Wednesday, November 30, 2011
Word Cloud
At this point, I have published a fairly large number of posts. If you want to see the words that have appeared most frequently, below is a word cloud of this blog up to now (click to enlarge).
Sunday, November 27, 2011
That Sinking Feeling
If you have been following what I have been saying about the performance of the Rhode Island economy over the last year, you know that things here have been deteriorating. Rhode Island has been in a recovery since February of 2010. Throughout 2010, the pace of economic activity here was substantial (relative, of course, to where we had been in "The Great Recession."). But since March of this year, my Current Conditions Index (CCI) has failed to match or exceed its year-earlier value. This, of course, indicates that the pace of economic activity here has slowed. In fact, based on this recent inability to match or exceed year-earlier values and that the CCI averaged its neutral value of 50 over the third quarter of this year, I characterized Rhode Island's economy as being "dead in the water."
Another way to see visualize this is with a graph of the CCI's values by month over the last three years (click to enlarge). I don't think I need to add much discussion to this chart, a picture like this is worth a thousand words, as the old saying goes.
Another way to see visualize this is with a graph of the CCI's values by month over the last three years (click to enlarge). I don't think I need to add much discussion to this chart, a picture like this is worth a thousand words, as the old saying goes.
So, at the present time, 2010 appears to be "the good old days." As we contrast last year with what is occurring now, it seems inevitable to get a sinking feeling.
Tuesday, November 15, 2011
Current Conditions Index Report: September 2011
This is an abbreviated version of the September Current Conditions Index report. For the tables, historical reports, and more information, please visit my web site: http://www.llardaro.com . I made my monthly appearance on Channel 10 this morning. Here is a link to that interview. And, as always, the CCI received excellent coverage in both the Providence Business News and GoLocalProv.com.
The third quarter ended with a whimper, as the Current Conditions Index for September rose back to its neutral value of 50, as only six of the twelve CCI indicators improved. While that’s hardly cause for celebration, at least September’s CCI was better than the contractionary reading of 42 for August.
Among the remaining indicators, Employment Service Jobs, a leading labor market indicator, fell by 2.1 percent in September, although its level may well have bottomed. Single-Unit Permits, which reflects new home construction, declined by 16.7 percent in September, after two months of improvement. Clearly, new home construction here remains at very depressed levels. Finally, New Claims, a leading labor market indicator that indicates layoffs, rose by 29.7 percent, its third consecutive failure to improve. We may well have moved into a period of rising layoffs, a trend that could seriously undermine our future economic momentum.
The third quarter ended with a whimper, as the Current Conditions Index for September rose back to its neutral value of 50, as only six of the twelve CCI indicators improved. While that’s hardly cause for celebration, at least September’s CCI was better than the contractionary reading of 42 for August.
For the entire third quarter, the CCI averaged 50 — flat economic activity. Perhaps more disturbing is the fact that September marked the seventh consecutive month for which the CCI failed to meet or exceed its year-earlier value. At this point, I think it is safe to conclude that Rhode Island is no longer near stall speed, the conclusion I reached in last month’s report: we are now pretty much “dead in the water.” Yet in spite of this lack of positive momentum, I remain unconvinced that Rhode Island’s economy has actually entered a period of contraction. In other words, as bad as the data are, I do not believe that Rhode Island has fallen into a recession at the present time. However, I have now upgraded my assessment of the likelihood that Rhode Island falls into a recession this fiscal year from 50 to 60 percent.
September’s data reveal yet another very weak economic performance. Not only did half of the CCI indicators fail to improve, several of the improving indicators displayed a continued loss of momentum. Worse yet, two of the improving indicators should be viewed with extreme skepticism. First for the bizarre.
The Manufacturing Wage surged by 16.3 percent in September, on top of increases of 14.7 percent in August and 12.7 percent in July. Rhode Island’s Manufacturing Wage had been at levels around a decade behind the US average. At this pace, that gap should be entirely eliminated by the end of this year! Our state’s Unemployment Rate fell to 10.5 percent in September, in spite of declines in both payroll and resident employment. This was in large part due to yet another decline in our state’s Labor Force. View this jobless change with a rather large “grain of salt.”
