Wednesday, September 18, 2013

Current Conditions Index: July 2013

Below is a partial version of the July Current Conditions Index report. The full report, which includes tables and historical data, can be found on my web site: .
Rhode Island began the third quarter on a very positive note, as the pace of activity during the second quarter was sustained. The performance of Rhode Island’s economy for July was quite good, with the Current Conditions Index registering a value of 75, as nine of 12 indicators improved. Importantly, the overall strength of most of the leading indicators contained in the CCI has continued through all of this year (including July), which is a welcome occurrence as we enter the final half of the year.

Importantly, the primary negative from last month was eliminated in July — the CCI once again beat its value from a year ago. So, only once this year, June, has the CCI failed to beat its year-earlier level. Given the strength we witnessed starting in August of last year, we may well witness several more months where the CCI is unable to exceed its prior-year values, which will reflect a slowing in our rate of growth. Let’s cross that bridge when we get to it. For now, we should be focusing on all of the positive news contained in this month’s data along with Rhode Island's economic performance thus far in 2013.

Before doing this, let me to reiterate a point I made last month. Many remain confused by the seeming paradox of how a state's economy showing such momentum can remain so far below where it was back in 2006 and 2007. The answer, plain and simply, is that current levels of economic activity depend on both the rates of growth we are experiencing and the prior activity levels themselves. During The Great Recession, Rhode Island’s overall economy along with many of its indicators, declined greatly, about as far, if not farther, than just about any other state. So, our recent rates of growth applied to these depressed activity levels continue to generate relatively small changes in the actual level of economic activity here. Don’t expect this to change any time soon!  Rhode Island has yet to undertake the hard work required to reinvent itself and to make its economy more competitive. Recent organizational changes will do virtually nothing return us to where we once were.

All four of the CCI’s leading indicators turned in strong performances this month. Three of them did so in spite of very strong “comps” from a year ago. The uptrend in Single-Unit Permits, a leading indicator of housing, continued, reflecting further movement beyond its trough. Permits rose 6 percent in July and have now settled into a range of 70+ each month. US Consumer Sentiment improved for the sixth consecutive month in July, rising 17.7 percent.

The remaining leading indicators are related to the labor market. The first of these, Employment Service Jobs, which includes temporary employment, a prerequisite to overall employment growth, rose by 1.5 percent in July. While this indicator has consistently improved since last April, its rate of improvement has clearly slowed of late. New Claims for Unemployment Insurance is the most timely measure of layoffs. It recently appeared to be returning to a downtrend, but this change is not apparent at present. New Claims rose by 2.2 percent in July, its fourth increase in the last six months. Declining layoffs will be critical if Rhode Island is to continue improving as we move through the second half of the year. The fourth of the CCI’s leading indicators, Total Manufacturing Hours, which measures strength in our manufacturing sector, jumped by a very healthy 4.1 percent, driven by higher employment and the workweek.