Radio Appearance on WPRO

On Friday (3/18) I was on WPRO's Buddy Cianci Show. We discussed the employment/unemployment picture for Rhode Island, my Current Conditions Index, and the state's budget, especially proposed changes to the sales tax. Here is a link to that interview.

Media Coverage of the January 2011 Current Conditions Index

The January 2011 Current Conditions Index (the report is given in the prior post and on my website) received coverage in local media. Here is my discussion of the index on Channel 10's Business Talk with Frank Coletta. The Providence Business News, as always, gave very nice coverage to the report as well.

Current Conditions Index: January 2011

Things are not always as they appear. That certainly pertains to the labor market data prior to the recent rebenchmarking. As I had indicated in the last few reports, I expected the new labor market data to show greater employment levels since historically, revisions are typically higher in the early stages of recoveries and the magnitudes of implied job losses seemed to be too extreme. Let me confess, the magnitudes of the job gains in the newly released data took me by surprise.

What we now see is that Current Conditions Index values for all of 2010 were substantially higher than what the existing data throughout last year had led us to believe. Furthermore, these data point quite clearly to a change in the date for the beginning of Rhode Island’s current recovery from June of 2010 to February.

The data prior to rebenchmarking produced CCI values no higher than 58 for all of last year, with two non-expansionary values in October and November. What we now see is that after February, as the recovery progressed, the CCI exceeded 58 for the remainder of last year, reaching a high of 83 (where 10 of the 12 CCI indicators improved) on three occasions. The primary reason for the higher CCI values concerns two indicators. The first of these, Employment Service Jobs, is a leading labor market indicator that includes “temps.” While we thought it had failed to improve throughout all of 2010, the revised data show that it improved for every month of 2010. The other changing indicator, Private Service-Producing Employment, had only risen a few times last year. The new data show this improving for 10 of the 12 months in 2010. The two of these accounted for most of the revised CCI increases.

So, in light of all the CCI changes, January was another good month for Rhode Island. Its value, 67, while exceeding anything we had witnessed in the prior data, actually showed a decline from the (new) December value of 83. Eight of the twelve CCI indicators improved, with yet another strong performance from our latest “star,” Employment Service Jobs, which rose 2.8 percent.

There were modest gains in the remaining indicators that improved. US Consumer Sentiment rose, but by only 0.2 percent. Private Service-Producing Employment increased by 0.4 percent, its tenth consecutive improvement. Manufacturing turned in a seemingly modest performance, but that is deceiving. Total Manufacturing Hours rose by 0.5 percent, but this was its eighth improvement in the last nine months, something I thought we would never see again. Couple this with a strong increase in the Manufacturing Wage (+4.1%), and Rhode Island manufacturing strength mirrors that of the US. Our Labor Force increased by 0.8 percent, and the revised data show that improvements in our Unemployment Rate were not largely the result of Labor Force declines as the prior data appeared to show. Our Unemployment Rate remained above 11 percent in January, though. Finally, New Claims fell sharply in January (-12.9%).

Retail Sales declined in January (-0.8%), as did Government Employment (-1.3%). Benefit Exhaustions rose (+16.5%), while Single Unit Permits, a very volatile indicator of late, plunged by over 50 percent.

THE BOTTOM LINE:
The revised labor market data and CCI values point to the fact that Rhode Island is actually in a fairly “typical” recovery in terms of cyclical momentum. Our state’s sluggish job growth and stubbornly high jobless rate point to the sad reality that major structural impediments continue to counteract our state’s cyclical momentum, so overall, growth remains unacceptably low. Removing structural impediments should be our job #1.

An Interesting Difference with the US

One of the more interesting statistics I have kept up with over the last few years concerns the labor participation rate for our state. Specifically, this is referred to as the labor force participation rate, defined as the percentage of the working-age population that is in the labor force. Over the past few years, Rhode Island's labor force participation rate has taken on an interesting behavior relative to that of the US. The chart shows this (click to enlarge).

  

Nationally, there is both concern and more than a little bit of confusion concerning how this rate has been changing. It should be apparent from the graph that nationally, the labor force participation rate has continued to decline for some time now, falling to a level of around 64 percent (0.64) in February of this year. There was an excellent discussion of this on CNBC this morning, going into far more detail that I will engage in here.

At this point, the more interesting question in this state is why the participation rate for Rhode Island rose during 2009 while the US rate was declining and the reason why our state's participation rate has largely remained unchanged at very high values. While there are in reality a number of factors responsible for this, I'll give you a hint concerning why RI is so different: 99. See if you can figure out this "puzzle."

Presentation at the RISC Meeting -- February 26,2011

I was invited to speak at the Winter Meeting of the RI Statewide Coalition which was held last Saturday. If you would like to see my presentation, here is the link for part 1. The remainder of the talk (part 2) is on this link.

In future posts, I will lay out  some possible name and motto changes for our state and link back to articles I published in the ProJo that are related to the things I spoke of in the RISC talk.

Interview (2/16) on Buddy Cianci's Show

This past Wednesday I spoke with Buddy Cianci on WPRO. We discussed my Current Conditions Index and a host of other topics. You can listen to this interview by following this link.