Among the remaining indicators that improved, Private Service-Producing Employment, while still growing, continued to grow more slowly, falling below one percent growth this month. Unfortunately, much of the benefit from even this slower change was offset by yet another sharp decline in Government Employment (-2.8%). The questions concerning this indicator are when and at what level will it ultimately stabilize? Total Manufacturing Hours, a mainstay of this recovery was effectively flat in September, rising by 0.02 percent. Still, this indicator has risen, albeit at ever-decreasing rates for fifteen consecutive months. Retail Sales surged by 17.2 percent in September, its third improvement in the last four months, in spite of the continuing deterioration in US Consumer Sentiment, which fell again at a double-digit rate (-12.7%). Finally, Benefit Exhaustions, a reflection of longer-term unemployment, improved again, but at a slower rate (-9.1%).
Friday, November 4, 2011
A Chart of the Future Direction of Rhode Island's Economy
It has been abundantly clear from the performance of my Current Conditions Index over the past several months that Rhode Island's economy has continued to slow. As of the most recent report (August 2011), I reported that Rhode Island is essentially at "stall speed."
To understand what is actually happening at the present time, we need to revisit what occurred during the last recession. As that recession continued, the levels of many key economic indicators became so beaten down that they ultimately couldn't fall much further. So, the seeds for the present recovery began to emerge as our state's economy began to decline at slower and slower rates. I wish I could say that this was related largely to Rhode Island's leaders reinventing our state's economy and eliminating most of the structural weaknesses that continue to haunt us to this day. But, this is Rhode Island. The operating procedure of our state's leaders then, which continues to this day, can be summed up with a single word: Mañana.
Our long recession finally ended and economic growth returned around February of 2010, which is the date I place on the beginning of this recovery. As I have discussed in previous posts, this did not then, nor does it mean now, that we have returned to "normal" activity levels. What actually occurred is that the greatly diminished levels of many key variables eventually became relatively easy to beat. So, we finally began to beat these weak "comps," and we improved from there. Our rate of growth thus became positive, and for the remainder of 2010, Rhode Island's economy performed fairly well, certainly far better than it had in the prior three years!
What we are witnessing now is the "second act" of this play. We were able to handily beat the weak comps throughout 2010, but for this recovery to continue, we have to beat ever-improving comps through time. For this to occur, our rate of economic growth must be sustained or even accelerate, and the breadth of overall economic activity must expand.
As my Current Conditions Index shows, CCI values for 2011 have lagged the corresponding levels for the prior year since March. Thus, our economy's rate of growth has continued to moderate. Given the values for July and August, there is even some question in my mind as to whether there is much growth at all.
An excellent way to see the manifestations of the above discussion is to view Retail Sales for Rhode Island. As I have done on other occasions, I converted this to its real (inflation-adjusted) value, since Retail Sales is in current dollars, and its behavior can be distorted by inflation. The chart below shows this since 2007 (click to enlarge):
The first thing that should jump out at you is how far real Retail Sales today are below their peak in mid-2007. This is not unique to Rhode Island -- the levels of many variables today remain far below what they once were in the "good old days" of leverage and debt accumulation. Focusing on the present recovery (the blue shaded area), real Retail Sales have been largely range bound, displaying lower highs throughout this entire recovery, with a floor (or "support") around the $11.6 billion level.
It is this indicator, Real Retail Sales, that can serve as the proverbial "parakeet in the coal mine" with respect to the future (cyclical) direction of Rhode Island's economy. Based on the way this indicator has behaved throughout this recovery, there will either be a breakout above the red line (resistance) or a breakdown below the green line (support) in the coming months.
A breakout, which is what we should all be hoping for, will indicate that the present recovery is continuing. For this to occur, it will be necessary for employment to continue rising, which at the present time means that it returns to an uptrend. Along with this, tax revenue would continue to provide us with pleasant surprises, helping us moderate budget deficits.
A breakdown, the dreaded outcome, would reflect that our state's economy is unable to sustain its current growth and breadth of activity, meaning that we are headed into a double-dip recession. This would be accompanied by falling employment, increasing unemployment, declining tax revenue, and a rising budget deficit. The actions required to restore budget balance would inevitably further slow the pace of economic activity.
