Projo Biz Blog

For 11 of the last 12 months, the index has languished below 50. During January, February, March and May, the monthly values sank to 8.

In April, the index climbed to 17 -- prompting Lardaro, the index's manager, to suggest there was reason to hope that the economy might begin to turn around. Two indicators in April improved, albeit slightly. Retail sales, which had been declining, "squeaked by," and manufacturing wages also rose, according to the index.

But any hope of a near-term recovery was dashed in May when the index fell back to a value of 8.

The housing market meltdown has slowed the rate of house construction, with single-unit building permits down 33.3 percent in May. The building slowdown, however, could be viewed as a "bright spot," Lardaro said, because it may help the state reduce its bloated inventory of unsold houses.

The labor market also continued to deteriorate in May, with layoffs driving up new unemployment claims by 14.3 percent over May 2007, although the number of claims has improved during the past three months.

The share of people who ran out of their unemployment benefits -- "benefit exhaustions" -- climbed 31.9 percent compared with May 2007.

Employment service jobs, a "leading labor market indicator" that includes temporary help, fell by double digits for the fourth consecutive month. Employment service jobs tend to decline when the economy is contracting and rise when it's growing.

Government employment also shrank, and is expected to continue to do so as the state agencies begin to lay off employees to bring spending in line with state budget cuts.

Meanwhile, the size of the labor force in May shrank, which suggests that some residents either gave up looking for work or got jobs in other states.

Not surprisingly, the weak job market along with rising food and fuel costs has caused consumer sentiment to plummet and spending to shrink. Retail sales fell 10.6 percent in May, though the overall level of sales remained relatively high, Lardaro said.

"We're in the second stage of a recession,'' Lardaro said. "This winter it could get even worse ..."

The only indicator that improved in May -- the reason that the monthly index remained above zero -- was manufacturing wages. But that, too, could be short lived. Total manufacturing hours in May fell at its most rapid rate since September 2002, as both the workweek and employment declined.