Current Conditions Index: April 2014

This is an abbreviated version of the April Current Conditions Index report. The complete report, which includes tables, along with past reports, can be found on my website: www.llardaro.com .

 

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The non-event bounce back from the adverse effects of the harsh February weather we witnessed in March apparently continued into April. What a way to begin the new quarter! The April Current Conditions Index remained stuck at its same value since February, 58. This extends the string of consecutive months where the CCI has failed to improve relative to its year-earlier value to nine. Looking at the CCI for all of 2014, one has to conclude that this year is turning out to be a real disappointment. If I had to summarize Rhode Island’s current economic performance with one word, that word would be precarious.

This should not be viewed as indicating that there are no positive forces at work here. Look at how much payroll employment has been rising: for March, Rhode Island added 7,600 jobs while only losing 900, for a net change of 6,700. Clearly, the pace of job growth has accelerated here of late while job loss has diminished to levels far below what we experienced during The Great Recession. Yet in spite of this, and recent healthy declines in our state’s Unemployment Rate, we remain well below our prior employment peak of December of 2006 and our jobless rate is still the highest in the nation. Worse yet, Rhode Island’s image has suffered nationally: we have now come to be known as “the unemployment rate state.” Not only can we do better than this, we have to! The clock continues to run. Some promising legislative changes have emerged from the Rhode Island House. Let’s hope the Senate follows suit.

For April, only three of the five leading indicators contained within the Current Conditions Index improved, some by healthy rates.  The two that failed to improve do not signal any real weakness or transition to noticeably slower growth. Single-Unit Permits, which reflect new home construction, the indicator most adversely impacted by winter weather, stumbled in April, declining by 4.5 percent after bouncing back with a healthy 20.2 percent increase in March. Employment Service Jobs, which includes temporary employment, and is a prerequisite to employment growth, fell 1.0 percent in April, its fifth consecutive decline. Let’s just say I continue to view changes in this indicator suspiciously.

New Claims for Unemployment Insurance, the timeliest measure of layoffs, declined for the second consecutive month and fifth time in the last seven months. In spite of these recent improvements, it is not yet clear whether this indicator has resumed the longer-term downtrend that will be needed if we are to improve activity levels significantly in coming months. Total Manufacturing Hours, which measures strength in our manufacturing sector, rose sharply in April (+4.0%), as the workweek rose by a full hour and manufacturing employment increased by 600. It was odd to see that in spite of this manufacturing momentum, the Manufacturing Wage actually fell by 1.9 percent in April.  Finally, US Consumer Sentiment rose by 10 percent in April, its fifth increase following three consecutive months of declines.

 

 

Current Conditions Index: March 2014

This is an abbreviated version of the March Current Conditions Index report. The full report, which includes tables, along with past reports, can be found on my website: www.llardaro.com .

 

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The much anticipated bounce back from the adverse effects of the harsh February weather turned out to be a non-event. While the indicators most obviously impacted by the weather improved as expected, several other indicators were far less accommodating, leaving the March Current Conditions Index stuck at the same value it attained in February, 58. Unfortunately, this extended the string of consecutive months where the CCI has failed to improve relative to its year-earlier value to eight.

New home construction, which came to a virtual standstill last month, returned to a more reasonable level. And Retail Sales, which should have felt weather effects, remained strong for both February and March. As we move farther beyond the uncertainties produced by winter weather, the underlying performance of Rhode Island’s economy is becoming more apparent. While the overall picture that emerges is mixed, we appear to have entered a period where our negatives are beginning to expand, increasingly offsetting the beneficial effects of the parts of our state’s economy that continue to exhibit strength. The result will be a period of yet slower growth overall which will at times mask some or a great deal of the positive momentum that exists within our state. While this is hardly the outcome we wanted to observe, it indicates that we can expect the present recovery to become even less broadly based should these trends persist. The good news, which is becoming more difficult to find, is that an accelerating rate of growth for the national economy will clearly benefit Rhode Island as we move through the remainder of 2014. How much we benefit, however, is a very different question. We may well see improvements in absolute terms (like the recent decline in our Unemployment Rate), but relative to other states, we will continue to lag (we remained #1 for joblessness in March).   

