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April 2005 — Vol. 83, No. 3 Job growth in Connecticut:Better but still behindCan the state go from lagging to leading?
In many ways, Connecticut has a lot going for it. Right now, though, job growth isn’t one of them. Although the state Labor Department’s revised job growth figure for 2004 is better than previous monthly estimates had indicated, Connecticut still ranks below the national average. The number of jobs here grew by 1.3% last year, compared with 1.7% for the nation as a whole. While the country overall has regained more than 90% of the jobs it lost during the 2001 recession, Connecticut has recovered only 36% of its 61,400 lost jobs. After two years of job losses, the state saw only modest average annual job growth during 2003 and 2004, notes Donald Klepper-Smith, chief economist and director of research for DataCore Partners LLC. He now projects the creation of 12,000 new jobs in 2005 on an average annual basis, although many of them will be entry-level. “The employment [graph] line is sloping upward,” he says. Rae Rosen, senior economist and assistant vice president for the Federal Reserve Bank of New York, also notes a resurgence. “We’ll continue to see job growth pick up, but not particularly quickly,” she predicts. She says she expects “growth in business services, private education hires, things related to tourism and hospitality, health and social services.” “It’s good news that we’re finally starting to see more jobs being added,” says John Rathgeber, CBIA executive vice president and COO. “But Connecticut has a lot of catching up to do. The state needs to fix some serious problems that have been discouraging companies from making job-creating business investments here,” he says. Productivity gains peaking?One reason job growth nationwide hasn’t been very robust is that productivity gains have been. “This recovery, both locally and nationally, has [involved] output recovering faster than job growth,” says Rosen. “The strong growth rate in productivity has been higher than the average — and very rapid.” Between 2001 and 2004 the country experienced the strongest productivity gains in more than 50 years, averaging 4.3% annually in nonfarm businesses, according to the Bureau of Labor Statistics. Productivity gains (a measure of rising living standards) allow businesses to produce more without having to hire more workers. At some point, though, businesses can’t squeeze out any more productivity gains and have to increase their workforces. Our economy may now be at that point, believes Klepper-Smith. “We’re looking at an economy where resources are being stretched thin on both the capital and human resource sides,” he says. “Many businesses are starting to look at the long run and are deciding it’s time to begin hiring some good people.” Costs curb desire to hireBut even if businesses want to step up hiring, certain factors here in Connecti-cut tend to discourage it. The No. 1 deterrent to job growth is the cost of doing business in Connecticut, says John Pavia, associate general counsel at R.R. Donnelly in Stamford. Pavia, who chairs a subcommittee of the governor’s Jobs Cabinet that is studying business outsourcing and offshoring, says, “Labor is cheaper in many other countries, and it’s sometimes a very attractive alternative to send business overseas. We [Connecticut] have regional and international competition that is going to blow us away if we don’t ... resolve our issues [regarding] high costs and infrastructure.” “We are the fifth most expensive state in the nation in which to do business,” adds Peter Gioia, CBIA economist. Business costs here, he says, are 12% above the national average. “Connecticut is at the midpoint or above for practically every cost of significance to business, whether it’s health care benefits, taxes, workers’ compensation, energy, or local and state taxes,” he says. When you consider those costs, he adds, it’s not surprising Connecticut has not been doing very well in terms of job creation. “There is a constant pressure on businesses to reduce costs in order to stay competitive,” says Joe Brennan, CBIA senior vice president for public policy. “They need help doing that so they can compete in the global economy.” Reducing business costs, then, is the primary issue the state needs to address, Brennan says, pointing out that high taxes and the cost of health care benefits and mandated benefits such as workers’ and unemployment compensation all work together to constrain job growth. The state, he adds, also needs to make improvements to our transportation infrastructure, especially along the I–95 corridor where traffic congestion discourages business growth, and to the electricity infrastructure in southwestern Connecticut. That region’s transmission lines have not be upgraded, as they have elsewhere in the state, and consequently can’t handle consumers’ surging demand for power. Delays in upgrading the lines have not only increased the risk of power outages but have also significantly added to the state’s already high energy costs. “We’re working with state legislators to get them to address these problems,” Brennan says. “Connecticut is never going to be a low-cost state in which to do business,” he acknowledges, “but we do have to have more of a level playing field with other areas that we compete with for jobs.” R.R. Donnelly’s Pavia says, “We have to start thinking outside the box and realizing that some manufacturing plant in Naugatuck isn’t competing with just a plant in Pennsylvania but with [plants in other countries]. We also must realize that we have people here in Connecticut who have skill sets you can’t find anywhere else in the world. We can be a major player in the international economy.” Pavia and his Jobs Cabinet subcommittee have put together proposals to market Connecticut internationally and to leverage the relationships the state has with the many foreign companies already operating, and providing jobs, here. State’s worker quality a plus — and a problemThe skills of Connecticut workers was a reason why one manufacturer, Middlefield-based Cooper-Atkins Corp., recently moved a piece of its business to Connecticut from Florida. Although labor costs are lower in Florida and overhead costs are much higher here, company President and CEO Carol Wallace knew she would have a skilled, dependable workforce to draw from in Connecticut. “But it’s not easy to stay in business in Connecticut,” says Wallace, who recently opened an operation in China to produce low-end commodity bimetal thermometers. Her company researches and builds more-sophisticated products in its U.S. plants. Other manufacturers have apparently also found it difficult to operate competitively in Connecticut. As Federal Reserve economist Rosen notes, many of the jobs Connecticut lost during the last recession were manufacturing jobs. Yet, ironically, many of the state’s manufacturers say they have job openings but can’t find people with the right skills. In a recent CBIA survey, manufacturers said positions for tool and die makers, CNC programmers, engineers, CAD/CAM workers and plant managers are extremely difficult to fill. Which points to another thing Connecticut needs to address: making sure the state’s education and job training programs meet employers’ need for a globally competitive workforce. Wallace says she’s encouraged by the state Department of Education’s current focus on improving academics in the technical high school system. “It will alleviate a burden on business to remediate students as they come into entry-level positions,” she says, “and the result will be a better, more prepared workforce able to step into the high-tech jobs we’re trying to develop.” Roger Joyce, vice president for engineering at the international Bilco Co. in West Haven, agrees. “One of the major benefits of Connecticut is that it has a well-trained, well-educated, highly skilled workforce,” says Joyce, whose company manufactures specialty doors for such places as concert halls, hospitals and schools, and sells them in 65 countries. But, he adds, “The technical high school system needs to refocus its mission to become more aligned with business” so the schools provide students with the academic and technical skills required for the kinds of jobs that will be available. Joyce says today’s students will need rigorous academic preparation as well as skills in cultural diversity, working in teams and working with various disciplines. Investing in R&DWhat else can Connecticut do to enable businesses to create more jobs? Joyce sees a need to increase support for research and development if the state wants to create new jobs in such strong and growing Connecticut industries as biosciences, pharmaceuticals and aerospace. Wallace also thinks the state should invest more in R&D. “In order to survive, you need to reinvent yourself, and in so doing, reinvest in yourself and your community. We need some support for new technology,” she says. Joyce sums up his views of what Connecticut can do to become more competitive for job growth: “Understand what businesses need in the state — lower costs, greater support. Determine what [kinds of] businesses can thrive in this market. Ensure that we have the infrastructure in place to support those businesses. And have an education system that supports the development of a skilled labor force tailored to the specific needs of our growing businesses.” Note: CBIA’s recommendations for how Connecticut can become a national leader in job creation are detailed in the association’s Government Affairs Program. Related article:
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