So, the ultimate question is which way is Rhode Island headed? Had our leaders used the past crisis ("The Great Recession") to reinvent our state's economy, making it more competitive with greater exposure to growth-oriented sectors, the most likely outcome for us would have been a breakout above with continued recovery. While a crisis is a terrible thing to waste, the inaction of our state's leaders, guided by their primary leadership principle -- Mañana, means that Rhode Island wasted the opportunity afforded it during the last recession to make meaningful structural changes to our state's economy. We once again find ourselves "flat footed," largely at the mercy of national and global economic momentum.
Ironically, the world has changed -- national economic momentum is largely influenced by global trends, especially what is occurring in Europe. So, even the US is no longer the master of its own fate. The real question for us thus becomes exactly what is it that Rhode Island is the master of?
To understand what is actually happening at the present time, we need to revisit what occurred during the last recession. As that recession continued, the levels of many key economic indicators became so beaten down that they ultimately couldn't fall much further. So, the seeds for the present recovery began to emerge as our state's economy began to decline at slower and slower rates. I wish I could say that this was related largely to Rhode Island's leaders reinventing our state's economy and eliminating most of the structural weaknesses that continue to haunt us to this day. But, this is Rhode Island. The operating procedure of our state's leaders then, which continues to this day, can be summed up with a single word: Mañana.
Our long recession finally ended and economic growth returned around February of 2010, which is the date I place on the beginning of this recovery. As I have discussed in previous posts, this did not then, nor does it mean now, that we have returned to "normal" activity levels. What actually occurred is that the greatly diminished levels of many key variables eventually became relatively easy to beat. So, we finally began to beat these weak "comps," and we improved from there. Our rate of growth thus became positive, and for the remainder of 2010, Rhode Island's economy performed fairly well, certainly far better than it had in the prior three years!
What we are witnessing now is the "second act" of this play. We were able to handily beat the weak comps throughout 2010, but for this recovery to continue, we have to beat ever-improving comps through time. For this to occur, our rate of economic growth must be sustained or even accelerate, and the breadth of overall economic activity must expand.
As my Current Conditions Index shows, CCI values for 2011 have lagged the corresponding levels for the prior year since March. Thus, our economy's rate of growth has continued to moderate. Given the values for July and August, there is even some question in my mind as to whether there is much growth at all.
An excellent way to see the manifestations of the above discussion is to view Retail Sales for Rhode Island. As I have done on other occasions, I converted this to its real (inflation-adjusted) value, since Retail Sales is in current dollars, and its behavior can be distorted by inflation. The chart below shows this since 2007 (click to enlarge):
The first thing that should jump out at you is how far real Retail Sales today are below their peak in mid-2007. This is not unique to Rhode Island -- the levels of many variables today remain far below what they once were in the "good old days" of leverage and debt accumulation. Focusing on the present recovery (the blue shaded area), real Retail Sales have been largely range bound, displaying lower highs throughout this entire recovery, with a floor (or "support") around the $11.6 billion level.
It is this indicator, Real Retail Sales, that can serve as the proverbial "parakeet in the coal mine" with respect to the future (cyclical) direction of Rhode Island's economy. Based on the way this indicator has behaved throughout this recovery, there will either be a breakout above the red line (resistance) or a breakdown below the green line (support) in the coming months.
A breakout, which is what we should all be hoping for, will indicate that the present recovery is continuing. For this to occur, it will be necessary for employment to continue rising, which at the present time means that it returns to an uptrend. Along with this, tax revenue would continue to provide us with pleasant surprises, helping us moderate budget deficits.
A breakdown, the dreaded outcome, would reflect that our state's economy is unable to sustain its current growth and breadth of activity, meaning that we are headed into a double-dip recession. This would be accompanied by falling employment, increasing unemployment, declining tax revenue, and a rising budget deficit. The actions required to restore budget balance would inevitably further slow the pace of economic activity.
So, the ultimate question is which way is Rhode Island headed? Had our leaders used the past crisis ("The Great Recession") to reinvent our state's economy, making it more competitive with greater exposure to growth-oriented sectors, the most likely outcome for us would have been a breakout above with continued recovery. While a crisis is a terrible thing to waste, the inaction of our state's leaders, guided by their primary leadership principle -- Mañana, means that Rhode Island wasted the opportunity afforded it during the last recession to make meaningful structural changes to our state's economy. We once again find ourselves "flat footed," largely at the mercy of national and global economic momentum.
Ironically, the world has changed -- national economic momentum is largely influenced by global trends, especially what is occurring in Europe. So, even the US is no longer the master of its own fate. The real question for us thus becomes exactly what is it that Rhode Island is the master of?
