The Pryor Tell of the Projo Economic Index


The Providence Journal’s still-new economic index has always seemed of questionable value to me.

Notably, it very heavily weights data from Bureau of Labor Statistics employment reports.  Of 11 “key economic indicators,” five come from this report: jobs based in the state, employed Rhode Islanders, labor force, unemployment rate, and labor force participation.

Depending how an index is structured, that might not matter.  The RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI) also uses multiple related datapoints, but they are juxtaposed with other things.  The Projo only cares if a datapoint has gone up or down, whereas JOI counterbalances, for example, employment and jobs against welfare-program enrollment.

The difference is most stark when you realize that the unemployment rate is really only employment compared with labor force.  That’s pretty close to using the same datapoint multiple times.

More notable, perhaps, is that the Projo’s index reviews Rhode Island in a vacuum, without comparing it with other states.  Most of the 12 datapoints were updated for the latest JOI report, but the fact that the Ocean State remained 47th and the country, nearly falling to 48th, would not support the claims that Democrat Governor Gina Raimondo’s Commerce Secretary Stefan Pryor offers in response to the Projo’s index: “The latest data demonstrates that the Rhode Island economy is making impressive progress on multiple fronts.”  That may be true of the United States, but Rhode Island is just along for the ride.

The use of Pryor to provide context for Providence Journal readers is also tellingly problematic.  He has essentially been a cheerleader for his boss since the very beginning and cannot be assumed to be offering an honest assessment.

Thus, when Pryor applauds that “startups are being birthed at a record-setting pace,” insisting that, “clearly, Rhode Island is a hospitable place for business startups,” he is conspicuously not providing cold analysis.  The source for this datapoint is the Secretary of State’s office, and it leaves out some very important information:  the number of business deaths.  For illustration, the Bureau of Labor Statistics reports 3,678 business births in 2017, but subtracting business deaths leaves an increase of only 182.

This leaves aside the observed reality that business startups can increase when the economy is not good because people have incentive to create work for themselves when jobs are hard to find.  In 2015, we compared Rhode Island and Massachusetts in this space when it comes to businesses starting up or expanding versus closing or contracting, and came to the hypothesis that the state’s business climate kicks in as a problem about a year into businesses’ lives.

This topic is all somewhat complicated and in the weeds, but the key point is this:  The Projo’s index, aided with cheerleading from Pryor, guides readers away from possibilities such as I describe.  They walk away feeling as if the economy is “revving up,” thus defusing any impulse to force the dramatic change that our state so desperately needs.