For March, four of the five leading indicators contained within the Current Conditions Index improved, some by healthy rates. Single-Unit Permits, which reflect new home construction, the indicator most adversely impacted by winter weather last month, bounced back with a 20.1 percent increase in March (returning to around 70 permits per month). New Claims for Unemployment Insurance, is the timeliest measure of layoffs, also turned in a strong performance, falling by 7.1 percent relative to last March. At present, it is not clear whether this indicator will resume its previous downtrend. Should it fail to, it would impart a decidedly negative bias to the momentum that exists at present. Total Manufacturing Hours, which measures strength in our manufacturing sector, sustained its strength in March (+2.3%), as a rise in employment offset the negative effect of a slight decline in the length of the workweek. US Consumer Sentiment rose by only 1.6 percent, but this was its fourth increase following three consecutive months of declines. The final leading indicator, Employment Service Jobs, which includes temporary employment and is a prerequisite to employment growth, fell  1.3 percent in March, its fourth consecutive decline. Let’s just say I continue to view changes in this indicator suspiciously.

Current Conditions Index: February 2014

This is an abbreviated version of the February Current Conditions Index report. The full report, which includes tables, along with past reports, can be found at my website: www.llardaro.com.

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The rugged winter weather that continued into February clearly took its toll on Rhode Island’s overall economic performance, although there were still a number of areas where Rhode Island did well. The most obvious tragedy of the weather was new home construction, which was almost nonexistent in February. Yet at the same time, both Retail Sales and US Consumer Sentiment turned in very strong performances. The Current Conditions Index for February was 58, a decline from its (downwardly revised) value in January of 67, and below the February 2013 value, which was also 67. However, I have scored the CCI for February with an asterisk — guilty with an explanation: were it not for the recorded plunge in Single-Unit Permits (to 26 units for the entire state), the value of the CCI would likely have been 67, matching its values for last month and one year ago.

Yet even if that change had occurred, the CCI still would have failed to improve relative to its year-earlier value for a seventh consecutive month and eighth time in the last nine months. Clearly, these “misses” are not all, nor mostly, attributable to the weather over the past several months, so some slowing of our state’s overall cyclical momentum is continuing. The upside to this, if there is one, is that payroll employment has been rising substantially more than we were led to believe with the data prior to the most recent rebenchmarking, and we just received word that December’s employment number will be revised even higher. I guess this is Rhode Island’s version of life in the fast lane!

For February, two of the CCI’s five leading indicators improved, while two failed to improve, and the fifth was highly weather distorted. Looking first at those that failed to improve, Employment Service Jobs, which includes temporary employment and is a prerequisite to employment growth, fell by 1.3 percent in February, its third consecutive decline. However, based on the recent contradictory rebenchmarking changes to this indicator, the only thing I feel confident in concluding is that this indicator either increased, decreased, or remained unchanged in February. The other leading indicator that failed to improve, New Claims for Unemployment Insurance, is the timeliest measure of layoffs. For February, it rose by 11.5 percent compared to a year ago, its second failure to improve since last August. The downtrend in this indictor since July of 2013 may well have ended, which would be particularly bad news for our state. Finally, Single-Unit Permits, which was highly distorted by the weather, fell by 57.1 percent relative to a year ago. In spite of this, Rhode Island is continuing to move beyond its cyclical trough in new home construction.  

US Consumer Sentiment rose by 5.2 percent in February, its third increase following three consecutive months of declines. The final leading indicator, Total Manufacturing Hours, which measures strength in our manufacturing sector, resumed strong growth in February (+3.0%), boosted by increases in both the workweek and employment.

Current Conditions Index: January 2014

Below is a partial version of the January 2014 Current Conditions Index report. The full report, which includes tables and historical data, can be found on my web site: www.llardaro.com .
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The new year began with some happy news concerning Rhode Island employment: payroll employment was revised higher by 3,100 relative to the original estimate. But this is Rhode Island, where behind every silver lining lurks a gray cloud: our jobless rate, which was already either the highest or among the highest in the country, was also revised - even higher. So, there is some cause for celebration in the rebenchmarked payroll data, but the household survey data continues to paint a very discouraging picture as far as how this recovery is progressing.

How did Rhode Island’s cyclical economic momentum fare in light of the revised data? The Current Conditions Index, which was designed for this very purpose, also showed a continuation of the good news - bad news situation we have remained mired in for some time now. First, the good news: in light of the newly released labor market data, the CCI was revised higher for four months in 2013 (April, June, September, and November). And, for January, the CCI rose from the (downwardly revised) December value of 58 to 75, as nine of twelve indicators improved. Now for the bad news: the CCI was only revised lower for two months in 2013 (May and December), but the CCI values based on the new data show that the CCI has now failed to improve relative to its year-earlier value for six consecutive months and seven of the last eight months. So, while the values of several CCI indicators were revised higher, these upward revisions were not sufficient to permit us to exceed the favorable CCI values we experienced at the end of 2012 and into January of 2013. It should be noted though, that there were several ties (like this month).