Monday, October 24, 2011
More Evidence of a Flat Economy
One of the more important indicators of Rhode Island's economic performance is income tax withholding. Part of the reason for its importance is that it is not a survey-based indicator, so we don't have to worry about the possibility of survey error and subsequent revision. Furthermore, income tax withholding is real-time data. But it is not what economists refer to as a "leading economic indicator," which is the best type of indicator to use when attempting to predict the future. To the contrary, income tax withholding is a "lagging indicator" which reflects economic activity in past months.
In using income tax withholding as the basis for attempting to understanding Rhode Island's current economic performance, three things must be taken into account. First, income tax withholding is a nominal value, meaning that it does not take inflation into account. Therefore, inflation can distort this indicator, making its performance appear to be better than it really is. Second, there are seasonal variations in the amount of withholding collected throughout the year. To account for this, it is necessary to perform seasonal adjustment. After both of these adjustments have been made, it is possible to meaningfully compare any particular month to any other month. The result, after both of these corrections have been made, is called seasonally adjusted real income tax withholding. To simplify this and what follows, I will simply refer to it as real withholding. Finally, it is critical to remember that, as stated above, withholding is a lagging economic indicator.
First, let's take a look at income tax withholding using seasonal adjustment, but not adjusting for inflation. The chart below shows this (click to enlarge). Its performance of late looks very impressive. Someone using this chart as the basis for determining how well Rhode Island's economy is performing would almost certainly give a very positive vote -- the line of late is clearly sloping upward with a respectable slope.
Now for a more detailed look -- place the above chart in the context of the longer-term trend in withholding, as shown in the next chart (click to enlarge):
While the recent trend still seems promising, in a longer-term context it is apparent that since 2008, income tax withholding in Rhode Island has remained below its longer-term trend. But can't that just be evidence that this recovery has been relatively slow compared to past recoveries? The answer is yes it can. But since neither of the above charts takes inflation into account, we need to view real income tax withholding before making any final determination on current economic performance based on withholding.
The final chart takes inflation into account, showing real income tax withholding (click to enlarge). I have made the base period the purchasing power of September of 2011 (the most recently available data). Notice how real withholding has failed to break above its recent highs of around $75 million, and that it has remained range bound between $70 and $75 million throughout this entire recovery. I labelled these as "support" and "resistance," respectively, terminology from the technical analysis of markets. So, it is not in any way a stretch to state that during this entire recovery, Rhode Island's real income tax revenue has displayed a flat (horizontal) trend. So, while current dollar income tax withholding has been rising, as the above two charts show, its relatively static real value reflects the fact that current dollar growth has only matched, and failed to exceed, the rate of inflation.
However, that's not necessarily bad news. State budgets are run based on nominal values, and nominal withholding growth appears to be strong up to this point. And therein lies the true caveat: what happens from this time forward?
The answer to this question cannot be adequately determined based solely on the past behavior of any single indicator like income tax withholding, whether nominal or real values are considered. As I have indicated numerous times on this Blog, it is necessary to "hedge" one's bets by using a set of indicators to arrive at a far more educated answer to this question. And that is precisely why I formulated and publish my Current Conditions Index each month (http://www.llardaro.com/current.htm ).
The CCI value for August indicated a contraction value (of 42). If we were to observe a string of several consecutive contraction values, it would then be appropriate to conclude that Rhode Island would indeed have begun a double-dip recession. But we are not there yet. And at this point, I am not willing to make that call.
In using income tax withholding as the basis for attempting to understanding Rhode Island's current economic performance, three things must be taken into account. First, income tax withholding is a nominal value, meaning that it does not take inflation into account. Therefore, inflation can distort this indicator, making its performance appear to be better than it really is. Second, there are seasonal variations in the amount of withholding collected throughout the year. To account for this, it is necessary to perform seasonal adjustment. After both of these adjustments have been made, it is possible to meaningfully compare any particular month to any other month. The result, after both of these corrections have been made, is called seasonally adjusted real income tax withholding. To simplify this and what follows, I will simply refer to it as real withholding. Finally, it is critical to remember that, as stated above, withholding is a lagging economic indicator.
