New Claims, had
displayed bizarre increases that month that were not explainable by any of the
obvious undercurrents in our state’s economy. As expected (with my fingers
crossed), both went from double-digit rises last month (remember we want both
of these to decline) to double-digit declines. So, while it is still accurate
at this point to say that Rhode Island’s overall performance in 2014 has
been disappointing, the July CCI provides
us with a potential glimmer of hope that perhaps things here are beginning to
strengthen after all as we move through the second half of 2014. Before we get
carried away, it must be noted that this July’s CCI reading of 75, while a
marked improvement over June, was still below the reading for last July,
marking the twelfth consecutive month where the CCI has failed to beat its
year-earlier value. I can certainly think of happier one-year anniversaries! So, as
Rhode Island moves into the last half of 2014 the most pressing issue continues
to be whether Rhode Island’s economic performance will ultimately decouple from
the accelerating national economy.
In July, four of the five leading
indicators contained within the Current Conditions Index improved, most doing
so at healthy rates. Single-Unit Permits, which reflect new home
construction, turned in a very strong performance for July, rising by 26.3
percent relative to its value last July. Total Manufacturing Hours, which
measures strength in our manufacturing sector, rose sharply again in June
(+3.6%), as both the length of the workweek and manufacturing employment
displayed significant increases. Oddly, in spite of such strong and sustained
manufacturing momentum, the Manufacturing Wage actually declined for a fifth consecutive time in July, by 4.3
percent.
Two of the leading indicators that failed
to improve last month did considerably better in July. New Claims, which
is a leading labor market indicator, fell at a double-digit rate (-17.2%) after
inexplicably rising at a double-digit rate in June, making it more likely that
this indicator will resume a downtrend. Employment Service Jobs, which
includes temporary employment, and is a prerequisite to employment growth, rose
for the first time since last November (+1.2%), halting a streak of seven
consecutive declines. In spite of this good news for July, I continue to view
changes in this indicator somewhat suspiciously. The sole leading indicator
that failed to improve this month was US Consumer Sentiment, which
declined for the third consecutive month (-4.3%) following a string of five
consecutive increases.
