UCONN Says: There is no jobs recovery in sight for Connecticut

Connecticut Center for Economic Analysis University of Connecticut

There is a no jobs recovery in sight. Assuming national growth trails off from the unsustainable 5.7% of the fourth quarter, Connecticut continues to lose jobs through 2011; the rate of loss simply slows from the predicted rate in the previous CCEA Outlook.

The state’s economy has undergone a critical structural change as the degree of outsourcing—whether to other states or abroad—has grown quickly for more than a decade; the result is that even strong growth in total output may not translate into rapid improvement in employment. The effect shows in a pattern of progressively slowed jobs recovery.

Before 1990, Connecticut’s economy recovered jobs lost in recessions in ten months or less; recovery took 23 months and then 39 months in the last two recessions. Unless the state adopts policies and makes strategic investments to change this progressively deteriorating pattern, a jobs recovery may never arrive.

A longer term perspective—looking at the last decade—on the state’s economic performance underlines the depth of the challenge. Connecticut (CT) seasonally adjusted (SA) employment at 1,619 thousand is now 55,700 lower than at the dawn of the millennium. Construction permits for 2009Q4 at 897 were down 1,516 compared to a decade earlier. Not only has total employment declined, but the state has lost large numbers of high skill, high wage jobs in manufacturing and financial services, and seen vigorous growth in mostly low skill, low wage jobs in accommodations, food service, and health care.

Due to productivity gains, Connecticut’s total economic output (real gross domestic product, or CTRGDP) did grow over the decade, by $23.1 billion—but it was a weak performance, delivering growth just three quarters of the national rate of almost 20% for the decade.

The current fiscal crisis—a cumulative deficit of $1.2 billion in the current biennium—threatens to pull Connecticut’s economy down even more. And if this economic malaise continues beyond 2011, the state’s deficit only grows. To change this pattern, government investments must be more than countercyclical band aids, they should frame a facilitating business environment and create forward looking infrastructure to generate long term job growth, productivity gains, and a transition to the increasingly electricity dependent and knowledge economy.