First, let's take a look at income tax withholding using seasonal adjustment, but not adjusting for inflation. The chart below shows this (click to enlarge). Its performance of late looks very impressive. Someone using this chart as the basis for determining how well Rhode Island's economy is performing would almost certainly give a very positive vote -- the line of late is clearly sloping upward with a respectable slope.
Now for a more detailed look -- place the above chart in the context of the longer-term trend in withholding, as shown in the next chart (click to enlarge):
While the recent trend still seems promising, in a longer-term context it is apparent that since 2008, income tax withholding in Rhode Island has remained below its longer-term trend. But can't that just be evidence that this recovery has been relatively slow compared to past recoveries? The answer is yes it can. But since neither of the above charts takes inflation into account, we need to view real income tax withholding before making any final determination on current economic performance based on withholding.
The final chart takes inflation into account, showing real income tax withholding (click to enlarge). I have made the base period the purchasing power of September of 2011 (the most recently available data). Notice how real withholding has failed to break above its recent highs of around $75 million, and that it has remained range bound between $70 and $75 million throughout this entire recovery. I labelled these as "support" and "resistance," respectively, terminology from the technical analysis of markets. So, it is not in any way a stretch to state that during this entire recovery, Rhode Island's real income tax revenue has displayed a flat (horizontal) trend. So, while current dollar income tax withholding has been rising, as the above two charts show, its relatively static real value reflects the fact that current dollar growth has only matched, and failed to exceed, the rate of inflation.
However, that's not necessarily bad news. State budgets are run based on nominal values, and nominal withholding growth appears to be strong up to this point. And therein lies the true caveat: what happens from this time forward?
The answer to this question cannot be adequately determined based solely on the past behavior of any single indicator like income tax withholding, whether nominal or real values are considered. As I have indicated numerous times on this Blog, it is necessary to "hedge" one's bets by using a set of indicators to arrive at a far more educated answer to this question. And that is precisely why I formulated and publish my Current Conditions Index each month (http://www.llardaro.com/current.htm ).
The CCI value for August indicated a contraction value (of 42). If we were to observe a string of several consecutive contraction values, it would then be appropriate to conclude that Rhode Island would indeed have begun a double-dip recession. But we are not there yet. And at this point, I am not willing to make that call.
Tuesday, October 11, 2011
Current Conditions Index: August 2011
This is an abbreviated version of the August Current Conditions Index report. For the tables, historical reports, and more information, please visit my web site: http://www.llardaro.com . I made my monthly appearance on Channel 10 this morning. Here is a link to that interview. And, as always, the CCI received excellent coverage in both the Providence Business News and GoLocalProv.com , while as of the time I am writing this post, the ProJo has yet to even mention it.
So much for a potentially strong start to the third quarter!
While the Current Conditions Index originally registered a jump to 67 in July
from 58 in June, updated data caused July’s value to be revised down to 58
based on New Claims, which moved from a slight decrease (improvement) to a small
increase. What could possibly be worse? August’s CCI value fell all the way to
42, a contraction range reading, as only five of the twelve CCI indicators
improved this month. Note that this contraction reading occurred only three
months after the neutral reading (of 50) for May. Taken together, these recent
CCI values reaffirm what I have been saying for a while now: Rhode Island’s
economy has definitely slowed over the past several months. In fact, the set of
2011 CCI values up to this point are
trending lower, as we are have witnessed lower highs and lower lows. However, this does
not indicate that Rhode Island has entered a recession. It is
never advisable to make too much of a single month’s data. Were Rhode Island in
recession, we would have observed six or more consecutive contraction readings.
So, while I continue to believe that there is a 50 percent chance of a
recession for Rhode Island this fiscal year, I do not believe
we are in a recession at the present time. But the bizarre labor market data
for August certainly make this pronouncement considerably more difficult.
Sunday, October 2, 2011
It's Not Supposed to Be Like This!
Pardon the fact that I have not posted anything for a while, I switched from Cox Cable to FiOS (ready my post about issues I was having) and had to make all the required changes associated with this. Please note that my web site has now been moved to http://www.llardaro.com .
Recent gains in payroll employment here, which have at times appeared to defy gravity, seem to contradict any hint of weakness, reinforcing the declining unemployment reflects economic strength view. You might think that these large monthly employment gains have been a potential source of confusion to me, as my Current Conditions Index has continued to show a slowing pace of economic activity in Rhode Island. But as of 2011, I have been following Rhode Island's economy for twenty years. Suffice it to say that along the way I have observed and come to know all too many patterns and data combinations that reflect the idiosyncrasies of Rhode Island's economy.
