Braving the brisk temperatures, over 500 business leaders gathered in downtown Hartford for the CBIA and MetroHartford Alliance 2017 Economic Summit + Outlook Jan. 9.
On the agenda: two panel discussions featuring top state and national economists, analysts, entrepreneurs, and executives from both private and public sectors for a wide-ranging conversation on addressing challenges and finding success in Connecticut.
Governor Dannel Malloy also appeared, less than a week after opening the 2017 General Assembly session with a message about a leaner state government and creating predictability for businesses, families, and individuals.
“We need to live within our means,” Malloy said. “That means we’re going to have to make some hard decisions about what services we provide.
“If we’re going to pay our obligations and size our obligations to the state that we are, then we’re going to have to make hard decisions. I’m prepared to do that.”
Malloy also told business leaders he needs their support for developing “a state that lives within its means, gets the job done, makes the hard decisions, invests with you and in you, and produces more jobs in our state.”
Capri Frank, from Avon-based Miller Foods, was among those who welcomed the Governor’s message, saying lawmakers don’t always realize the impact policy changes have on small businesses.
“It trickles down and larger businesses have the ability to manage it a little bit better but those types of things make it harder,” she said.
Frank said the Governor sounded like he is running a business in addressing labor, benefit, and other state obligations that cost taxpayers billions. She says if small businesses can take those steps, so can the state.
“When you’re in small business you have to buckle down, you have to renegotiate,” she said. “You have to find ways.”
November’s employment report represented recent good news for Connecticut’s economy, with the state’s unemployment rate falling to a nine-year low of 4.7%.
Patrick Flaherty, assistant director of research and information at the Connecticut Department of Labor, said despite adding 85,000 jobs since the end of the recession in 2010, the state’s economic recovery has been slow.
With slow, but steady, growth expected in 2017, Connecticut is also suffering from a shortage of skilled labor.
“We have a real demographic challenge here in Connecticut,” said Flaherty, pointing to 15,000 fewer babies are being born today than in 1990.
While not a bad thing, “this does have enormous implications and demographic consequences,” Flaherty said. This trend is due to a declining teen pregnancy rate and educated women opting to have fewer children.
If we solve the budget deficit problem, the economy will grow, not the other way around.
While the efforts of the state technical high schools and community college programs should not be underestimated, “we need to figure out how to turn today’s retail and food services workers into tomorrow’s manufacturing jobs”, says Flaherty.
“These shadow labor force workers do not have the skills that you, as manufacturers, need today, but [they have] a high work ethic.
“How to get them into manufacturing can be a trick, and unfortunately it’s not going to be through the schools. Those that have already left school that are already employed in low-skill jobs could take up some of this shortage that we have.”
Looming Deficit, Undefined Spending Cap
Nick Perna, economic advisor for Webster Bank, offered his insight into the two issues facing Connecticut’s elected officials this upcoming session: the $1.5 billion budget deficit, and the constitutional spending cap.
Perna argued that a better looking economy with an abundance of jobs and fiscal stability, facilitated by elected officials, will also help the labor force shortage by attracting new residents.
“If we solve the budget deficit problem, the economy will grow, not the other way around,” Perna said.
Connecticut’s “spending cap that isn’t” must be another priority for the General Assembly.
Perna suggested that a tax cap, alongside the spending cap, is “something that should be looked at” so that “you can’t constantly raise taxes,” which could create more burdens for residents and businesses alike.
“There are ample opportunities in Connecticut to regionalize and consolidate municipal resources for cost sharing and savings,” says Perna, who was quick to mention that politics have stood in the way of this idea being seriously considered in a state with 169 municipalities.
“It’s an absolutely perfect consulting project. It’s going to require a lot of resources and work, but I think it could be well worth doing.”
Slow and Steady
“Connecticut’s economy is not going to overheat anytime soon,” said Ryan Sweet, director of Real-Time Economics at Moody’s Analytics, “2017 is, unfortunately, going to be uneventful.”
Despite slow job growth, wage pressures in the region could make Connecticut a more competitive place to find employment.
“One comparative advantage that Connecticut has over its neighboring states is that the labor market isn’t as tight,” Sweet explained.
“That is going to make Connecticut very competitive. As unit labor costs rise in those areas, businesses may start to look to Connecticut to relocate or set up new shop in the economy that has lower wage pressures.”
Sweet suggested the state should make investments in municipalities, workforce development, and infrastructure improvements.
“The state should run like the New England Patriots,” Sweet compared in regard to making investments.
“Sometimes [they] do something that doesn’t make any sense, that’s going to hurt them this year, but longer term, it benefits them. I think this has both near-term and long-term benefits.”
When asked what Connecticut can do to draw in the generation of millennials, Sweet, a millennial himself, suggested that the state should invest in the poorer cities so that younger professionals will gravitate towards them to work and live.
Once they establish roots in the state, Sweet said, millennials would be more likely to buy a home and raise a family here.
‘Land of Hidden Treasures’
The second panel shared personal stories of innovation and finding success.
Lalitha Shivaswamy, founder and president of Helios Management Corp., began the discussion by characterizing Connecticut as a state that is “a land full of hidden treasures.”
All three panelists said their entrepreneurial journeys stemmed from discovering voids in their industries.
Andy Greenawalt, principal of Gnostic Ventures, embraced the stereotype of entrepreneurs creating start-ups in their basements, from very early on being inspired by the “do-ers,” not the thinkers.
Jon Rydberg, founder and CEO of Orchid Advisors, said the cornerstone of his management consulting firm is to “stay absolutely neutral in the highly charged industry” of firearms manufacturing, particularly in a state like Connecticut.
Amit Gavish, general manager of BriefCam North America, explained that major U.S. city law enforcement departments approach his firm to learn from their video surveillance techniques.
Creating startup companies in Connecticut is, according to the panel, an accessible task.
Greenawalt, who is based in the New Haven region, says that there is a negative perception that the state isn’t friendly for businesses and entrepreneurs, and that “the problems [of the state] take away energy from seeing what is great.”
“So much innovation has happened here in Connecticut historically,” he said. “Connecticut needs to overcome its skepticism of startups.”
“As an entrepreneur, that’s what I run on—quality human beings,” Greenawalt added, pointing to New Haven’s own Yale University, among other colleges in the state, as “renewable resources” of talent and innovation.
Rydberg, whose business is located in East Hartford, admits that “starting businesses can be an intimidating move,” but in his experience, the entrepreneurial resources the state has provided has been “instrumental in helping us get up off the ground.”
Despite its various challenges, the panelists also agreed that Connecticut’s small size is a huge advantage for emerging or smaller businesses.
Larger cities, like New York and Boston, are complex to navigate for smaller businesses, Rydberg notes, where access to higher levels of support is “10 times more overwhelming.”
Another integral resource for businesses—customers—are also easier to reach in a smaller state, which Gavish described as “intimate.”
Gavish, who hails from Israel, also said foreign companies do not have a negative perception of Connecticut’s business climate—in fact, there is no perception of the state, which provides a “critical mass of resources.”
The panelists wrapped up the summit with a discussion about how Connecticut is not only attractive for businesses, but for current and future workers as well.
“When I pull someone out of New York, I have to quickly say, here’s the job offer, now let me show you a dozen interesting companies around me because I’m asking you to relocate,” said Greenawalt, who is responsible for recruiting talent from larger cities.
“Breaking down that perception that we help support [new workers] by our 169 neighborhoods is important.”