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August will turn out to be the most
significant month thus far in 2014 for two reasons. First, in August, Rhode
Island was able to sustain the improved momentum we witnessed in July, as the
Current Conditions Index matched its July value of 75, which had been its
highest thus far in 2014. Second, and most importantly, August brought with
it the one “signal” we were sorely in need of this year: after a string of
twelve consecutive months where the CCI had failed to beat its year-earlier
values, at long last, the CCI for August of this year exceeded its value from
last August. So, the major negative related to consecutive disappointments
in our state’s economic performance relative to a year ago has ended at twelve.
The implication of both of these factors is critical: we appear to have
transitioned from a period where the current recovery was becoming less broadly
based into one where economic momentum is increasing. That, as the saying goes,
is a big deal!
Along with this good news it is important to keep in mind the central role that our goods-producing sector has played: both housing and manufacturing have continued to move well beyond their cyclical troughs, helping us to sustain our fluctuating cyclical momentum. So, as Rhode Island moves farther into the second half of 2014, our state’s economic performance might not have decoupled from the accelerating national economy after all. Stay tuned!
In August, four of the five leading
indicators contained within the Current Conditions Index improved. The one
leading indicator that failed to improve, Single-Unit Permits, which
reflects new home construction, had previously turned in a string of strong
performances. This volatile indicator declined by 8.6 percent in August
relative to its value last year.
Total Manufacturing Hours, which measures strength in our
manufacturing sector, rose once again in August (+1.1%), but August growth was
substantially slower than it was in July, as manufacturing employment rose but
the length of the workweek fell slightly. As has been true for some time now,
the Manufacturing Wage declined, for a sixth consecutive time in August,
by a difficult to believe 4.6 percent.
New Claims, which is a leading labor market
indicator, fell at a double-digit rate (-20.5%) for the second consecutive
month, raising the likelihood that this indicator will resume a downward trend.
Employment Service Jobs, which includes temporary employment, and is a
prerequisite to employment growth, rose for the second time since last November
(+2.2%), growing at almost twice the July rate.
Finally, US Consumer Sentiment rose in August (+0.2%), ending a
string of three consecutive declines.