But one doesn't need all this experience to know that it is always preferable to focus on a set of indicators, not any one single variable, to gain an accurate picture of Rhode Island's economic performance. That, of course, was the basis for my creating the Current Conditions Index. And even for a single indicator like payroll employment, there are often several related measures worthy of observation.
As I have discussed in prior posts, there are two measures of overall employment for Rhode Island. The first, which I have been alluding to above, is payroll employment, the number of jobs in Rhode Island. The second is resident employment, the number of Rhode Islander residents who are working, irrespective of whether this occurs in or outside of Rhode Island. One major difference between these is the inclusion of self-employed persons in resident employment. And that difference matters a great deal in the early stages of recoveries or at turning points for the economy.
The chart below shows the recent behavior for both employment measures here (click to enlarge):
Note that the year-over-year rate of growth for resident employment peaked before the end of 2010 and has continued to decline, becoming ever-more negative, as 2011 progressed. For payroll employment there is a very different story: after moving to a positive rate of growth in the beginning of 2011, growth continued to accelerate through June. For July there was a modest slowing in growth, before plummeting to an almost 0% growth rate in August. So, was employment here really rising or falling recently?
RESULT #1: Regarding the recent behavior of payroll employment: POSITIVE MEASUREMENT ERROR COMETH BEFORE THE FALL.
The dramatic-appearing run up in payroll employment should therefore be viewed as spurious, overstating payroll strength. In August, think of payroll employment figure as a "burp," expelling the measurement error that had accumulated in prior months.
Next, let's link the recent declines in Rhode Island's unemployment rate to changes in employment -- but the employment measure that is in the same survey it is -- the household survey (click to enlarge):
Shouldn't the unemployment rate only fall when employment is rising? While that certainly sounds reasonable and intuitive, it is not necessarily true. First, which measure of employment is this referring to? Second, since the beginning of 2011, Rhode Island's unemployment rate has been declining along with its resident employment.
RESULT #2: THE UNEMPLOYMENT RATE CAN DECLINE EVEN WHEN RESIDENT EMPLOYMENT IS FALLING.
Obviously, there must be another force at work for this to occur, one that is obviously not intuitive. That force is the behavior of our state's labor force, as the next graph shows (click to enlarge):
Rhode Island's labor force has been declining since early 2011, along with both resident employment and the number of unemployed. The fact that the number of unemployed has been declining, even though resident employment has also been falling, is what lies at the heart of the explanation of this strange seeming combination of changes.
The math of August's numbers can be obtained from the following table (data in thousands) (click to enlarge):
Compared to last August, the number of unemployed Rhode Islanders fell by 7,000. That's the good news. But while this was occurring, Rhode Island's labor force declined by 15,200, and its resident employment dropped by 8,200. The trick to understanding this is knowing how the ultimate change in the unemployment rate is determined: the percentage change in the unemployment rate (-7.8%) is approximately equal to the difference between the percentage changes in the number of unemployed (-10.5%) and the labor force (-2.6%). To simplify this a bit: even though the number of employed Rhode Island residents declined compared to a year ago, in percentage terms, the fall in the number of unemployed was greater than the decline in the labor force. Also, note that while the fall in resident employment was a fairly large number (8,200), in percentage terms, this was "only" a fall of 1.6 percent, far smaller than the drop in the number of unemployed.
Let me conclude by moving from the math of these calculations and show that in spite of these percentage changes and the way the unemployment rate is calculated, the August data show that a substantial number of Rhode Island's unemployed dropped out of the labor force, presumably as they were unable to obtain suitable employment. Make no mistake, however, the simultaneous and relatively large drop in resident employment is every bit as troubling as this, as it is reasonable to conclude from this rather rare trend that thousands of self-employed Rhode Islanders also "threw in the towel" on their business enterprises. Either way, this indicates that Rhode Island has entered a period of slower economic growth, which is entirely consistent with the recent behavior of my Current Conditions Index.
RESULT #3: ALWAYS FOLLOW A SET OF ECONOMIC INDICATORS RATHER THAN A SINGLE ONE.
