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.