Hopefully WPRO will eventually figure out the correct spelling of my last name.

While we're at it, I located a page at WPRO that has listings for all of my interviews during the last six or so months.

Media Coverage of the December 2010 Current Conditions Index

The December Current Conditions Index (the report is given in the prior post and on my website) received coverage in local media. Here is my discussion of the index on Channel 10's Business Talk with Frank Coletta. The Providence Business News, as always, gave very nice coverage to the report as well.

Current Conditions Index: December 2010

Over the past few months, I have been keeping my fingers crossed concerning whether Rhode Island’s current recovery would continue. My greatest fears were that either this recovery would stall or worse yet, end abruptly moving us back to where we clearly don’t want to be. The December Current Conditions Index reading restored my faith on this front for now at least, as the CCI moved beyond its recent two-month stint with a contraction and a neutral reading. For December, the CCI rose to 58, back in the expansion range, as seven of twelve indicators improved compared to a year ago.

As I noted in last month’s report, Rhode Island’s recovery might even have more strength and momentum than recent reports indicate, as we will soon see the labor market data revisions going back to late 2009. If the historical pattern for these revisions holds, prior employment data should be revised (rebenchmarked) higher, which is my expectation at this point. Historically, the December labor market data is often revised, even in “normal” times. Combine this with an economy that has recently shifted into recovery mode, and I don’t exactly find myself with a great deal of confidence in the currently available data for December.

There were several very strong performances among the CCI indicators in December. Retail Sales, one of the foundations upon which Rhode Island’s recovery has been built, improved again, rising by 8.7 percent, capping a strong holiday shopping season. This indicator has now increased for ten of the past eleven months. Another part of our foundation, US Consumer Sentiment, rose for a second time after two consecutive decreases. It’s uptrend remains in effect. The most amazing story of this recovery to me continues to be strength in our state’s manufacturing sector. For December, Total Manufacturing Hours rose by 1.6 percent, powered by yet another increase in the length of the workweek. December marked the fifth consecutive improvement for this indicator, an anomaly for Rhode Island. Along with this, the Manufacturing Wage rose again, by 3.0 percent. The other portion of our state’s good producing sector, housing, improved this month. Single-Unit Permits, which reflects new home construction, rose 3.1 percent in December, but it remains at low levels.

Two other indicators improved in December. Benefit Exhaustions, which reflects long-term unemployment, fell by 13.4 percent, its tenth consecutive improvement, while our state’s Unemployment Rate declined again, from 12.7 percent last December to “only” 11.5 percent this December, partly the result of declines in our Labor Force, which fell by 0.2 percent compared to a year ago.

All of the remaining indicators failed to improve. New Claims, a leading indicator that measures layoffs, rose by 25.4 percent, partly the result of comparison to a clogged-phone period a year ago. Employment Service Jobs, another leading labor market indicator, dropped by 12.6 percent compared to a year ago. Private Service-Producing Employment fell again (-0.2%), but its rate of decline has continued to moderate. Finally, Government Employment declined by 0.3 percent in December. Expect future declines based on the absence of any future assistance from the federal government.

THE BOTTOM LINE:

Through December, the available labor market data point to a very fragile state economy. The potentially good news is that revisions to the recent data will be released soon. Typically, in the early stages of recoveries, revisions are higher, so things weren’t as bad as they had appeared to be. I expect that to be the case this time. Hopefully, some earlier CCI values might also be revised higher and things were less bleak than we thought.

December 2010 Data

The December 2010 data, the existing data at least, are given in the table below. While the Rhode Island's economy has made substantial improvement since its recession, weakness remains. The potentially good news concerns upcoming data revisions (rebenchmarking). With the release of the January employment data (later this month), we will see the revised labor market data extending back to late 2009. If history turns out to be accurate, during the initial stages of recoveries, revisions are to higher values. That doesn't say how much higher, though. I expect some upward revision to the existing data, so things weren't quite as bad as we had been led to believe. But I don't expect truly dramatic changes. We'll have to keep our fingers crossed for that.

Once the rebenchmarked labor market data have been released, I will make one or more posts discussing the changes and their significance.

Is Rhode Island's Population Really Rising?

Ever since the Census results were released, the presumption has been that Rhode Island's population is increasing, as the number of persons in the 2010 Census was higher than the number in the 2000 Census. Well, sometimes a picture says a thousand words. Below is a graph of annual population values for Rhode Island from the US Bureau of the Census (click to enlarge this).

Is our state's population really rising? Answering something as simple as this actually has one item that needs to be specified: Rising relative to when? If we compare the 2010 Census to the 2000 Census, then yes, Rhode Island's population has indeed risen. But we ranked #49 out of the 50 states for this change, by the way.

A preferable way to view population change is to examine what has been happening each year for the last several years. Sadly for Rhode Island, annual population has fallen every year since July of 2004! Rhode Island was the only state with the dubious distinction of having such a long streak of population declines. So, looking at population change in a more relevant context than it has recently been viewed here, Rhode Island's population is falling.

Stay tuned! I will have more about this in coming posts.