This year will end on a higher note than last: and 2015 may be better yet.
Recent CBIA surveys show more Connecticut businesses expanding than contracting, by a ratio of 3 to 1. The majority of companies surveyed report increased sales and anticipate adding jobs over the next six months.
All of these factors promise to sustain moderate economic growth in the state.
Connecticut is likely to close out 2014 with double the job gains we saw in 2013. A booming aerospace industry, stronger consumer spending, and a steadier return of housing sales and construction make it likely that we'll exceed those gains in 2015.
Wages will also begin a comeback, and unemployment should eventually drop to 5%.
Revving the engine
Three big changes could effectively accelerate this growth and create a base for some better long-term economic conditions.
1. Inflation is benign.
Slower growth in Europe and East Asia may dampen exports somewhat in 2015; right now, the impact is dramatic. This gives the Federal Reserve time before it raises federal fund rates, which will lead to higher borrowing costs. The Consumer Price Index is 1.7% annual rate of growth and should stay around there, leading to low inflation in 2015. We may not see the Fed raise rates: slightly, slowly: until late 2015.
2. Aerospace is back in action.
Commercial aerospace is thriving, especially a high demand for regional jets with fuel-efficient engines. That spells good news for the hundreds of Connecticut manufacturers who make parts and engines. Expect increases in capital and industrial property investments and hiring in 2015 and beyond.
3. Oil is lower.
Oil prices, which were $114 per barrel at the start of this year, plunged below $80 per barrel in mid-November because of slack global demand, strong U.S. production, and political strife that has kept Saudi output high despite weak prices. The gas "sale" will boost consumer spending during the holiday shopping season and well into 2015.
In longer terms, the prospect of an energy-independent U.S. has huge implications for trade balance, prices, defense, and geopolitics.
All of this is very positive, but expect some bumps. The state faces an anticipated budget deficit and has yet to sufficiently address unfunded liabilities.
Indeed, none of this momentum will be sustained without a serious effort to make Connecticut more economically competitive.
National studies rank Connecticut near the bottom in terms of business-friendliness. Unless lawmakers address the factors behind these low rankings: issues like the state's budget deficit and unfunded long- term liabilities: we will not be able to take full advantage of the economic growth we're seeing on the national level.
CT20x17 is a statewide, bipartisan campaign that aims to make Connecticut a top 20 state for business by 2017. CBIA, together with dozens of other business, professional, and community groups, is working to develop policy recommendations for the upcoming legislative session.
Making Connecticut a top 20 state for business means supporting public policy decisions that spur private investment, accelerate economic growth, create good jobs, and ensure a better future for everyone.