Sunday, September 25, 2011
NEW WEB PAGE ADDRESS
I have moved the location for my web page from http://members.cox.net/lardaro to http://www.llardaro.com. Please change this in your bookmarks. My full Current Conditions Index reports will be published there each month from this time forward. PDF files of past reports will also be available there.
Tuesday, September 13, 2011
Current Conditions Index: July 2011
Rhode Island started the third quarter on a mixed
note. The good news is that the Current Conditions Index for July rose to 67
from its value of 58 in June. That is the highest CCI reading since February of
this year. The bad news is that in spite of this higher reading for July, the
CCI once again registered a value below its level one year ago. As of July, the
Current Conditions Index has failed to beat its year-earlier value for five
consecutive months. So, while Rhode Island’s present recovery is continuing,
the rate of improvement in the overall level of economic
activity continues to moderate.
Make no mistake about it, though, Rhode Island’s
economy continues to grow as it has through all of 2011. This recovery will be
eighteen months old in August. As I noted last month, the positive economic
momentum this has afforded us will provide us with some margin for error in
dealing with whatever weakness lies ahead. “The” question, however, continues
to be what will happen nationally — will the US experience a double-dip
recession?
In July, the trends in several key indicators
continued to deviate from what we will need them to be if growth is to
re-accelerate. Our Labor Force has now declined or failed to
improve on a year-over-year basis for the last six months. Worse yet, on a
monthly basis, the decline extends all the way back to last December. This, of
course, casts doubt on the validity of the “signal” provided by recent declines
in our Unemployment Rate.
At this point, I recommend not attempting to gauge the overall strength of
Rhode Island’s economy by the behavior of our state’s Unemployment Rate.
Not only is this indicator losing some of its statistical meaningfulness, it is a lagging indicator as well. The
number of Employment Service Jobs,
a leading labor market indicator that includes “temps,” has fallen for the past
five months, although its comp last July was very difficult to beat. Along with
this, US Consumer Sentiment fell by another 5.3 percent versus
last July. While much of this is related to the total dysfunction of our
nation’s legislative branch, its effects are nonetheless spilling over into
other elements of economic activity.
Fortunately, not everything is moving toward
unfavorable trends. The spectacular and (to me at least) unexpected ongoing
strength in our state’s manufacturing sector continued in July. Total
Manufacturing Hours (+3.2%
in July) has now improved for the last thirteen months. Both employment and
hours rose in July. Growth in the Manufacturing Wage went parabolic in July, rising by 12.8
percent compared to a year ago. Clearly, sustaining our state’s recent
manufacturing momentum will require continued dollar weakness, which, given
federal government dysfunction, is likely to continue. Private
Service-Producing Employment rose
by 2.2 percent in July, its highest growth rate since October. Sadly, the
benefits of this change were offset by another sharp decline inGovernment Employment (-3.0%).
Retail Sales rose by 1.8 percent in
July, its fourth improvement in the last five months. New
Claims, a leading labor market indicator that indicates
layoffs, fell by only 0.4 percent this month, but that was its seventh
consecutive improvement. Single-Unit Permits, which reflects new home
construction, rose by 1.4 percent in July, its first improvement in a while,
although the number of permits remains extremely low. Finally, Benefit
Exhaustions, which measures long-term unemployment, declined by
14.4 percent, sustaining its overall downtrend.
Saturday, September 3, 2011
This Week
I always try to make at least one post per week on this Blog. Unfortunately, I have Cox bundle service, so all of my Cox services, most notably the Internet, have been non-existent since last Sunday at 9am. Apparently, I live on "the block that Cox forgot." This whole experience has been like having to deal with the Rhode Island's DMV on the home-base level! I call every morning, talk to Cox's tech support, who after thinking my service had been restored, suddenly "discover" that 20 homes on my street remain without any service. I always get the same: "Hopefully your service will be restored by tonight" response. Yeah, but in the long-run, we're all dead! Thank God I have an iPhone (obviously not with Cox), so I can make calls while my Cox phone service "sleeps." And, I am writing this blog post from Starbucks in Wakefield.
As I have been reflecting on all of this and trying to remain constructive, I am VERY thankful that my home, and all of my street, have power. Those who still don't have power are the ones who are truly suffering.
There are a few things I have been contemplating, given all the time I now have on my hands. First, what if Irene had actually been a hurricane, with sustained winds of 70+ mph? Why did a tropical storm do this much damage throughout this state? I'm not buying the duration of winds argument at this point.