For January, two of the CCI’s five leading indicators failed to improve. The first of these, Employment Service Jobs, includes temporary employment, which is a prerequisite to employment growth. It fell by 2.4 percent in January, which was its second consecutive decline. Continuation of its recent uptrend is now questionable as its values have apparently plateaued around 9,000 for the better part of a year. The other indicator, New Claims for Unemployment Insurance, the timeliest measure of layoffs, rose by 1.3 percent in January, its first failure to improve since last August. The downtrend in this indictor since July of 2013 may be ending. It will be necessary to observe its behavior over the next several months before any confirmation is possible, however.  

Single-Unit Permits managed to improve by 5.5 percent in January relative to its value one year ago, although weather-related factors make interpreting changes in this indicator very difficult. In spite of this, it is safe to conclude that Rhode Island is continuing to move beyond its cyclical trough in new home construction. US Consumer Sentiment rose at a double-digit rate in January (+10.1%), its second increase following three consecutive months of declines. Expect its uptrend to continue as long as the stock market improves. The final leading indicator, Total Manufacturing Hours, which measures strength in our manufacturing sector, barely rose in January (+0.2%), as a  decline in the workweek almost offset the job gains that occurred. At least part of the decline in hours may be weather related.

 

Current Conditions Index: December 2013

Below is a partial version of the December Current Conditions Index report. The full report, which includes tables and historical data, can be found on my web site: www.llardaro.com .
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As the fourth quarter and 2013 came to an end, Rhode Island’s economic performance continued as it had for a while - we are moving forward, albeit at a not very encouraging speed. The news overall continued to be mixed: the good news was that the Current Conditions Index for December rose slightly to 75 from its November value of 67. And, within December’s performance, there were some positive results, mainly that almost all of the CCI’s leading economic indicators improved. That bodes well as we move into 2014. The bad news pertains to the continuation of a disturbing pattern: for a fifth consecutive month, and the sixth time in seven months, the CCI failed to exceed its year-earlier value. Hopefully, since the CCI values in early 2013 were not as strong as they had been in late 2012, we will soon find ourselves exceeding year-earlier values again in the first part of 2014. That is a very real possibility if the US economy continues to strengthen. We’ll just have to keep our fingers crossed. Once we begin to exceed prior-year values this will be the signal that the recovery is once again becoming more broadly based and that our momentum is accelerating. As I noted last month, the ultimate test of how robust Rhode Island’s recovery proves to be will be defined by our ability to accelerate from current and past rates of growth. We can only hope that our state’s continuing failure to meaningfully redefine itself for the information age (other than renaming the EDC) won’t pose too many obstacles. 

For December, four of the CCI’s five leading indicators improved. The other, Single-Unit Permits, barely failed to improve, declining 1.4 percent from a year ago. While this was only its third non-improvement in over a year, this month’s result may well be more of a reflection of December’s weather than of any underlying economic weakness in our state’s housing sector.

US Consumer Sentiment rose sharply (+12.9%) in December following three consecutive months of declines. It has remained in an uptrend that we can expect to continue as long as the stock market continues to improve. Employment Service Jobs, which includes temporary employment, a prerequisite to overall employment growth, rose by 2.0 percent in December following a decline last month. While it remains in an uptrend, it appears quite likely that its values are levelling off around 9,000, assuming that rebenchmarking next month doesn’t change this pattern. Should layoffs begin to rise, this will pose a number of problems to our economic momentum as we move into 2014.

All of the remaining leading indicators improved in December. New Claims for Unemployment Insurance, the timeliest measure of layoffs, improved significantly in December, falling by 21.8 percent, its second consecutive double-digit decline. While this indicator is not yet in a well-defined downtrend, the most recent four months indicate that this may be changing. The final leading indicator, Total Manufacturing Hours, which measures strength in our manufacturing sector, rose by a very healthy 3.5 percent in December, driven mainly by a large increase in the length of the workweek. This indicator has now improved for eleven of the last thirteen months. Combined with the recent behavior of Single-Unit Permits, it is clear that Rhode Island’s goods-producing sector is far from dead.

 
 

Current Conditions Index: November 2013

Below is a partial version of the November Current Conditions Index report. The full report, which includes tables and historical data, can be found on my web site: www.llardaro.com .
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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.