What Does Lardaro’s Index Mean?
It seems as if URI Economics Professor Len Lardaro is changing his explanation of his index in a subtle, but significant, way:
The Current Conditions Index fell to 33 in December, down from 50 in November and 42 in October. But Lardaro emphasized that the latest report was not uniformly negative. …
The Current Conditions Index uses a dozen national and local economic indicators to track the state’s economic performance. A reading of 0 would mean no indicators improved compared with a year earlier, while 100 would mean all 12 improved.
December was the eighth consecutive month that saw Lardaro’s index top its year-earlier level, as four the 12 indicators showed month-over-month improvement, including manufacturing wages, the size of the labor force and new claims for unemployment benefits.
Every explanation that I’ve read up to now has stated that a score below 50 means contraction and a score over 50 means expansion. (I also thought the indexes compared each month to a year earlier, not the prior month.) Have we just been shrinking for so long that Lardaro has to delve deeper to find a positive message?