Second, my experience in this instance has fortunately been restricted to dealings with the private sector, where alternatives exist if I am unhappy with my existing service. Were this instead related to one of the roughly half of our state's legislators who run unopposed, I would not have had any option for making a change (unless, of course, that person were to commit a felony). Sadly, while the other half of the legislature has opposition, they often end up being re-elected in spite of relatively few accomplishments or problems voters here might have with them. Rhode Island residents are all too willing to complain, but when it comes time to taking action in terms of voting against an incumbent whom one dislikes, this very seldom occurs. Even worse, very few persons here actually bother to vote, even though they are registered!
Why the dichotomy? People would no doubt respond that with Cox, or any private-sector company for that matter, there is actual money on the line. Actually, there is a far greater cost here than one might realize. Permit me to inject a bit of economics here. The cost of anything potentially consists of two parts, the direct or explicit cost, what we actually pay, and the indirect or implicit cost where time is involved in consuming a good or service. In my situation, even though I can get a credit from Cox for service time lost, this will only offset the explicit portion of total cost. The implicit cost, which is related to lost phone calls, Internet, and television (I missed reports on the disastrous employment report yesterday), involves chunks of time because I have been forced to seek alternative ways of having these services. These implicit costs have now become quite high as I move ever closer to the one-week mark. So, contrary to intuition, receiving a credit does not provide total compensation for the services I have lost, anymore than it reflects the total cost involved.
Let me end by moving once again to the statewide level. If anyone is naive enough to believe that retaining incumbent legislators whom persons don't really support is without cost, guess again. There is both the explicit cost, of being forced to pay higher taxes than we should pay given the quality of public services and leadership here, and the implicit cost of the lost time due to our state's celebrated atmosphere of excessive business regulations, time waiting at places like the DMV (blame the system set up, not the workers for this), and the list goes on and on and on. I'll leave it to you to guess which cost, explicit or implicit here, is larger.
As I have been reflecting on all of this and trying to remain constructive, I am VERY thankful that my home, and all of my street, have power. Those who still don't have power are the ones who are truly suffering.
There are a few things I have been contemplating, given all the time I now have on my hands. First, what if Irene had actually been a hurricane, with sustained winds of 70+ mph? Why did a tropical storm do this much damage throughout this state? I'm not buying the duration of winds argument at this point.
Second, my experience in this instance has fortunately been restricted to dealings with the private sector, where alternatives exist if I am unhappy with my existing service. Were this instead related to one of the roughly half of our state's legislators who run unopposed, I would not have had any option for making a change (unless, of course, that person were to commit a felony). Sadly, while the other half of the legislature has opposition, they often end up being re-elected in spite of relatively few accomplishments or problems voters here might have with them. Rhode Island residents are all too willing to complain, but when it comes time to taking action in terms of voting against an incumbent whom one dislikes, this very seldom occurs. Even worse, very few persons here actually bother to vote, even though they are registered!
Why the dichotomy? People would no doubt respond that with Cox, or any private-sector company for that matter, there is actual money on the line. Actually, there is a far greater cost here than one might realize. Permit me to inject a bit of economics here. The cost of anything potentially consists of two parts, the direct or explicit cost, what we actually pay, and the indirect or implicit cost where time is involved in consuming a good or service. In my situation, even though I can get a credit from Cox for service time lost, this will only offset the explicit portion of total cost. The implicit cost, which is related to lost phone calls, Internet, and television (I missed reports on the disastrous employment report yesterday), involves chunks of time because I have been forced to seek alternative ways of having these services. These implicit costs have now become quite high as I move ever closer to the one-week mark. So, contrary to intuition, receiving a credit does not provide total compensation for the services I have lost, anymore than it reflects the total cost involved.
Let me end by moving once again to the statewide level. If anyone is naive enough to believe that retaining incumbent legislators whom persons don't really support is without cost, guess again. There is both the explicit cost, of being forced to pay higher taxes than we should pay given the quality of public services and leadership here, and the implicit cost of the lost time due to our state's celebrated atmosphere of excessive business regulations, time waiting at places like the DMV (blame the system set up, not the workers for this), and the list goes on and on and on. I'll leave it to you to guess which cost, explicit or implicit here, is larger.
Subscribe to:
Posts (Atom)